Food Price Inflation, Revolts and the Role of Speculation

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Recent revolts in the Mid-East and elsewhere have been viewed as a demand for political change. They are also related to the rapid increase in the price of basic food supplies. Prices of course respond to changes in demand and supply. Poor crop yields in parts of the world, along with a rise in demand in emerging markets, have contributed to the rise in prices. It is also possible that speculation in the trading of commodity derivatives may have an influence of the wild swings in commodity prices. Trading in derivatives have been shown to effect price swings in other commodities such as oil. The price of oil is affected by changes in supply and demand but the price of oil futures is also used to set prices in OPEC. This raises questions about the contribution of speculation to the wild swings in the price of food commodities.