Spatial Distribution of the International Food Prices: Unexpected Heterogeneity and Randomness

Global food prices are typically analysed in a time-series framework. We complement this approach by focusing on the spatial price dispersion of the country-pair bilateral trade in the international food trade network (<em>IFTN</em>), for ten relevant commodities. The main purposes are to verify if the Law of One Price (<em>LOP</em>) holds and to investigate the emergence of randomness in the price-formation mechanism. We distinguish between the “internal” variance, which indicates the magnitude of price discrimination, and the “external” variance, that is a measure of price dispersion. We find that, for some commodities, spatial price dispersion is remarkable and persistent over time (i.e., failure of the <em>LOP</em>) and that there exists a strict correlation between price spikes and peaks in spatial price variability. We test whether the price distribution can be replicated through a stochastic process of extraction. Surprisingly, the actual distribution of prices, for several commodities, is well described by a random distribution. Then, the process of data aggregation is not neutral because the information at the micro-level scale might be lost at the macro-scale, due to the complexity of the <em>IFTN</em>. Finally, we discuss some possible economic explanations of these outcomes and the main methodological, environmental, and policy consequences.