Working Paper
US Policy Contributions to Agricultural Commodity Price Fluctuations, 2006–12

Since 2006, global prices and price volatility for foodgrain commodities have spiked frequently and dramatically. Such spikes have had the heaviest economic and social impact on developing nations, where agriculture accounts for a sizable portion of economic activity. We demonstrate how US public policies have contributed to these spikes. We first assess the impacts of US agricultural and macroeconomic policies on basic food commodity markets in the United States and their spillover effects on world markets prior to 2006. We then focus on new causal mechanisms that have emerged since 2006, sourced with energy and environmental policies. We assess the emergence of US biofuel policies, highlighting how these policies have interacted with each other and with biofuel policies in the rest of the world. This assessment focuses on the role of such policies in the integration of fuel and foodgrain prices. We also analyse the political economy of US biofuel policies, the changing US political landscape, and current Farm Bill politics and their linkages to biofuels. We demonstrate that the ‘iron triangle’ that once influenced governmental intervention in programme commodity markets has expanded into an ‘iron maze’ of environmental, energy, and agricultural organized interest groups that continues to evolve.