Understanding how producers make decisions to allot acreage among crops and how decisions about land use are affected by changes in prices and their volatility is fundamental for predicting the supply of staple crops and, hence, assessing the global food supply situation. The innovations of the present paper are estimates of monthly (i.e. seasonal) versus annual global acreage response models for four staple crops: wheat, soybeans, corn and rice. We focus on the impact of (expected) crop prices, oil and fertilizer prices and market risks as main determinants for farmers' decisions on how to allocate their land. Primary emphasis is given to the magnitude and speed of the allocation process. Estimation of intra-annual acreage elasticity is crucial for expected supply and for input demand, especially in the light of the recent short-term volatility in food prices. Such aggregate estimates are also valuable to verify whether involved country-specific estimations add up to patterns that are apparent in the aggregate international data. The econometric results indicate that global crop acreage responds to crop prices and price risks, input costs as well as a time trend. Depending on respective crop, short-run elasticities are about 0.05 to 0.25; price volatility tends to reduce acreage response of some crops; comparison of the annual and the monthly acreage response elasticities suggests that acreage adjusts seasonally around the globe to new information and expectations. Given the seasonality of agriculture, time is of the essence for acreage response: The analysis indicates that acreage allocation is more sensitive to prices in northern hemisphere spring than in winter and the response varies across months.

Understanding how producers make decisions to allot acreage among crops and how decisions about land use are affected by changes in prices and their volatility is fundamental for predicting the supply of staple crops and, hence, assessing the global food supply situation. This study makes estimations of monthly (i.e., seasonal) versus annual global acreage response models for the world's principal staple food crops: wheat, corn, soybeans, and rice. Primary emphasis is given to the magnitude and speed of the allocation process. Estimation of intra-annual acreage elasticity is crucial for expected food supply and for input demand, especially in the light of the recent short-term volatility in food prices. The econometric results indicate that global crop acreage responds to crop prices and price risks, input costs as well as a time trend. Depending on respective crop, short-run elasticities are about 0.05 to 0.40; price volatility tends to reduce acreage for some of the crops; comparison of the annual and the monthly acreage response elasticities suggests that acreage adjusts seasonally around the globe to new information and expectations. Given the seasonality of agriculture, time is of an essence for acreage response. The analysis indicates that acreage allocation is more sensitive to prices in the northern hemisphere spring than in winter and the response varies across months.

This book provides fresh insights into concepts, methods and new research findings on the causes of excessive food price volatility. It also discusses the implications for food security and policy responses to mitigate excessive volatility. The approaches applied by the contributors range from on-the-ground surveys, to panel econometrics and innovative high-frequency time series analysis as well as computational economics methods. It offers policy analysts and decision-makers guidance on dealing with extreme volatility.

"The conference was organized by the three editors of this book and took place on August 15-16, 2012 in Seattle."--Preface.

This article estimates a worldwide aggregate supply response for key agricultural commodities -- wheat, rice, corn, and soybeans -- by employing a newly-developed multi-country, crop-calendar-specific, seasonally disaggregated model with price changes and price volatility applied accordingly. The findings reveal that, although higher output prices serve as an incentive to improve global crop supply as expected, output price volatility acts as a disincentive. Depending on the crop, the results show that own-price supply elasticities range from about 0.05 to 0.40. Output price volatility, however, has negative correlations with crop supply, implying that farmers shift land, other inputs, and yield-improving investments to crops with less volatile prices. Simulating the impact of price dynamics since 2006, we find that price risk has reduced the production response of wheat in particular -- and to a lesser extent, rice -- thus dampening price incentive effects. The simulation analysis shows that the increase in own-crop price volatility from 2006-2010 dampened yield by about 1-2% for the crops under consideration.

Following the world food price spike in 2008 and again in 2011, there has been increased attention on better understanding the drivers of food prices, their impacts on the poor, and policy response options. This paper provides a simple model that closely simulates actual historical food price behavior around which the analysis of the drivers of food price levels, volatility, and the associated response options is derived. Future food prices are likely to remain higher than pre-2007 levels and recent price uncertainty is likely to continue for the foreseeable future. Accelerated use of food crops for industrial purposes (biofuels) continues to offset the slowing population growth effect on food demand. World food stocks remain at relatively low levels where the likelihood of price spikes is higher. Production gains may be harder to achieve in the future than in the past, with more limited space for area expansion, declining yield growth, and increases in weather variability. Suggested responses to reduce average food price levels are to (i) raise food crop yields, and their resilience, as the single most important action needed for an enduring solution to global food security; (ii) improve the rural investment climate to induce a private sector supply response; (iii) facilitate land markets to expand planted food crop areas and strengthen property rights to improve the use of existing cropped areas; (iv) better use price risk management tools; and (v) increase the responsiveness of the food system to price increases through better integrating markets to ensure world price signals reach more producers to induce a supply response. To reduce world food price volatility, suggested responses are to: (1) develop weather-tolerant crop varieties to reduce food production shocks; (2) improve management of food-grain stock purchases and releases to reduce, rather than amplify, local and world food price volatility; (3) shift to market-based biofuels policies (make biofuels mandates more flexible); (4) open trade across all markets to diversify short-term production shocks dissipating the associated price effects; and (5) improve market transparency to reduce market uncertainty and the associated large price corrections following revisions to market information (production, stocks, and trade). Suggested measures to reduce the negative impact of price shocks on food security are: (a) reduce taxes and tariffs (in some cases) to lower domestic prices, (b) short-term food...