Food prices at record high - to stay high for extended period

[John.St]

According to Financial Times, quoting the IMF, FAO’s index of global food prices has increased by 40 percent since June 2010 and is now 5 per cent above the previous record prices in June 2008.

http://www.ft.com/cms/s/0/4c46da8c-45ca-11e0-acd8-00144feab49a.html#axzz1FgW0qCmg
Edit: link works for registered users only.

Use these instead, if not reg.:

FAO Overview: http://www.fao.org/worldfoodsituation/wfs-home/foodpricesindex/en/

FAO Report: http://www.fao.org/giews/english/gfpm/GFPM_03_2011.pdf

 

[barnaby33]

Thats what happens when the Fed tries to rescue the US from its fiscal profligacy. Most of the printed money is going straight into bank vaults but it has sparked inflation fears. Those fears have driven up commodity costs all across the board. Since it doesn't matter where you live those commodities are paid for in dollars, everyone feels the pinch.

More of this to come when QE3/4/5/6/7/8/9 etc announced in the next few years. Its interesting because base money supply isn't increasing that fast, but the fear that all those bonars are going to come out of bank vaults is the spark that has lit the fire of commodity price increases. I just paid 4 bucks a gallon for gas, thats gotta leave a mark!

 

[gouchobob]

John St. -The link apparently quoting a 40% in food prices doesn't work. As a matter of fact I don't think prices have risen by 40% since June, maybe in Argentina but not the world as a whole.

Barnaby33- Do you think blaming the U.S. is quite fair? Don't higher prices have something to do with demand from places like China? Doesn't your $4 gas have something to do with unrest in the middle east?

 

[John.St]

John St. -The link apparently quoting a 40% in food prices doesn't work.

Oh, problem is that I am a registered FT user.

As a matter of fact I don't think prices have risen by 40% since June, maybe in Argentina but not the world as a whole.

UN's FAO don't agree with you.

World Food Price Index 2010 JUN: 168 - 2011 FEB: 236

FFPI: http://typo3.fao.org/fileadmin/templates/worldfood/images/index_table.jpg

FAO Overview: http://www.fao.org/worldfoodsituation/wfs-home/foodpricesindex/en/

FAO Report: http://www.fao.org/giews/english/gfpm/GFPM_03_2011.pdf

 

[barnaby33]

Barnaby33- Do you think blaming the U.S. is quite fair? Don't higher prices have something to do with demand from places like China? Doesn't your $4 gas have something to do with unrest in the middle east?

So Blaming any one entity is never a successful strategy except for demagoguery. However in this case yes the US is essentially the prime mover in whats happening. Rather the US has made policy decisions that set in place over decades what is now happening. To say that the US is to blame as if we woke up one idle tuesday and hit the "inflate" button, would be false. The decisions we've made in the last few years are the outgrowth of the ones we (as a society and a government) made in the few years previous.

I've lived in SoCal my entire life. Living here gives you a VERY distorted notion of what the world is like. If you don't travel and most Americans don't it can be hard to connect the dots. Even if you do it may be hard. Think about it for a moment though, Population has been increasing globally for decades at an increasing rate. Why have food prices gone parabolic in the last year or so? Did the Chinese suddenly all start demanding Buick's fresh baked bread and copper? Commodity price increases can increase quickly, at the margin. However that entire dynamic demands that demand closely match supply. The world is rampant with over capacity, including that most precious of all, oil. If you doubt the last statement, which I hope people do, check the spread on WTI vs Brent crude.

Josh

 

[gouchobob]

Oh, problem is that I am a registered FT user.

UN's FAO don't agree with you.

Food Price Index 2010 JUN: 168 - 2011 FEB: 236

FFPI: http://typo3.fao.org/fileadmin/templates/worldfood/images/index_table.jpg

FAO Overview: http://www.fao.org/worldfoodsituation/wfs-home/foodpricesindex/en/

FAO Report: http://www.fao.org/giews/english/gfpm/GFPM_03_2011.pdf

Ok, I see where you are coming from. This is a big problem in underdeveloped countries where food purchases equal a big percentage of income. Although a big increase in grain costs doesn't mean the cost of a loaf of bread is going up much as grain is only one component of the bread.
Food inflation (i.e. what people actually pay at the supermarket) in the U.S. is predicted to increase only 2 to 3 percent this year which is a far cry from 40%. A good article discussing food prices is linked below.

http://www.timesnews.net/article.php?id=9030300

 

[gouchobob]

So Blaming any one entity is never a successful strategy except for demagoguery. However in this case yes the US is essentially the prime mover in whats happening. Rather the US has made policy decisions that set in place over decades what is now happening. To say that the US is to blame as if we woke up one idle tuesday and hit the "inflate" button, would be false. The decisions we've made in the last few years are the outgrowth of the ones we (as a society and a government) made in the few years previous.

