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

[bigbadwolf]

Nevertheless, I continue to wonder how much fault for the current mess China has for manipulating the relative weakness of the yuan?

Then why does the US not do what people like Pat Buchanan, Michael Hudson, and Paul Craig Roberts advocate: erect a tariff barrier? This free trade process is eviscerating US industry. It's no good if a Chinese-made DVD player can be had for $39.99 if I don't have a job to begin with. Or if I do have a job, those cheap imported goods are being had at the expense of displacing American workers, with US multinationals and big box retailers benefiting. This whole free-trade agenda has been pushed single-mindedly by the corporate sector, which has wanted to exploit labor arbitrage. It's not enough to blame China.

 

[gouchobob]

*Snort of derision* -- if you're using official US govt. stats, I don't see the point of this discussion. A recent piece in the NYT:



I find this prognosis more credible:


And this piece in MSNBC:

Just more anti-anything American blather. I don't think you understand the subject or are perhaps trying to confuse people. The prices you are talking about are raw commodity prices not what somebody pays in the supermarket. The cost of the raw commodity usually only makes a a fraction of the cost of a food item. Read the following to get a better understanding of the issues, quit trying to scare people with half-truths.

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

Your sources are a joke, the National Inflation Association? What is that? I tried to find out, apparently it one guy who puts out ridiculous inflation forecasts to scare people into buying penny stocks he also promotes. The MSNBC is just one persons anecdotal findings nothing scientific or credible. The reason you didn't post anything better is that it doesn't exist.

Sorry but but I will stick to government statistics and forecasts, the U.S. isn't the same as Argentina's Indec yet.

 

[gouchobob]

I can't find anything to disagree with in your post. World population is rising. There has been bad weather. But what you're ignoring is the impact of quantitative easing, which makes it easier (and cheap) for the big players to speculate in various markets. That is the key point. We can quibble about its impact.

I don't think anyone here (at least not me) is saying the Fed is acting malevolently. But its policies lead to speculative bubbles in one area after another. If anything, I'd argue that the present economic policy consists solely of building up another speculative bubble.

Wrong again its the Chinese keeping their currency pegged to the dollar at an artificially low rate that has caused the problem.

 

[gouchobob]

Then why does the US not do what people like Pat Buchanan, Michael Hudson, and Paul Craig Roberts advocate: erect a tariff barrier? This free trade process is eviscerating US industry. It's no good if a Chinese-made DVD player can be had for $39.99 if I don't have a job to begin with. Or if I do have a job, those cheap imported goods are being had at the expense of displacing American workers, with US multinationals and big box retailers benefiting. This whole free-trade agenda has been pushed single-mindedly by the corporate sector, which has wanted to exploit labor arbitrage. It's not enough to blame China.

Free trade is good for everybody in the long run, tariff's don't benefit anybody. Argentina has lots of tariffs. Ask the people in Argentina how they like the poor quality of locally produced goods and the high cost of imported goods. Free trade is not just corporations looking for cheap labor, its also people looking for new markets for their goods. The problem with China is that they like and want to continue playing their one-sided game which has created the trade imbalances that now exist.

 

[Ries]

If the Fed is actually driving the dollar down-
(against which currencies?
obviously, it will not act the same against all currencies- some, like for instance the peso, it has been going UP against for years)

Wouldnt that make as many food items cost LESS as more?

For instance, the USA is a huge net food exporter-
Apples, cherries, crab, salmon, corn, wheat, soy, rice- all of that is grown or harvested in the USA, and exported to other countries.

If the dollar goes down against the yuan, for example, chicken feet become cheaper. The USA exports around 3 Billion chicken feet a year to China.

I still maintain that the web of events and factors that affect world food prices are, indeed, global, and far beyond the ability of any one currency exchange rate, even the dollar, to affect.

Certainly, worldwide or local inflation will affect some prices- and exchange rates will make the Egyptians buy more US wheat over Russian wheat, depending on them.

But Oil prices and weather both dwarf any affect that a few hundred billion of QE could possibly have on world markets.

The chinese are buying 10 million new cars every year. They all need gas.
The chinese and indian economies are growing at significant rates lately- and a lot of that is oil and raw materials intensive- infrastructure spending in China alone consumes huge amounts of world production, and those new roads and trains then suck in more energy. The chinese are building something like one new power plant a month.

The unmet demand for food in both China and India is HUGE- as incomes go up, and they have been, in both places, the amount of increases in food consumption for both countries will increased dramatically- and thats before you even factor in population increases- which are no small amount, worldwide.

Food will continue to rise, even if the dollar suddenly rose to $3 per EURO tommorow.

