Has world cereal market instability increased?

This paper argues that world cereal prices are good indicators of the state of world cereal markets. It tests whether real prices for wheat, rice and maize exhibit deterministic or stochastic trends, concluding that the underlying trends are most likely deterministic. After appropriate deterministic detrending, the paper tests for increased variance of the residuals of real cereal prices, finding that there does not appear to be evidence for increased year-to-year price instability. Tests for increased intra-year price variability also reject the hypothesis of increased variability. Discussion of recent changes in the pattern of world cereal production and trade suggests that these conclusions are not contrary to observed trends.