Multicommodity Trade Network Equilibrium With Mixed Demand and Food Security

ABSTRACT Rising food insecurity is a pressing global concern. Many developing countries rely on a combination of international trade and food aid to satisfy the nutritional and caloric demands of their populations. Trade openness has been shown to have positive long‐term effects on food security; however, it can cause short‐term crises in food availability and affordability. Strategic grain reserves are among the tools governments use to control food prices and ensure availability while maintaining trade openness. This paper constructs a multicommodity trade network equilibrium model with mixed demand to examine the implications of strategic grain reserves for food security. The model incorporates fixed and elastic demand components, representing commodities held in reserves and those entering markets through trade, respectively. The equilibrium conditions are stated, and alternative variational inequality formulations are presented. Several simple examples are solved analytically for illustration, and an algorithmic framework for computing equilibrium solutions to larger cases is provided. A set of numerical examples is presented, inspired by wheat exports from the Black Sea region to North and Sub‐Saharan Africa, as well as purchases by the World Food Program. The impacts of the Russo‐Ukrainian war on trade patterns and the effects of varying strategic reserve levels are assessed. We observe that each additional one million metric tons of fixed demand raises the corresponding market's equilibrium demand price by $0.830–$0.886 per metric ton, with the cumulative increase reaching approximately $11 per metric ton over the reserve levels considered and substantial cross‐market spillovers.