+

Factors Affecting the Inclining/Declining Trends Food Prices

Matthew Tjahjadi, Ivan Lukito, Marianne Garbo, Nour Rahhal

+Agenda Introduction Defining Food Prices Regression Analysis on All Factors Direct Factors Influencing Food Price Indirect Factors Influencing Food Price

Conclusion

+Introduction Analysis of Inclining/Declining Patterns of

Food Prices Factor 1: Oil Prices Factor 2: Population Factor 3: Natural Disasters

Analysis of Indirect Factors Factors: Climate Change and Income

Is there correlation between all the individual independent factors?

+Defining Food Prices in US Food Price Index consists of the average of

commodity group price indices The five food commodities are:

Meat Cereal Sugar

Dairy

Vegetable Oil

+Data SamplingData is given monthly from the

beginning of January 1990 to March 2015

For Piecewise forecasting monthly data is used

Data sampling is used to run regression analysis – quarterly data used instead of monthly To avoid all the factors from being important

+Piecewise Forecasting

0 50 100 150 200 250 300 3500.0

50.0

100.0

150.0

200.0

250.0

300.0

f(x) = 0.950914863660878 x − 50.0809807833788R² = 0.793692162051432

f(x) = − 0.625731468592331 x + 175.423643302303R² = 0.811060019315434

f(x) = 0.302612569525898 x + 99.2477229441196R² = 0.544252120256142

Piecewise Forecasting For Food Prices

Time Series

Food

Pric

e In

dex

+Forecasting Equations

y = 0.3026x + 99.248 for 0<x<75 (January 1990 to April 1996)

y = -0.6257x + 175.42 for 76<x< 149 (April 1996 to July 2000)

y = 0.9509x - 50.081 for x>150 (July 2000 onwards)

+Regression on All The FactorsRegression Statistics

Multiple R 0.920999879R Square 0.848240778

Adjusted R Square 0.846702677Standard Error 17.53764896Observations 300

 Coefficient

sStandard

Error T-Stat P-value

Intercept 172.4784 24.434341 7.058854 1.1976E-11

Oil Price 1.497832 0.0612047 24.47250 4.373E-73

US population (million) -0.33971 0.0932002 -3.64502 0.0003157Frequency of

Disasters/Month -0.33251 0.1304022 -2.54992 0.0112789

+Factor 1: Oil Price

1 13 25 37 49 61 73 85 97 1091211331451571691811932052172292412532652772893010.0

50.0

100.0

150.0

200.0

250.0

300.0

Food Price Index vs. Oil Price

Food Price Index

Oil Price

Time Period

Food

and

Oil

Pric

es/M

onth

+Factor 2: Population

1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 9770

90

110

130

150

170

190

210

230

250

World Population (in 25 million) Vs. FPI

World population(in 25 million) FPI

Period

Popu

latio

n an

d FP

I

+Factor 3: Natural Disasters

Affect-ing Food Prices; 82.10%

No Effect on Food Prices; 17.90%

Percentage of Natural Disasters that Affect Food Prices

Disasters Affecting Food Prices Significantly: Flooding, Drought, Severe Weather, Winter Weather

+Factor 3: Natural Disasters

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 100

0

100

200

300

400

500

600

700

800

Food Price Index vs. Frequency of Natural Disasters

Quarter #

+Indirect Factors

+ConclusionFood prices are forecasted to increase in

the next decade What are the implications?

Oil price is the main driver of the inclining/declining patterns of food prices

84% of the trend is explained by the three main factors: oil price, population and natural disasters

Indirect Factors explain the remaining 16%

+References

+Questions