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World Wheat Price Volatility

  • Year: 2012
  • Author: Wyatt Thompson, Garry Smith, Armelle Elasri
  • Journal Name: OECD Food, Agriculture and Fisheries Papers
  • Journal Number: 59
  • Publisher: OECD
  • ISBN: 1815-6797

This study complements OECD analyses on commodity price volatility by providing quantitative assessments of the impact of two structural changes that a number of market observers have identified as contributing to world wheat market price volatility. The factors examined relate to changes in demand in the large emerging countries of the BRICs (comprising Brazil, the Russian Federation, India and China), as a result of continuing economic growth and development and the effect of a lower levels of global wheat stocks in recent years. A further scenario extends the analysis of the role of stocks in price volatility by examining some effects of a hypothetical international buffer stockholding scheme to stabilise international wheat prices. Each scenario was undertaken with the Aglink-Cosimo model and the stochastic baseline as reported in the OECD-FAO Agricultural Outlook, 2011-2020. The results suggest that both factors have contributed to the recorded volatility in world wheat markets in recent years. However the increase in market volatility arising from economic development and income growth is likely to occur gradually, while the moderating effect of larger stocks may only be fleeting. The stylised wheat buffer stock scheme with a price band may lead to slightly lower market volatility under highly specific conditions and constraining assumptions. These, however, have proven difficult to achieve and sustain in practice, as observed from past attempts to implement such schemes.

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