It's strange to hear the deflation advocates continue their mantra of lower prices while food prices have hit their highest levels in the United States in 26 years in March, and wheat continues to soar in price.
September futures for wheat hit $7.11 on Wednesday, a huge jump of 58 percent from June.
For now wheat is a problem, but it's doubtful that will continue, as countries around the world have increased wheat plantings for several years, and it's more the drought news coverage of Russia and Eastern Europe which is driving wheat prices, more than the actual supply available.
Even so, food inflation is a major threat, and that, probably more than any other element, can lead to social unrest and riots.
Businesses have said the rising inputs associated with their products will be passed on to consumers. And if foolish governments attempt the price control thing, it'll get worse, as enormous shortages will occur, making it even more volatile.
Major foods like meat, dairy and grain is expected to rise higher in price over the next decade, according to the Organization for Economic Cooperation and Development.
Another unknown is how the supply and demand factor will change as consumers in emerging markets increase their meat consumption, which increases demand not only for meat products, but grains used to feed the livestock.
Of larger emerging market countries, India is facing some of the larger inflation problems, with an annualized rate of 10.55 percent as of June.
People can play all the games with numbers they want, and change the definition or parameters of deflation, but inflation will be the problem going forward, and people need to make decisions based on that.
No comments:
Post a Comment