For the mainstream’s view of the world, price inflation has hardly been a concern.
Yet in reality, price inflation appears to be seeping into the global economy mostly channeled through the commodity spectrum (one must add health, education costs among the other contributors).
A particular cause of concern has been rising international food prices which according to the FAO is at a 6 month high.
chart from FAO
World food prices rose in September to the highest in six months as dairy and meat producers passed on higher feed costs to consumers, the United Nations’ Food & Agriculture Organization said.An index of 55 food items tracked by the FAO rose to 215.8 points from a restated 212.8 points in August, the Rome-based agency reported on its website today. Dairy costs jumped the most in more than two years.Livestock breeders and dairy farmers are passing on the higher cost of feed, after grain prices jumped in June and July, according to Abdolreza Abbassian, an economist at the FAO in the Italian capital. Higher prices don’t mean a food crisis is imminent, he said today by phone.“Despite a very difficult market, the fundamentals that suggest a food crisis are just not there,” Abbassian said. “Market sentiment is now accepting high prices more as a rule than as an exception.”
Surging food crisis has been associated with social strife, particularly as one of the major trigger to the recent Arab Spring revolts. (chart from Sovereign Man)
While changes in weather patterns have proven to be a catalyst, many other policies such as tariffs, subsidies (agri and bioethanol) and others plays a role in exacerbating the supply side situation.
Importantly, massive inflationism by global central banks has been a key contributor to the demand side.
A continued ascent in food prices will amplify the risks of stagflation especially pronounced for emerging markets.
This is one very important dynamic to keep an eye on.
Have some steak today before they become pricey.
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