Start cranking up your food bills now

Friday 4 February 2011, 8.14pm HKT


Chinese lapcheung (Getty Images)

GLOBAL FOOD PRICES hit record highs in January 2011, the United Nations says. The UN index of 55 food commodities recorded price increases for seven straight months and the inflationary pressure is likely to continue for many more months.

In the USA, farmers reported 11% price increases in just one month for corn, sugar and stockfeed commodities.

The outlook on worldwide skyrocketing food prices basically rests on demand in China. If Chinese demand on food and non-food commodities don’t let up, that puts upward pressure on food prices across the board.

The U.S. economy is a good barometer of commodity prices globally because of its production as well as consumption of durable (e.g. machinery, electrical appliances, etc) and non-durable goods (e.g. food, water, clothes, etc).

[via Bloomberg TV news item, 3.40am, 04 Feb 2011]

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via Agora Financial

“The jagged [yellow] line shooting up 50% since June of this year [2010] is the UBS Bloomberg Constant Maturity Commodity Index for farm products. The smooth, gently accelerating [blue] line is the food component of the consumer price index. The latter [Food CPI: blue] is lagging the former [CMCI: yellow] — a situation that can’t last. And won’t.”

(5 min. Forecast: The Embargo, Agora Financial, 22 Oct 2010)

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ASIDE

Food price inflation has been on the rise since around year 2000, so this isn’t news to anyone. Some related stories:

Food Price Crisis 101 (Center for American Progress, 01 May 2008)

This article is highly recommended reading:

“Food prices have risen 83 percent worldwide since 2005 and some staples such as rice and wheat have risen 141 percent and 130 percent respectively in the last year [2007] alone.” (Ibid.)

Rising prices and low stockpiles have fueled civil strife and political instability in urban areas of vitally strategic countries such as Egypt, Indonesia, Afghanistan, Somalia, Haiti, Pakistan, and India.” (Ibid.)

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Betting the Farm (The Sunday Telegraph via The Standard, o1 June 2009)

Highlights:

“The government obviously believes that speculation by investors was the source of recent price rises.”

“… there are fundamental trends driving the increases … rising global population will be a fundamental driver of the rising price of food …”

“Dry places are getting dryer and wet places are getting wetter and this is playing havoc with farming.”

Rising wealth leads to rising food consumption but it also leads to more meat consumption. Raising cattle or sheep requires significantly more grain and stimulates demand for soft commodities.”

“… demand for food continuing to rise significantly as the global population rises and gentrifies, the fundamental arguments for continued rises in soft commodity prices and all that means for inflation are easy to see.”

*

Food Inflation Coming? (Satwaves pro edition, 24 Oct 2010)

“Food, like energy, is an area where compression of margins is very limited:  raw material prices are largely passed through to the consumer.” (Ibid.)

*

National Inflation Association Projects Future U.S. Food Price Increases (520 kB, PDF)

“The report highlights how despite cotton rising by 54%, corn rising by 29%, soybeans rising by 22%, orange juice rising by 17%, and sugar rising by 51% during the months of September and October alone, these huge commodity price increases have yet to make their way into America’s grocery stores because corporations have been reluctant to pass these price increases along to the consumer. In today’s dismal economy, no retailer wants to be the first to dramatically raise food prices. However, NIA expects all retailers to soon substantially raise food prices at the same time, which will ensure that this Holiday shopping season will be the worst in recorded American history.” (Back to Basics, 13 Nov 2010)

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Chartology: Visualizing Food Inflation (Steadfast Finances, 05 Nov 2010)

via Steadfast Finances

“If you’re wondering what’s going on, the answer is pretty simple: commodity prices have soared in the presence of a weakening U.S. Dollar (e.g. quantitative easing).” (Ibid.)

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Images (all pilfered and used without permission):

  • “Chinese lapcheung”: processed raw cured meat, pork, lamb and beef biltong on sale in traditional old Chinese Soho food market on Graham Street, Hong Kong © Tim Graham of Image Bank via Getty Images (image #81868731)
  • “A Matter of Time” via Agora Financial
  • “1-Year Relative Performance” chart via Steadfast Finances

© The Naked Listener’s Weblog, 2011.

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