Risk Assessment of Food Supply: A Computable General Equilibrium Approach

The world’s food markets have experienced significant instability in recent years and this instability has led to increasing concerns over food security at both the regional and global levels. This thesis employs an advanced computable general equilibrium (CGE) approach and conducts empirical research to address three important topics in the literature of food security assessment.

The first element of the research revisits the long-standing trade liberalisation debateon Japanese rice imports. The Japanese government has been reluctant to liberalise the rice trade on the grounds that it would threaten its ‘‘national food security’’ in the events of such shocks as crop failure and trade embargoes, and it would make the Japanese economy more dependent upon food imports and, thus, more susceptible to these risks. Using a CGE model with a Monte Carlo simulation, the research quantifies the welfare impacts of productivity shocks and export quotas by major rice exporters and finds little evidence of Japan suffering
from such shocks.

The second aspect of the research explores the root causes of the soaring grain prices in 2008 by assessing the impacts of possible factors on world-market prices of wheat, rice and maize within a global CGE modelling framework. It is found that the primal actual demand and supply factors explain only about 20 per cent of the increases in terms of wheat, rice and maize.

The third part of the research assesses the impact of the escalating world-market grain price in 2008 on the grain prices in the least developed countries (LCDs), using a world trade CGE model. It finds that while the price rises of wheat and maize are limitedly explained by the main real-side factors, over half the rice price hike is accounted for by export restrictions and oil price spike. The emergence of biofuel production, which is popularly considered to be one of the most critical driving forces, marginally increases the grain prices of LDCs. This is because LDCs have little import and export of maize, and feedstock of biofuel (sugar cane and oil seed) does not show strong substitutive effects on the price of wheat, rice and maize.

Through these analyses, the thesis makes a methodological contribution and identifies policy implications. The methodological contribution is the application of the Monte Carlo method to CGE analysis, which made it possible to evaluate the probabilistic impacts of Japan’s rice trade liberalisation. Policy implications are identified for trade liberalisation, grain stocks, export restrictions, and biofuel policy including energy price and financial speculation.