Betting on food: which role for market fundamentals in 2007-2008 grain price boom

This paper examines the grain prices boom occurred in 2007-2008. First, it delineates a framework of world grain production and stresses the structural weaknesses of this sector. Then the paper focuses on the period 2007-2009, describes price trends and investigates about the possible causes of the boom occurred in grain prices. Particular attention is paid to the role played by financial speculation. Many empirical works are revised to illustrate the current debate: it is evident that there is not a general agreement concerning this topic. In the last part the impact of change in market fundamentals is taken in exam by trying to evaluate the influence of World Agricultural Supply and Demand Estimates monthly reports on grain (and particular corn) future prices. The results shows a significant decrease in WASDE reports capacity of influencing prices in 2007-2009. A possible explanation of this phenomenon is that during the previously cited period prices were influenced by factors other than market fundamentals.