WP1: How Fertilizer Affects Food Prices

Did the Fertilizer Cartel Cause the Food Crisis?

by Hinnerk Gnutzmann and Piotr Spiewanowski

Abstract: Food commodity prices escalated during the 2007/2008 food crisis, and have scarcely fallen since. We show that high fertilizer prices, driven by the formation of an international export cartel as well as high energy prices, explains the majority of the recent price spikes. In particular, we estimate the pure fertilizer cartel effect explains up to 50% of crisis food price increases. While population growth, biofuels, high energy prices and financial speculation doubtlessly put stress on food markets, our results help to understand the severity and sudden emergence of the crisis and suggest avenues to prevent its repetition.
Keywords: food crisis, fertilizer, cartel, competition policy

Fertilizer Fuels Food Prices: Identification through the Oil-Gas Spread

by Hinnerk Gnutzmann and Piotr Spiewanowski

Abstract: Since the 2008 Food Crisis, the link between agriculture and energy has become contentious. Agriculture consumes energy both directly, through oil products, and indirectly, through fertilizer. Since fertilizer cost depends on natural gas prices, we exploit variations in the oil/gas spread to estimate the causal cost contribution of fertilizer to agricultural commodity prices. Fertilizer accounts for 44% of food commodity cost, far exceeding the importance of direct energy, making it essential for understanding food markets. Shocks to fertilizer markets may thus have a far wider economic and social impact than so far acknowledged.
Keywords: food-energy link, commodity markets, fertilizer



WP3: Finance, Speculation and Commodity Markets

Stock Market Response to Potash Mine Disasters

by Oskar Kowalewski and Piotr Spiewanowski

Abstract: We examine the stock market reaction to natural and man-made disasters in potash mines. We use a sample of 44 mining accidents worldwide over the period 1995-2016. A quarter of the accidents were the result of a natural disaster, such as flooding, that often ended in the closure of the potash mine. The remaining accidents were caused mainly by human error, and almost 50% were work accidents often associated with serious injury or death. On average, mining firms experience a drop in their market value of 0.89% on the day of a disaster. However, we observe a significantly stronger response of the stock market to natural events. Indeed, the regression analysis confirms that the firm’s market loss is significantly related to the seriousness of the accident. On the other hand, we do not find any other micro- or macro-level factors that determine the stock market reaction following a disaster.
Keywords: potash mine, stock market, disasters, event study, working accident, catastrophe