Announcement

Collapse
No announcement yet.

A Punch to the Mouth Food Price Volatility Hits the World

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • A Punch to the Mouth Food Price Volatility Hits the World

    Gregor covers food price volatility and increasing costs. Of course c1ue will tell us he is all wrong...

    http://gregor.us/forecast/a-punch-to...its-the-world/

    *snip*

    And critically, it has a particular impact on food.

    Many factors seen over the past decade have produced higher food prices: population growth, urbanization, the decline of arable land per person, and the upgrading of diets for example. But more damaging than food inflation has been the pushing of global food prices out of their long, quiet envelope of stability. From the recently released UN Report on the World Food Situation:
    The FAO Index (Food and Agriculture Organization of the U.N) shows that, while prices are once again down from a peak, a troublesome volatility started to affect food prices this decade. These are the very prices that caused social instability in countries like Mexico in 2007-2008 (pressure on corn prices, owing in part to US corn ethanol mandates) and more recently in northern Africa (Arab Spring).

    Commodity observers will note the rough correspondence with oil prices, and of course that’s no mistake. Inputs to food production are heavily composed of fossil fuels. In the same way that both high (and highly volatile) oil prices play havoc with economies, food prices and marginal speculation in food have done the same.

    2011 also saw the highest average oil prices since 2008, at $94.81 per barrel. That is not far below the average high of 2008, at $99.67. In between was a crash in oil prices — and most commodities — which unfolded at a rate almost as rapid as the original run-ups from 2006-2008. What happens next?

    The USDA has just released its Food CPI readings for 2011, along with their forecast for 2012.
    With 11 months of data recorded, the outlook for the 2011 Consumer Price Index (CPI) and food price inflation has become clear. The CPI for all food is projected to increase 3.25 to 3.75 percent. Food-at-home (grocery store) prices are forecast to rise 4.25 to 4.75 percent, while food-away-from-home (restaurant) prices are forecast to increase 2 to 2.5 percent. Although food price inflation was relatively weak for most of 2009 and 2010, cost pressures on wholesale and retail food prices due to higher food commodity and energy prices, along with strengthening global food demand, have pushed inflation projections upward for 2011.

    For 2012, food price inflation is expected to abate from 2011 levels but is projected to be slightly above the historical average for the past two decades. The all-food CPI is projected to increase 2.5 to 3.5 percent over 2011 levels, with food-at-home prices increasing 3 to 4 percent…

    With non-existent wage growth and a dearth of investment opportunities, these price advances in food costs have much more impact than it appears. What asset classes are keeping pace with the year-over-year increases in food? Certainly not stocks, as the S&P 500 has gone nowhere in a decade. Moreover, a 3.5% increase in Food CPI this year, with more to come next year, falls on top of a deeply under-utilized US economy in which tens of millions derive income from government transfer payments, most of which are not sufficiently ratcheting higher from “inflation-adjustments.” Food Stamp recipients, for example, are not seeing food inflation adjustments in their benefit checks that would compensate for the price increases. Not even close.
    *snip*

  • #2
    Re: A Punch to the Mouth Food Price Volatility Hits the World

    Amusing that you would highlight this article as somehow being different when it lays the price of food on oil prices, not meat consumption, or fresh water, or soil depletion, or (insert reason here).

    Comment


    • #3
      Re: A Punch to the Mouth Food Price Volatility Hits the World

      Originally posted by c1ue View Post
      Amusing that you would highlight this article as somehow being different when it lays the price of food on oil prices, not meat consumption, or fresh water, or soil depletion, or (insert reason here).
      aaaaaannnnnnnndd one of the basic ideas for becoming a farmer was to have access to precious fuel over less important exploits, thank you!

      Comment


      • #4
        Re: A Punch to the Mouth Food Price Volatility Hits the World

        Originally posted by d&g
        aaaaaannnnnnnndd one of the basic ideas for becoming a farmer was to have access to precious fuel over less important exploits, thank you!
        There's no question about fuel being available, the question is about cost. And there's no question that cost of fuel is going up - whether for tractor fuel, fertilizers, pesticides, or transport.

