Philip C. Abbott

Bio: Philip C. Abbott is an academic researcher from Purdue University. The author has contributed to research in topics: Commercial policy & Free trade. The author has an hindex of 24, co-authored 96 publications receiving 2339 citations. Previous affiliations of Philip C. Abbott include Agricultural & Applied Economics Association & Al Akhawayn University.

What's Driving Food Prices?

Abstract: Preface : The temperature of the rhetoric in the food-versus-fuel debate has been rising right along with the prices of corn and oil. Farm Foundation is not about heat or fueling fires. Our mission is to be a catalyst for sound public policy by providing objective information to foster deeper understanding of the complex issues before the food system today. We commissioned this paper to provide a comprehensive, objective assessment of the forces driving food prices. In recent months, much has been written in the academic and popular press about commodity prices, biofuels and food prices—often with varying perspectives and conclusions. Farm Foundation asked Wallace Tyner, Philip Abbot and Christopher Hurt, all of Purdue University, to review the literature and provide a comprehensive assessment of the forces driving food prices today. The three economists reviewed more than two dozen reports and studies, summarizing them in light of their own examination of the facts. As is true of many issues in the food system, the full story behind rapid increases in food prices is not a simple one. Today’s food price levels are the result of complex interactions among multiple factors—including crude oil prices, exchange rates, growing demand for food and slowing growth in agricultural productivity—as well as the agricultural, energy and trade policy choices made by nations of the world. But one simple fact stands out: economic growth and rising human aspirations are putting ever greater pressure on the global resource base. The difficult challenge for public and private leaders is to identify policy choices that help the world deal with the very real problems created by today’s rising food prices without jeopardizing aspirations for the future. It is the intent of Farm Foundation that the objective information provided in this report will help all stakeholders meet the challenge to address one of the most critical public policy issues facing the world today.

What’s Driving Food Prices in 2011?

Abstract: Preface ree years ago Farm Foundation, NFP asked Purdue University economists Wallace Tyner, Philip Abbot and Christopher Hurt to review the literature and provide a comprehensive assessment of the major factors driving commodity and food prices. Our objective was to cool the heated rhetoric in the food-versus-fuel debate, which had been rising right along with the prices of corn and oil. Today, although the rhetoric seems to be lower, prices of oil and commodities, including corn, soybeans and wheat, have again approached the levels of 2008. In addition, policy makers today are focused on a national debate over fiscal policy—a debate that encompasses the future direction of food, agricultural and energy policies. Farm Foundation commissioned the current paper to provide a comprehensive, objective assessment of the forces driving commodity and food prices. A major question was whether the forces at work today are the same as or different from those of 2008. Our goal is to provide public and private decision makers with an objective assessment of the forces driving commodity prices, as well as offer some insights into the impacts on policy options. Now, as in 2008, the full story behind rapid increases in commodity prices is not a simple one. Many of the factors driving prices remain the same but play out in different ways—including biofuel demands, exchange rates and weather. As concluded in 2008, one simple fact stands out: economic growth and rising human aspirations are putting ever greater pressure on the global resource base. As with the earlier work, this report does not attempt to attribute the proportion of the price increases among the different drivers. Rather the focus is on understanding the nature and interactions of the respective factors. In an environment of higher and more volatile commodity and food prices, as well as budget constraints, policy makers and society are faced with difficult choices about fundamental elements of food, agricultural and energy policies. We hope that the information provided in this report will strengthen the ability of all stakeholders to address some of the most critical public policy issues facing the world today. We authors are agricultural economists on the faculty at Purdue University. Abbott works in international trade and macro factors. Hurt works in analysis of commodity markets. Tyner is an energy and policy economist most recently specializing in biofuels policies. We each brought a unique perspective to the table, and have learned …

Recent Global Food Price Shocks: Causes, Consequences and Lessons for African Governments and Donors

