Food Prices Increasing

skeptik · Post by **skeptik** » 25 Aug 2006, 10:58

ianryder wrote:To put people's minds slightly at rest, whilst googling about the coming 'food crisis' a couple of weeks ago I found lots of scary reports and predictions for the coming winter. It was then I noticed that a lot of the ones I had been reading were from 2003 and we're still here and I don't remember much of a panic.

Ha! A good reminder that one has to keep the bullshit filters and spin compensators regularly maintained. Journalists aren't interested in anything except worst case scenarios. Why? Because thats what sells. Good news is not news. "It's not a problem, we don't think much is going to happen" doesnt make the front page.

I dont mean that Journos tell outright porkies, but they they will cherrypick the worst of what happening, then spin the 'possible' consequences with high doomerosity.

snow hope · Post by **snow hope** » 25 Aug 2006, 11:06

Yes, I can see a future where many members of the extended family all (have to) pull together. Grandparents, parents, children, the parent's brothers and sisters and maybe their famalies all living in one big house or in two houses beside each other - maybe semi-ds. Or 3 or 4 storey terrace houses with a family on each floor.

If things get very tough financially and many people become unemployed or can only work for very low wages, then they will be forced to rely on each other far more - moving back in with parents and/or grandparents. This is already happeneing with many young people not leaving the family home in the same way as they did 10,20 or 30 years ago.

One thing I am very conscious of is the knowledge my parents have regarding gardening, cooking, plumbing, health car engines, etc. etc. which I know a fair bit about, but my kids don't have very much knowledge of at all - I suppose just down to modern life.

I have a friend who lived in a large victorian 4 story house when he was a child and his grandparents lived on the bottom floor, his family lived on the second and some of the third floor and some relations lived up the top. I remeber going to his house (30 odd years ago now) and it was like zoned off - there was just bits you didn't go into because it was sort of out of bounds.

Back to the future or forward to the Past.....

ianryder · Post by **ianryder** » 25 Aug 2006, 11:08

skeptik wrote:Journalists aren't interested in anything except worst case scenarios.

Unless of course it's the really worstest case scenario ever, end of the world as you know it type scenario. 'Not bothered about that one...too complicated and the editor says it'll hit sales of the Range Rover on the next page'

MacG · Post by **MacG** » 25 Aug 2006, 12:12

skeptik wrote: Ha! A good reminder that one has to keep the bullshit filters and spin compensators regularly maintained. Journalists aren't interested in anything except worst case scenarios.

Yea. But when something really nasty happen everyone will act surprised.

SarahSimcock · Post by **SarahSimcock** » 25 Aug 2006, 12:33

According to the British Retail Consortium, the price of food has risen in five of the past seven months, even while the price of non-food items has kept falling. Even the price of beef is now at levels not seen since before the BSE crisis in 1996, rising 3.1% in the past year.

According to trade magazine The Grocer, Tesco has hiked the price of lettuce by 10.9%, smoked bacon by 13% and milk by 11% in just the past three months. The FT said: ?Analysts believe that the latest round of price rises could signal the end of a period of aggressive competition among supermarkets as retailers act to restore profit margins and respond to rising costs.?

Post by **mikepepler** » 25 Aug 2006, 14:37

SarahSimcock wrote:According to the British Retail Consortium, the price of food has risen in five of the past seven months, even while the price of non-food items has kept falling. Even the price of beef is now at levels not seen since before the BSE crisis in 1996, rising 3.1% in the past year.

According to trade magazine The Grocer, Tesco has hiked the price of lettuce by 10.9%, smoked bacon by 13% and milk by 11% in just the past three months. The FT said: ?Analysts believe that the latest round of price rises could signal the end of a period of aggressive competition among supermarkets as retailers act to restore profit margins and respond to rising costs.?

"second round" effects of the oil price rises I think (combined with the abnormal weather). This is what the economists said wasn't going to happen, because companies were not able to pass the price rises on to customers. Maybe they are wrong? If food prices are climbing at this rate, this is bound to hit inflation, and therfore interest rates...

ianryder · Post by **ianryder** » 25 Aug 2006, 14:56

mikepepler wrote: If food prices are climbing at this rate, this is bound to hit inflation, and therfore interest rates...

I've been thinking that as well but I've heard a few mumbles lately that because the inflation is caused by an external factor, ie energy costs / prices, interest rates won't be the weapon of choice. In fact there won't be a weapon, we'll just have to live with climbing prices. Upping interest rates at that moment would be a killer blow but wouldn't bring down prices because things just cost more.

