From the 1980s till 2000, global food prices fluctuated moderately around a consistent value. From the beginning of 2004 they increased rapidly with dramatic spikes in 2008 and 2011. (FAO Food Price Index from Jan 1990 to Jan 2012, and an index of cereals, meat and sugar prices from Jan 1982 to Dec 1989).

n 2008 more than 60 food riots occurred around the world in 30 different countries, 10 of which resulted in multiple deaths. After an intermediate drop in 2009, even higher prices from the end of 2010 coincided with additional food riots (in Mauritania and Uganda), as well as the larger protests and government changes in North Africa and the Middle East known as the "Arab Spring". (FAO Food Price Index. Red dashed vertical lines correspond to beginning dates of food riots and major unrest in North Africa and the Middle East. Blue vertical line indicates the date NECSI submitted a report to the U.S. government, warning of the link between food prices, social unrest and political instability).

We constructed a dynamic model that quantitatively agrees with food prices (FAO Food Price Index (yellow line), ethanol supply and demand model (blue line), and speculator and ethanol model (red line)). Our analysis shows that dominant causes of price increases are investor speculation and corn to ethanol conversion. Models that just treat supply and demand are not consistent with the actual price dynamics. The two sharp peaks in 2007/2008 and 2010/2011 are specifically due to investor speculation, while an underlying upward trend is due to increasing demand from ethanol conversion. The model includes investor trend following, as well as shifting assets between commodities, equities and bonds to take advantage of increased expected returns.