        The question is: does the farmer benefit from feedstock input cost increases, is hurt, or just passes it along?

        If the farmers are hurt by feedstock input cost increases, then clearly oil price increases are bad.

        If they can pass them along or benefit, then oil prices increases are good.

        The 2nd question is what part of food price increases is due to input feedstock price increases, what part is due to things like ethanol subsidies, and what part is due to other factors like water, soil depletion, meat demand, etc.

        Comment


        • #5
          Re: A Punch to the Mouth Food Price Volatility Hits the World

          Originally posted by c1ue View Post
          There's no question about fuel being available, the question is about cost. And there's no question that cost of fuel is going up - whether for tractor fuel, fertilizers, pesticides, or transport.

          The question is: does the farmer benefit from feedstock input cost increases, is hurt, or just passes it along?

          If the farmers are hurt by feedstock input cost increases, then clearly oil price increases are bad.

          If they can pass them along or benefit, then oil prices increases are good.

          The 2nd question is what part of food price increases is due to input feedstock price increases, what part is due to things like ethanol subsidies, and what part is due to other factors like water, soil depletion, meat demand, etc.
          You have all the answers, yo tell me. I'm just a dumb farmer...

          Comment


          • #6
            Re: A Punch to the Mouth Food Price Volatility Hits the World

            Originally posted by doom&gloom View Post
            You have all the answers, yo tell me. I'm just a dumb farmer...
            SAME.....or ex-farmer.....now looking HARD at a dairy support unit.

            Here's what we're looking at:

            A Dairy Support Unit(basically a very large developing grazing block..currently 1/3 pasture, 1/3 forestry to harvest then convert to pasture, 1/3 native bush)

            Surrounded by 8 quite profitable/successful dairy farms with low energy inputs bar their need to ship their cattle beasts long distances to the next available run off blocks as well as truck in their baleage.

            High demand for grazing/run off/baleage, low supply for considerable distance, little to no possibility for grazing/run off/baleage competition in local area.

            4 of the 8 farms have put in offers to buy the dairy support unit......my partner(good mate in the Army and a good industry operator) has first option to purchase below assessed value(due to the land being a part of a family trust being sold with the beneficiary option written into it)...looking hard at it......but I have to admit to being quite concerned about a repeat of 08...when prices crashed.

            EJ seems to think not in his recent posts?

            We might be getting back into dairy industry sooner than we thought!

            Comment


            • #7
              Re: A Punch to the Mouth Food Price Volatility Hits the World

              Originally posted by lakedaemonian View Post
              SAME.....or ex-farmer.....now looking HARD at a dairy support unit.

              Here's what we're looking at:

              A Dairy Support Unit(basically a very large developing grazing block..currently 1/3 pasture, 1/3 forestry to harvest then convert to pasture, 1/3 native bush)

              Surrounded by 8 quite profitable/successful dairy farms with low energy inputs bar their need to ship their cattle beasts long distances to the next available run off blocks as well as truck in their baleage.

              High demand for grazing/run off/baleage, low supply for considerable distance, little to no possibility for grazing/run off/baleage competition in local area.

              4 of the 8 farms have put in offers to buy the dairy support unit......my partner(good mate in the Army and a good industry operator) has first option to purchase below assessed value(due to the land being a part of a family trust being sold with the beneficiary option written into it)...looking hard at it......but I have to admit to being quite concerned about a repeat of 08...when prices crashed.

              EJ seems to think not in his recent posts?

              We might be getting back into dairy industry sooner than we thought!
              Write a contract with the purchase for all the users, or have the existing owner write a contract to lock in prices up front for a few years, then buy...

              Comment


              • #8
                Re: A Punch to the Mouth Food Price Volatility Hits the World

                Originally posted by doom&gloom View Post
                Write a contract with the purchase for all the users, or have the existing owner write a contract to lock in prices up front for a few years, then buy...
                Funny that......I was thinking the same thing....3-5 year lease on grazing with personal guarantee and price ratchet.

                Comment

                Working...
                X