Rising food prices and global unrest might ensue from this month’s worst US drought since the 1934 Dust Bowl, with 64 per cent of the country desperately hoping for rain.
Predicted to last until October, the drought is foreseen to devastate US harvests, which would significantly affect global prices of maize, wheat and soybeans, of which America is the world’s largest exporter.
World prices for these foods have already reached record levels and will continue to affect developing countries the most, especially those relying on agricultural imports.
A speculator amplified food price bubble might also contribute to the global catastrophe.
When investors bet on food prices, the drought’s market signals are augmented, say researchers from the New England Complex Systems Institute (Necsi).
“The drought is clearly going to kick prices up. It already has,” said Necsi president Yaneer Bar-Yam. “We’ve created an unstable system. Globally, we are very vulnerable.”
In the late 1990s, food markets were deregulated, allowing hedge funds and investments banks to bet on prices, thereby making markets prone to sudden, massive fluctuations.
Additionally, Necsi found that biofuels are also responsible for a gradual rise in prices.
The Necsi’s mathematical model of global food market behaviour anticipated a new food bubble in early 2013, before taking into account the recent drought.