  Recent droughts in the midwestern United States threaten to cause global
catastrophe driven by a speculator amplified food price bubble. Here we show
the effect of speculators on food prices using a validated quantitative model
that accurately describes historical food prices. During the last six years,
high and fluctuating food prices have lead to widespread hunger and social
unrest. While a relative dip in food prices occurred during the spring of 2012,
a massive drought in the American Midwest in June and July threatens to trigger
another crisis. In a previous paper, we constructed a model that quantitatively
agreed with food prices and demonstrated that, while the behavior could not be
explained by supply and demand economics, it could be parsimoniously and
accurately described by a model which included both the conversion of corn into
ethanol and speculator trend following. An update to the original paper in
February 2012 demonstrated that the model previously published was predictive
of the ongoing price dynamics, and anticipated a new food crisis by the end of
2012 if adequate policy actions were not implemented. Here we provide a second
update, evaluating the effects of the current drought on global food prices. We
find that the drought may trigger the expected third food price bubble to occur
sooner, before new limits to speculation are scheduled to take effect. Reducing
the amount of corn that is being converted to ethanol may address the immediate
crisis. Over the longer term, market stabilization requires limiting financial
speculation.
