View Full Version : Days of cheap food are over (Article title)
Four paragraphs excerpted from a much longer article.
Notice the interplay between general inflation, fuel prices, and efforts to increase production of bio-fuels.
I suspect that higher food costs will tend to increase dissatisfaction among some elements of the population, particularly the lower strata in third-world countries. Perhaps that will result in a more volatile political landscape.
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Days of cheap food are over, say suppliers as ingredient costs soar
Premier Foods, the group behind Branston Pickle, Oxo, Mr Kipling and Quorn, said a "systemic change" in world ingredient markets, with "violent rises" in many commodities, had heralded a new era, bringing to a close almost 15 years of relatively stable, low inflation.
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Chief executive Robert Schofield said: "Over the past 30 years the cost of food as a proportion of disposable income has come down from 30% to less than 10%. It is going to edge back up ... I think we've got two or three years of inflation at the very least."
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In a robust message to the big retailers, Mr Schofield said: "I have no intention of taking a hit on margin ... Imagine what would happen if you've got 20% or 25% inflationary pressure on your business and you don't put your prices up. These are numbers that put you out of business if you don't do that."
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Demand from the far east and the trend toward bio-fuels were driving up carbohydrates around the world. "We can't see, from where we are sitting, that these sorts of pressure are going to go away, so this is not a blip ... If you're buying pasta in Italy it has gone up 25%; if you're buying tortillas in Mexico it's gone up; if you're buying bread in the UK and Europe it has gone up." There was a knock-on impact on livestock, milk and glucose prices, he added.
LINK to article (http://business.guardian.co.uk/story/0,,2162376,00.html)
Definitely and it seems to be on an exponential path.
I have watched the price of hay increase dramatically. A bale of hay now goes for about $22. The same bale was $17 a year ago and $12 the year before that. Every year it gets harder and harder to find good quality.
Farm land is disappearing which creates less competition for growing good quality. The demand far exceeds the supply. The farmers know they will get a decent price for hay they would have pitched cheap even 5 years ago.
Raw grain is the same. The quality isn't going down because grain still has a human consumer market, but the prices are increasing because of more demand and less farms. Two hundred lbs of grain which was $38 a year ago is now $55.
Similar story on citrus. The land is being sold for development. FL has lost I don't know how many citrus farms because of hurricanes (spreading citrus canker) and land sold for development.
Gas prices are just one factor in the equation. I watch gas prices go up and down, however, I never see the end product reduce once it has reached a certain level. Land is the finite resource. Somewhere I read there is enough oil in North America alone to last 400 years. How much farm land will we have in 10 years? Not to mention no large animal Vets......another industry taking a hit. Who will attend to the animals we humans like to consume?
For example:
http://www.countryworldnews.com/Editorial/ETX/2006/et0921vets.html
Oil is a very small part of it.
.02
Thank you for your thoughts, Pegasus. I wasn't aware of some of the numbers you mention. And the transition from farmland to suburban tract homes cannot help but reduce supply, as you point out.
I came across a new item this morning from the Financial Times. LINK to article (http://http://www.ft.com/cms/s/0/1f0d4c6a-5ca1-11dc-9cc9-0000779fd2ac.html)
I've reproduced it below - notice that food represents up to 65% of consumer spending in developed nations.
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UN warns of food price unrest
By Javier Blas in Rome
Published: September 6 2007 18:57 | Last updated: September 6 2007 18:57
Developing countries face serious social unrest as they struggle to cope with soaring food prices, inflation that shows no signs of abating, the United Nations’ top agriculture official has warned.
Jacques Diouf, director-general of the UN’s Food and Agriculture Organisation, said surging prices for basic food imports such as wheat, corn and milk had the “potential for social tension, leading to social reactions and eventually even political problems”.
Mr Diouf said food prices would continue to increase because of a mix of strong demand from developing countries; a rising global population, more frequent floods and droughts caused by climate change; and the biofuel industry’s appetite for grains.
“That combination of factors would most likely lead to increases in food prices,” Mr Diouf told the Financial Times in an interview.
Signs of the social unrest these prices could cause were seen in Mexico this year where mass protests were triggered by rising corn prices. Mr Diouf said food represented about 10-20 per cent of consumer spending in industrialised countries, but up to 65 per cent in developing nations.
