Excessive Food Price Variability Early Warning System is 'first step'
The Excessive Food Price Variability Early Warning System has been developed to work as a gauge of price swings for corn, wheat and soybeans and can help policy makers identify “excessive volatility,” according to the International Food Policy Research Institute.
The system determines the statistical probability of a price move on a particular day, based on trading in the prior 60 sessions, according to Carlos Martins Filho, a senior research fellow at the Institute who helped develop the model. If the chance is 5% or less, he said, the move is deemed extreme or abnormal. “Our goal is here to define a clear method and metric to define when commodities are experiencing clear higher volatility,” said Filho. “You first have to identify, consistently and in a very transparent manner, periods of extreme price volatility. It’s a first step. It’s not a tool that will lead to any policy prescription.”