In early 2007 food prices started to increase dramatically, creating more hunger, social unrest, political protests, and a debate on causes and cures. According to the FAO, the number of people getting less food than necessary reached 1 billion. After a century of declining food prices, increased productivity and relative stability several curves started to shift. Due to production growth levelling out and a steady increase in the global demand for food, in addition to policy changes in the food sector, public food stocks declined and the market situation became tighter. As a result, the global food market became more vulnerable to external shocks, like negative impact from climate-related changes, growing demand from the bio-fuel sector, and speculation in food commodities. By focusing on supply and demand forces in the food market, the growth of bio-fuel production, and financial speculation, we ask what caused food prices to peak in 2008, and which factors are the most important in explaining the events. In our view, deregulations within the financial sector led to extreme levels of financial capital entering the food commodity market, contributed to prices increasing more and faster than can be explained by supply and demand forces alone. Even if the growth in bio-fuel production by many is held as a climate change mitigation measure, and production short-falls over the last decade are caused by severe weather events, we do not believe that climate change directly or indirectly caused food prices to peak in 2008.
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