I've lived in SoCal my entire life. Living here gives you a VERY distorted notion of what the world is like. If you don't travel and most Americans don't it can be hard to connect the dots. Even if you do it may be hard. Think about it for a moment though, Population has been increasing globally for decades at an increasing rate. Why have food prices gone parabolic in the last year or so? Did the Chinese suddenly all start demanding Buick's fresh baked bread and copper? Commodity price increases can increase quickly, at the margin. However that entire dynamic demands that demand closely match supply. The world is rampant with over capacity, including that most precious of all, oil. If you doubt the last statement, which I hope people do, check the spread on WTI vs Brent crude.

Josh

I'm not sure I understand your points. The purpose of Uncle Ben's QE program is to force a re-balance of trade between the U.S. and China.
Basically the Chinese for years have manipulated their currency to keep its value low versus the dollar to make their exports cheap and anything the U.S. would like to ship them expensive. Uncle Ben is saying no more. QE is basically an effort to devalue the dollar to force the Chinese to revalue their currency upward or suffer the consequences of higher inflation. Either through revaluation or inflation(their production cost will raise as result) trade will be brought more into balance.

 

[bigbadwolf]

I'm not sure I understand your points. The purpose of Uncle Ben's QE program is to force a re-balance of trade between the U.S. and China.
Basically the Chinese for years have manipulated their currency to keep its value low versus the dollar to make their exports cheap and anything the U.S. would like to ship them expensive. Uncle Ben is saying no more. QE is basically an effort to devalue the dollar to force the Chinese to revalue their currency upward or suffer the consequences of higher inflation. Either through revaluation or inflation(their production cost will raise as result) trade will be brought more into balance.

I don't know who's saying this but it isn't true. The US wants to keep running deficits and having foreigners accept paper "assets" for real goods. QE is not about balancing trade. The purported motive has been to "stimulate" the economy, which has not been happening. The real motive is probably to bolster the balance sheets of large financial firms, and make available funds for speculative purposes. Some of these funds have been used for speculating on food prices and according to some analysts have been a factor in their rise. Take it far enough and the dollar-based global financial system will buckle.

 

[gouchobob]

I don't know who's saying this but it isn't true. The US wants to keep running deficits and having foreigners accept paper "assets" for real goods. QE is not about balancing trade. The purported motive has been to "stimulate" the economy, which has not been happening. The real motive is probably to bolster the balance sheets of large financial firms, and make available funds for speculative purposes. Some of these funds have been used for speculating on food prices and according to some analysts have been a factor in their rise. Take it far enough and the dollar-based global financial system will buckle.

No I think your thinking is a little behind the times and perhaps overly influenced by sources probably a little out of touch with reality. I don't think its purpose is to give cash to financial institutions so they can speculate with it, sounds kind of like a conspiracy theory to me. I think what I'm saying makes a lot more sense. Rea the link below.

http://en.21cbh.com/HTML/2010-11-9/xMMDAwMDIwNTIxMw.html

The Chinese are quite vocally complaining that this is currency manipulation which it is, but the Chinese are the kings of currency manipulation, its the pot calling the kettle black.

 

[tomedison]

I don't know who's saying this but it isn't true. The US wants to keep running deficits and having foreigners accept paper "assets" for real goods. QE is not about balancing trade. The purported motive has been to "stimulate" the economy, which has not been happening. The real motive is probably to bolster the balance sheets of large financial firms, and make available funds for speculative purposes. Some of these funds have been used for speculating on food prices and according to some analysts have been a factor in their rise. Take it far enough and the dollar-based global financial system will buckle.

Pretty esoteric stuff. I'm a little confused.
Does the fact that the purported motive has not brought sufficient results yet mean it is not the true motive?
Ascribing the "probable" real motive to be to bolster balance sheets of large financial firms ...- is that like saying the real probable motive is helping US corps to stay profitable? Is that bad?
Would apprecite links to some analysts who demonstrate the profits showing up on corporate balance sheets are being used to speculate on food prices to a significant degree.
Take anything far enough and it will buckle. What do you want to say? Should the US remain quiescent while China adopts a monetary policy geared to gain unfair advantage? What do you suggest to create a better system?