 

[TomAtAlki]

"The USA exports around 3 Billion chicken feet a year to China."

I wish I had invested in chicken feet but who knew? :=)

 

[tomedison]

If the Fed is actually driving the dollar down-
(against which currencies?
obviously, it will not act the same against all currencies- some, like for instance the peso, it has been going UP against for years)

I can't dispute your basic premise that other factors have more to do with food prices than a weak US$, but I disagree that the US$ has been going up against the peso or any other currency. Yes, in absolute terms the US$ has gained on the peso, but it would have normally gained a lot more given the inflation that exists in Arg. It is only because the US$ has weakened that it isn't now at 5 AR pesos. I'm not aware the US $ has risen against any other currency except maybe weird ones like the Venezuelan Bolivar etc. It has dropped against Canadian, Australian and other currencies significantly and has waffled against the euro. I'm in Rio now and it is easily as expensive as NYC.
BBW - when asked to substantiate a positive assertion, e.g., 65% of the trade deficit with china is attributable to labor arbitrage, to wit, US corps' outsourcing of manufacture to China, it doesn't help your credibilitry to resort to deduction.

 

[John.St]

"The USA exports around 3 Billion chicken feet a year to China."

I wish I had invested in chicken feet but who knew? :=)

Then you would now own billions of chickens without feet and the animal protection crowd would demand you bought wheel chairs for them at a huge cost

 

[bigbadwolf]

BBW - when asked to substantiate a positive assertion, e.g., 65% of the trade deficit with china is attributable to labor arbitrage, to wit, US corps' outsourcing of manufacture to China, it doesn't help your credibilitry to resort to deduction.

I don't know where I read it, which is why I placed a question mark after the figure. Until I find the source, you will have to make do with a piece by Paul Craig Roberts:

[SIZE=-1]

The pressure put on China is misdirected. The exchange rate is not the main cause of the US trade deficit with China. The costs of labor, regulation and harassment are far lower in China, and US corporations have offshored their production to China in order to benefit from these lower costs. When a company shifts its production from the US to a foreign country, it transforms US Gross Domestic Product (GDP) into imports. Every time a US company offshores goods and services, it adds to the US trade deficit.[/SIZE]

[SIZE=-1]Clearly, it is a mistake for the US government and economists to think of the imbalance as if it were produced by Chinese companies underselling goods produced by US companies in America. The imbalance is the result of US companies producing their goods in China and selling them in America.

[/SIZE]

 

[Ries]

The americans eat the chickens, the chinese eat the feet. For some reason, the chinese have yet to develop a chicken with more than two feet, and the americans have yet to develop a taste for chicken feet.

The dollar is constantly going up and down against world currencies- if you look at the dollar versus euro for the last ten years, while the general trend has been for the dollar to fall against the euro, there have been some big peaks and valleys along the way.

In the last 5 years, its been as low as $1.20 and as high as $1.60 per euro- thats a 40 cent range, and all due to a wide variety of circumstances that Bernanke only wishes he could control.

http://www.oanda.com/currency/historical-rates/

It has not been, and probably will not be, a simple predictable single line downward- it jumps all over the place.

The chinese have been doing a better job of keeping the yuan relatively stable against the dollar, but only because they routinely will dump $20 or $50 Billion into the market, buying and selling to support their state determined exchange rate. The USA does not have this luxury, being a net deficit economy, not a net surplus like the chinese.

Currently, the US is a pretty small portion of the chinese economy- exports in general are somewhere around 20% of the chinese economy, and, of that, the USA is only about 20% of chinese exports.

So, in total, the US exports only represent about 5% or so of the chinese economy.
The US needs them a whole lot more than the Chinese needs the US market.
Especially since the crash has weaned a lot of chinese industries of US customers- thousands of factories that made things like toys and christmas decorations closed in the last 3 years- and the chinese economy still is growing at over 10% a year- so all those jobs have been absorbed making things for china, and for export to their other customers.

The US is becoming less and less relevant to the chinese.
The dollar is a safe international currency- and when we see events like the recent unrest in Libya, that is reinforced- in the last couple of weeks, the interest rate the USA must pay to borrow money has gone DOWN- because the "invisible hand" of the world market finds the USA to be an even safer place to invest in troubled times.
Interest rates on T Bills are a direct result of consumer confidence- Norwegian pension funds, Chinese banks, Saudi Princes, Japanese grandmas- all buy T Bills and US bonds, and all are buying MORE of them, and thus lowering the rates, when trouble stirs around the world.

This is not a theory or my ideology- its a simple observation of real world events.