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UPDATE July 2012 — The Food Crises: The US Drought

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Food price movements and model predictions

FIG 1: Food prices and model simulations - The FAO Food Price Index (blue solid line) [1], the speculator and ethanol model [2], without the effects of the current drought (yellow line) with the effects of the current drought (red line), and with the effects of the drought, but with speculation reduced (green line). In all cases, corn-to-ethanol conversion is considered to be constant after Jan 2012 and stock prices and bond prices are considered to be constant after July 2012. For the red and green line, drought is modeled as a shock in equilibrium prices (+3\%) in July 2012.

Correlations of changes in grain production

FIG. 2: Correlations of changes in grain production - Comparison of change in world (circles), US (squares) and Australian (triangles) grain production as a fraction of total world production by weight [3]. The correlation is small between world and Australia production changes (0.17), but high between world and US production changes (0.7).

[1] Food and Agriculture Organization of the United Nations, FAO Food Price Index (http: //www.fao.org/).

[2] M. Lagi, Y. Bar-Yam, K. Z. Bertrand, Y. Bar-Yam, The Food Crises: A quantitative model of food prices including speculators and ethanol conversion, arXiv:1109.4859v1 [q-fin.GN] (2011 http://arxiv.org/abs/1109.4859).

[3] Production, supply and distribution online, U.S. Department of Agriculture, Foreign Agricultural Service (http://www.fas.usda.gov/psdonline/).

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