“If we continue to see an increase in their [food] prices and in their import bill for food, there is a serious potential situation,” Mr Diouf said.
The warning comes as wheat prices are at a high, forcing developing countries such as India and Egypt to pay record prices for their food imports in what cereal traders described as “panic buying” to beef up reserves.
Wheat prices this week rose to a record $8.86 a bushel in Chicago, up about 60 per cent since January. Dairy product prices have also setting records, while other commodities, such as corn and soyabeans, are trading well above their historical averages.
Mr Diouf said although the biofuel industry directly increased the consumption of only a handful of agricultural commodities, such as corn and rapeseed, its effect spread to other food products because less acreage was devoted to non-biofuel crops and the cost of feeding livestock with grain was pushed up.
“The biofuel industry is a new factor creating demand for food for a non-food use,” he said.
Fears about the inflationary impact of biofuels on global food prices have prompted Cargill, the world’s largest agricultural company by revenues, to question the White House-led push for an increase in ethanol production through tax subsidies.
Additional reporting by Eoin Callan in Washington
The Reaper
09-07-2007, 07:39
Raw materials are up, up, up.
Food is not the only problem.
Steel, concrete, and other construction materials are still very high right now.
Oil is testing new highs again, and gasoline prices will follow.
And as most of us are aware, ammunition prices have doubled, with more increases yet to come, and surplus ammo has almost completely dried up.
I understand the desire for a drop in interest rates to protect investors and those who were ignorant enough to take ARMS that are coming due, but inflation is becoming a problem.
A tough situation to deal with.
TR
82ndtrooper
09-07-2007, 09:54
The Reaper makes an excellent point regarding the ARMS buyer and the current real or percieved crisis in the real estate market. I've said time and again that converting to an ARMS in the low side of the interest rate market is only inviting an higher rate down the road. The same holds true of the new buyer that opted for shorter term adjustable ARMS just 3 or 4 or 5 years ago. This crisis rests on the banks and loan company's that enticed the buyer with a sweetner rate and savings and income cash flow presentation. What they forgot to add in their presentation for the applicant was a rising rate scenario. That, in my book, is simply fraud and show's little concern for his or her loan practices.
Bush will no doubt take the blame for the real estate crisis as well from those Oh so enlightened ones that have yet to attend an economics 101 class. :rolleyes:
As for Mr. Schofield, mentioned in the article, I have to say that I find his excuse for rising inflation some what questionable. Just because there may be an inflation increase does not alway's mean that an increase in his products prices are necessarily called for. His business model is most likely lacking in the market share department and his product distribution network is limited. Others in his business have most likely accounted for this scenario.
A good business model alway's accounts for rising inflation, cost of raw goods, labor costs, etc, etc, etc. I'd rather have dominant market share than have customers seeking another similar product from a discounter.
I'd like to see his forward ten year business model.
Ret10Echo
09-07-2007, 11:56
Not to mention the increase in minimum wage. MD is putting in place an adjusted minimum based on geographical proximity to the NCR. The wage will range between $8 and $11+ depending on how close you are to D.C. . Now what makes people think that the cost of goods and services in the area will not experience a corresponding increase?
Back on track. The "renewable" energy and bio-fuels will only benefit us if the
material used to make the bio-fuel was a waste product that you would normall have throw out/disposed of. I mean, I could rip all the copper wire out of my house to sell for scrap and make some money...but does that make sense?
The Reaper
09-07-2007, 15:11
The blame is alrerady being placed on the lenders.
If they made sub-prime loans, they are predatory. If they didn't make the loans, they are racist and discriminatory.
Bottom line - if you have a low credit score, bankruptcies, or a history of late payments and write-offs, there is a reason that your interest rate is going to be higher than someone with a stable employment and credit history. You are obviously much more likely to default on your loan. And with the ARM, the bank is betting that rates will be higher sooner, and you are betting that they will stay low. With rates at historic lows, guess which way the trend line is almost certain to work?
Why is this a shock, and people seem to think that the USG should bail them out of their bad decisions and risk factor?
Young people, look at this as an object lesson of what happens to people with a bad credit history and gullibility/lack of SA, as well as the desire to live beyond their means.
TR