I'm not an economist so I'd be keen to hear other people's thoughts on this as I've sold up thinking interest rates are off to the moon

Post by **mikepepler** » 25 Aug 2006, 15:29

Well, I've found this document http://www.statistics.gov.uk/articles/n ... t_2005.pdf which tells you what's in the current list of things used to work out the CPI/RPI index. There's also this one http://www.statistics.gov.uk/articles/n ... rticle.pdf which has a historical list of the weightings given to each section, subsection and individual item. The interesting bits from the weightings are:
- food is on a downward trend
- electricity, gas and liquid fuel (heating oil) are heading up
- transport fuel is sharply up, but the weighting has been flat until this year!!!

It's interesting that the weighting for transport fuel has been fairly flat until this year - I think this means that any price rises before 2006 were under-estimated in the impact on inflation.

PaulS · Post by **PaulS** » 26 Aug 2006, 11:11

The reason for beef prices rising (fortunately, speaking as a farmer)is due to the fact that European markets have opened up for UK producers. That sucks some of the supply abroad, where meat prices are often higher, causing prices of the remainder to rise in the UK.

Mind you, a farmer gets paid max about ?2.40 per kilo of beef when selling to abattoirs, whereas the average price of beef in supermarkets is closer to ?10 per kilo.

Conclusion: buy direct from a farm. Meat boxes work our a little cheaper then supermarket prices, and its fresh and reasonably close. You may even learn the breed of cattle producing the beef.

... I know a farm that can help ...

andyh · Post by **andyh** » 26 Aug 2006, 21:10

Well food prices here in NZ are really starting to move north now, and from being a drag on inflation they are now a driver. See graph top right here:

http://www.interest.co.nz/news.asp

The NZ economic commentators have yet to work out that the country is on the verge of oil induced stagflation. Interest rates are already high (7.25%) and inflation is surging as the economy slows down. The most blindly optimistic had the central bank lowering rates around now - inflation way above the banks forecast has torpedoed that. Pundits talk now about lowered rates in the spring of next year - a pipe dream IMO. I go for a rate rise in the next 6 months as the banks hand is forced.
Pretty much a microcosm of what is happening elsewhere as oil rises. There is also a housing bubble just ripe for destabilising here in NZ - interesting to see how the US model pans out, there housing looks very sickly.
Many nad varied are the effects of rising oil.........

andyh · Post by **andyh** » 26 Aug 2006, 23:34

In fact the food rises here are starting to attract attention:

http://www.nzherald.co.nz/section/story ... D=10398235

Post by **mikepepler** » 30 Aug 2006, 08:13

More on inflation here: http://news.independent.co.uk/business/ ... 222295.ece

The Bank of England's chief economist Charlie Bean has warned that record oil prices could kill off the era of cheap goods, making it harder for policymakers to keep a lid on inflation.

Cheap imports from the Far East and eastern Europe have kept the prices of goods down. In spurring greater competition, globalisation has provided a "favourable tailwind to central banks' attempts to hold inflation down," Mr Bean said at the annual gathering of central bankers in Jackson Hole, Wyoming, sponsored by the Kansas City Federal Reserve Bank. Yet he cautioned: "Winds can be changeable and the process may go into reverse at some point. To an extent this may already be happening .... There is no never-ending banquet under the sun."

He pointed to the near-tripling of oil prices over the last couple of years, and the rise in commodity prices more generally, as global demand has rocketed, especially from China's rapidly-growing economy. He called the rise in oil prices the "flip-side" of globalisation. This meant policy makers should not look just to inflation measures that strip out energy costs because they are regarded as less volatile. The focus on measures of core inflation was "highly suspect", as they strip out soaring energy prices while retaining falling goods prices.

Post by **mikepepler** » 30 Aug 2006, 21:09

http://news.bbc.co.uk/1/hi/business/5299006.stm

UK retailers enjoyed their strongest sales growth in one and a half years during August, despite the recent rise in interest rates, the CBI has said. Its latest distributive trades survey confounded expectations of a post World Cup dip, with 45% of retailers saying sales were up and 33% reporting a fall. The positive balance of 12% is the best since December 2004 and the CBI now expects similar growth in September. It said stores were doing less heavy discounting and were raising prices.

The CBI report found average selling prices rose in August for the first time in two years. "Rising costs for energy and now also for foodstuffs have already caused retailers in certain sectors to start edging prices up," said John Longworth, chairman of the CBI's distributive trades survey panel. "Whilst this should not halt sales growth... the rate of growth may drop back." Economists said that signs of strength on the High Street would keep the Bank of England more biased towards raising the cost of borrowing again.

"This adds further weight to the view that the Bank of England will raise interest rates again in November," said James Knightley, an economist at ING.

Do the highlighted bits above sound like mild stagflation?