Abstract: Dramatic increases in international agricultural commodity prices began in 2006 and peaked in July 2008. An equally remarkable and rapid decline of those prices then ensued, accompanied by extreme volatility in those prices. The trend in food prices lagged the rapid increases in other commodity prices, including oil and metals, but accompanied those other prices in the downward part of the cycle. Not all agricultural commodities increased to the same extent—grains and oilseed prices increased the most, with rice among the most expensive at the peak and rising as much as crude oil, while prices of some African exports (cocoa, coffee and cotton) increased to a much smaller extent than the grains. High commodity prices quickly raised farmgate prices in developed countries. In developing countries, poor market integration and border barriers may have limited pass-through of these prices to the farmgate, but there was more rapid food price and general inflation than occurred in many developed countries. Countries were impacted to differing extents, and food riots occurred in the most affected cases. It has been noted that underlying fundamentals of food price inflation differ by the extent of development, as poor countries have smaller distribution costs but higher budget shares in basic staples. Import dependence, tradable versus non-tradable status of grains and whether there were home goods substitutes influenced the extent of price transmission. Many developing countries reacted by altering trade and domestic agricultural policies and attempted to stabilise domestic markets. Importing countries reduced tariffs and taxes in many cases, and food subsidies were increased in some cases. Export taxes were enacted to protect domestic users, and bans of exports were applied in some extreme cases—explaining the especially large increase in rice prices. While impacts on domestic prices vary across country cases, disentangling the role of policy response from market integration would require further work. Policy responses were complicated by disagreement at the time that prices were rising as to whether the increases would be permanent or short lived, which in turn depends on the root causes of the increases—over which there has been considerable debate. Consensus has emerged on some factors, while controversy over macroeconomic relationships persists. They were also complicated by dynamic adjustments of related prices, which were not instantaneous. For example, fertiliser prices did not fall until several months after grain prices fell. Policy responses of national governments in Africa and elsewhere in the developing world contrast sharply with initiatives recommended by the international community. International organisations, development banks and donors emphasise emergency relief and longer term agricultural development, whereas national governments heavily utilised market interventions through trade and domestic policy. In this paper, we will first explore the factors that have been offered to explain the run-up and subsequent down-turn in agricultural commodity prices. Explanations have included supply and utilisation events, competition for grains and oilseeds as food versus fuel, and financial factors such as currency changes that exaggerated prices measured in dollars. Interactions between these factors will matter to the resulting outcomes, so specific contributions cannot be assigned. Moreover, debate persists on the exogenous mechanisms driving these changes, which are often interrelated (e.g., worldwide economic boom and then global recession, speculation in commodities). The goal will be to identify factors likely to drive commodity prices in the future and to provide some understanding of the dynamics and persistence of the observed global price changes. The next part of the paper will explore how those global price changes were transmitted to developing country markets. The extent of farmgate price changes and retail food price adjustments will be documented to the extent feasible. The roles of border policy, domestic agricultural policy, market integration and retail food margins will be considered. Special emphasis will be placed on what actual policy adjustments were taken and how well they worked. Given the presumed underlying causes of high and then low food prices, and the uncertainty of future global commodity prices, policy options now available to developing countries will be explored. These will include short-run safety nets, market interventions and long-run incentives to agricultural development. In this part, special emphasis will be put on what happened in Africa and how it should respond in the future. Some of the key issues in the current debate on expanding African agricultural sectors, including price stabilisation and fertiliser subsidisation, will be explored. In the process, we will evaluate how far various methodologies have taken us in providing an understanding of the consequences of these recent events, and providing a sound basis for policy recommendations.

