Why rice price spike was highest in 2007 crisis, although its production went down the least
[This excerpt explains the huge spike in rice prices while it was the grain least affected by production falls.]
"Ironically, the largest relative price surge was in the grain least subjected to recent shocks in production or demand, and the least involved in futures and options trading. Rice harvests were not unusually small, in aggregate. Rice demand is also least affected by increased income, as it has a low income elasticity as a food, and is not used significantly as a feed for animals. The shock to demand for rice was largely generated by demand to make up shortfalls in wheat available to consumers. Important factors in this wheat shortage include low harvests and substitution of wheat for maize diverted from animal feed to biofuels in the United States. As discussed elsewhere, (Wright, 2009) the subsequent surge in the price of rice was exacerbated by a panic among exporter governments which progressively reduced access to rice export markets in 2007/2008, initiated by the announcement by India in October 2007 of an export ban, as part of a plan to increase domestic rice consumption to make up for a disappointing wheat harvest. Panic meant the meager global calorie stocks were not be efficiently allocated to those most in need"
Eugenio S. Bobenrieth H. and Brian D. Wright, “The Food Price Crisis of 2007/2008: Evidence and Implications,” Joint meeting of Intergovernmental Group on Oilseeds, Oils, and Fats (30th Session), Intergovernmental Group on Grains (32nd Session), and Intergovernmental Group on Rice (43rd Session) and Symposium of Value Chains for Oilseeds, Oils and Fats, Grains and Rice: Status and Outlook, Santiago, Chile, November 4-6, 2009, accessed August 19, 2014, http://www.fao.org/fileadmin/templates/est/meetings/joint_igg_grains/Pan....