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Accurate market price formation model with both supply-demand and trend-following for global food prices providing policy recommendations.

ABSTRACT: Recent increases in basic food prices are severely affecting vulnerable populations worldwide. Proposed causes such as shortages of grain due to adverse weather, increasing meat consumption in China and India, conversion of corn to ethanol in the United States, and investor speculation on commodity markets lead to widely differing implications for policy. A lack of clarity about which factors are responsible reinforces policy inaction. Here, for the first time to our knowledge, we construct a dynamic model that quantitatively agrees with food prices. The results show that the dominant causes of price increases are investor speculation and 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, whereas an underlying upward trend is due to increasing demand from ethanol conversion. The model includes investor trend following as well as shifting between commodities, equities, and bonds to take advantage of increased expected returns. Claims that speculators cannot influence grain prices are shown to be invalid by direct analysis of price-setting practices of granaries. Both causes of price increase, speculative investment and ethanol conversion, are promoted by recent regulatory changes-deregulation of the commodity markets, and policies promoting the conversion of corn to ethanol. Rapid action is needed to reduce the impacts of the price increases on global hunger.

SUBMITTER: Lagi M

PROVIDER: S-EPMC4653135 | biostudies-literature | 2015 Nov

REPOSITORIES: biostudies-literature

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Accurate market price formation model with both supply-demand and trend-following for global food prices providing policy recommendations.

Lagi Marco M Bar-Yam Yavni Y Bertrand Karla Z KZ Bar-Yam Yaneer Y

Proceedings of the National Academy of Sciences of the United States of America 20151026 45

Recent increases in basic food prices are severely affecting vulnerable populations worldwide. Proposed causes such as shortages of grain due to adverse weather, increasing meat consumption in China and India, conversion of corn to ethanol in the United States, and investor speculation on commodity markets lead to widely differing implications for policy. A lack of clarity about which factors are responsible reinforces policy inaction. Here, for the first time to our knowledge, we construct a dy ...[more]

PMID: 26504216

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Project description:BackgroundTen U.S. states, Canada, and Uruguay have passed laws to legalize the production and sale of cannabis for non-medical purposes. Available research has documented rapidly falling prices and changing product mixes, but many details are not well understood: particularly, the popularity, prices, and product characteristics of different cannabis edibles and extract-based products - each offering different ways to consume cannabis, with unclear health consequences.MethodsThis paper analyzes data from Washington's recreational cannabis market, which has recorded over 110 million retail item-transactions from July 2014 to October 2017. Previous research on price and product trends has focused mostly on herbal cannabis, which accounts for the majority, but a decreasing share, of sales. This paper applies advanced text-analytic methods to provide new insights, including (A) estimating potency data for edibles and (B) identifying extract sub-types. Patterns and trends are described, across product types, regarding THC and CBD profiles and price per THC.ResultsExtracts accounted for 28.5% of sales in October 2017. Of extracts categorized to subtype, nearly half were identified as "dabs", and another half "cartridges". In October 2017, price per 10 mg THC was roughly $3 among edibles, 70 cents among extract cartridges, and 30-40 cents for other flower and other extracts; solid concentrates offered the lowest priced THC among extract products. Price declines continue but have slowed. High-CBD chemovars are becoming more common, but still are almost non-existent in flower marijuana and rare (1% of sales) among extract products.ConclusionAs Washington's recreational cannabis market has developed over three and a half years, trends identified in that market may serve as an early indication of potential issues in other states. Legislators and regulators in other jurisdictions with commercial non-medical cannabis markets may wish to establish policies responsive to these trends in product popularity, price, and potency.

Dataset Information

Accurate market price formation model with both supply-demand and trend-following for global food prices providing policy recommendations.

Publications

Accurate market price formation model with both supply-demand and trend-following for global food prices providing policy recommendations.

Similar Datasets

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