What's Driving Food Prices? March 2009 Update

Abstract: In the spring and early summer of 2008, the temperature of the rhetoric in the food-versus-fuel debate was skyrocketing right along with the prices of corn, soybeans and crude oil. Farm Foundation is not about heat or fueling fires. Our mission is to be a catalyst for sound public policy by providing objective information to foster deeper understanding of the complex issues before the food system today. We commissioned Purdue University economists Wallace Tyner, Philip Abbott and Christopher Hurt to provide a comprehensive, objective assessment of the forces driving food prices. Released in July 2008, What’s Driving Food Prices? identified three major drivers of prices—depreciation of the U.S. dollar, changes in production and consumption, and growth in biofuels production. The three economists also reviewed more than two dozen reports and studies in the academic and popular press about commodity prices, biofuels and food prices, summarizing them in light of their own examination of the facts. Today, just eight months later, the landscape is remarkably different. The 2008/2009 crop production was higher than forecast, quieting talk of inadequate supplies. Significant declines have occurred in crude oil, grain and oilseed crop prices. Biofuel production has slowed. The value of the U.S. dollar has appreciated. A global financial crisis and recession now dominate the news. Given this remarkable reversal of conditions, we asked Tyner, Abbott and Hurt to reexamine the drivers of food prices. Their analysis indicates that now, as eight months ago, the answers are not simple. While the level of food prices has dropped, the forces driving those prices remain the same today as in July 2008, as does the need to understand how those forces work and interact. As did the July 2008 report, this update reinforces the fact that food prices are influenced by diverse and multiple factors generated by complex global economic issues. It is the intent of Farm Foundation that the objective information provided in this report will help public and private leaders better understand the functions of these driving forces as they make business and public policy decisions for the future.

Oligopolistic Behavior by Public Agencies in International Trade: The World Wheat Market

Abstract: A model of the world wheat market is presented which treats public policies as endogenous. The oligopolistic nature of international wheat trade is captured by assuming policy makers form conjectures on the slope of the excess demand function they face and use that information to determine domestic and trade policies. The policies reflect differing influences of political interest groups. A U.S. crop shortfall scenario illustrates the different results with endogenous policies compared to the traditional model.

How to Understand High Food Prices

Abstract: Agricultural price booms are better explained by common factors than by market-specific factors such as supply shocks. A capital asset pricing model-type model shows why one should expect this and Granger causality analysis establishes the role of demand growth, monetary expansion and exchange rate movements in explaining price movements over the period since 1971. The demand for grains and oilseeds as biofuel feedstocks has been cited as the main cause of the price rise, but there is little direct evidence for this contention. Instead, index-based investment in agricultural futures markets is seen as the major channel through which macroeconomic and monetary factors generated the 2007–2008 food price rises.

Global crop yield response to extreme heat stress under multiple climate change futures

Abstract: Extreme heat stress during the crop reproductive period can be critical for crop productivity. Projected changes in the frequency and severity of extreme climatic events are expected to negatively impact crop yields and global food production. This study applies the global crop model PEGASUS to quantify, for the first time at the global scale, impacts of extreme heat stress on maize, spring wheat and soybean yields resulting from 72 climate change scenarios for the 21st century. Our results project maize to face progressively worse impacts under a range of RCPs but spring wheat and soybean to improve globally through to the 2080s due to CO2 fertilization effects, even though parts of the tropic and sub-tropic regions could face substantial yield declines. We find extreme heat stress at anthesis (HSA) by the 2080s (relative to the 1980s) under RCP 8.5, taking into account CO2 fertilization effects, could double global losses of maize yield (ΔY = −12.8 ± 6.7% versus − 7.0 ± 5.3% without HSA), reduce projected gains in spring wheat yield by half (ΔY = 34.3 ± 13.5% versus 72.0 ± 10.9% without HSA) and in soybean yield by a quarter (ΔY = 15.3 ± 26.5% versus 20.4 ± 22.1% without HSA). The range reflects uncertainty due to differences between climate model scenarios; soybean exhibits both positive and negative impacts, maize is generally negative and spring wheat generally positive. Furthermore, when assuming CO2 fertilization effects to be negligible, we observe drastic climate mitigation policy as in RCP 2.6 could avoid more than 80% of the global average yield losses otherwise expected by the 2080s under RCP 8.5. We show large disparities in climate impacts across regions and find extreme heat stress adversely affects major producing regions and lower income countries.

Food price volatility

Abstract: The high food prices experienced over recent years have led to the widespread view that food price volatility has increased. However, volatility has generally been lower over the two most recent decades than previously. Variability over the most recent period has been high but, with the important exception of rice, not out of line with historical experience. There is weak evidence that grains price volatility more generally may be increasing but it is too early to say.