Tag Archive: food inflation

Source: The Telegraph

Millions of the world’s poorest people and the state of the global economy are threatened by the food price rises, writes Geoffrey Lean.

‘Within a decade,” promised the top representative of the world’s mightiest country, “no man, woman or child will go to bed hungry.”

Dr Henry Kissinger, at the height of his powers as US Secretary of State, was speaking to the landmark 1974 World Food Conference. Since then, the number of hungry people worldwide has almost exactly doubled: from 460 million to 925 million.

And this week the airwaves have been full of warnings that the formidable figure could be about to increase further, as a new food crisis takes hold. Some experts warned that the world could be on the verge of a “nightmare scenario” of cut‑throat competition for the control of shrinking supplies.

The cause of such alarm? On Wednesday, the Food and Agriculture Organisation (FAO) reported that global food prices had hit a record high and were likely to go on rising, entering what Abdolreza Abbassian, its senior grains economist, called “danger territory”.

That is bad enough for Britain, adding to the inflationary pressures from the soaring cost of oil and other commodities, not to mention the VAT increase. But for the world’s poor, who have to spend 80 per cent of their income on food, it could be catastrophic.

Robert Zoellick, president of the World Bank, warns that the rising prices are “a threat to global growth and social stability”, and Nicolas Sarkozy has identified them as a priority for the G20, which he chairs this year.

Already they are higher than in 2008, when they drove the tally of the malnourished briefly above a billion for the first time in history, and caused riots in countries as far apart as Indonesia, Cameroon and Mexico. That ended nearly two decades during which the number of hungry people had stayed the same, while the world population grew by 1.2 billion, so that the proportion of an increasing humanity without enough to eat steadily fell.

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Source: Bradenton.com

David O’Brien is getting used to seeing damaged vegetables. The salesman for C&D Fruit and Vegetable in Manatee sees hundreds of acres of strawberries, cucumbers, beans and squash at the farm destroyed by the recent cold weather.

The result of all the produce destruction is being felt across the state as grocery shoppers are finding fresh vegetables in short supply along with soaring prices.

Arching her eyebrows at prices along the produce aisle, Ilene Ellman decided to alter her shopping routine.

Source: Natural News

Figures recently released by the Food and Agriculture Organization (FAO) index of 55 food commodities indicates that worldwide food prices hit a record high in December. Though the costs of some food commodities like rice, corn and soy actually decreased, oil seeds and sugar jumped significantly due to various factors including erratic weather and droughts, according to reports.

In the past, such ups and downs on the commodity market did not immediately affect actual food costs for consumers, but some experts say that this is no longer the case, and that “food inflation” will occur right alongside the commodity price gains. And rapid food inflation has already taken place in India, for example, with recent reports indicating that the country experienced an overall food inflation rate of 18 percent in 2010.

Low food stocks, droughts and poor weather conditions have all contributed to the escalating food crisis, which has led many nations to cut off exports in order to save supplies for their own populations. And the resulting global shortages only exacerbate the problem further as importing nations scramble to source needed commodities for their own populations.

Abdolreza Abbassian, a senior economist at the FAO, explained in a Bloomberg report that since not all commodity prices are rising, the overall indicator can be deceiving. Even so, prices across the board may increase as a result of a domino effect from the commodities that are in short supply, or even from the same conditions like droughts and poor weather that have caused shortages and price increases in the other categories.

Rising global food prices and supply uncertainty are just another reason why self-sufficiency is vital to long-term survival. Individuals who grow their own food and live off their own land as much as possible will not be affected by volatile supply and demand issues that affect the global food market.

Source: SFGate

For the first time since 2008, inflation is hitting consumers in the stomach.

Grocery prices grew by more than 1 1/2 times the overall rate of inflation this year, outpaced only by costs of transportation and medical care, according to numbers released Wednesday by the U.S. Bureau of Labor Statistics.

Economists predict that this is only the beginning. Fueled by the higher costs of wheat, sugar, corn, soybeans and energy, shoppers could see as much as a 4 percent increase at the supermarket checkout next year.

“I noticed just this month that my grocery bill for the same old stuff – cereal, eggs, milk, orange juice, peanut butter, bread – spiked $25,” said Sue Perry, deputy editor of ShopSmart magazine, a nonprofit publication from Consumer Reports. “It was a bit of sticker shock.”

But it makes sense. Since November 2009, meat, poultry, fish and eggs have surged 5.8 percent in price. Dairy and related products have gone up 3.8 percent; fats and oils, 3 percent; and sugar and sweets, 1.2 percent.

While overall inflation nationwide was 1.1 percent, grocery prices went up 1.7 percent nationally and 1.3 percent in the Bay Area, said Todd Johnson, an economist for the Bureau of Labor Statistics office in San Francisco. “The largest effects on grocery prices here over the last month were tomatoes, followed by eggs, fish and seafood.”

Produce steady

Across the country, the price of produce has remained fairly steady. But the U.S. Department of Agriculture predicts that next year the price of fruits and vegetables, like many other food commodities, could go up. The government agency is forecasting a 2 to 3 percent food inflation rate in 2011 – a pace that is not unusual in a rebounding economy.

“We usually err on the conservative side,” said Ephraim Leibtag, a senior economist with the USDA, adding that “2011 holds a bit of uncertainty, so I wouldn’t be surprised if it goes higher. If it goes to 6 percent, then we should be worried.”

Michael Swanson, an agricultural economist at Wells Fargo, said that as long as corn, soybean and energy prices continue to climb, food inflation could reach 4 percent in 2011.

“The USDA always plays it safe,” he said, adding that the nation is likely to see the biggest increases since 2008, when the food inflation rate was a record 5.5 percent.

The global demand for corn – used for food and ethanol – has swelled so much that feed costs for farmers and ranchers are being passed on to the consumer, Swanson said.

Gas, diesel play a role

Gas and diesel prices also are playing a role. Wheat costs went through the roof this year when 20 percent of Russia’s crop was destroyed by drought and wildfires, causing the country, the third-largest producer in the world, to ban exports of the grain. The price of sugar, also used for ethanol in parts of the world, is priced at a two-decade high.

Kraft Foods Inc., one of the world’s largest food producers, has already announced plans to increase its prices because of mounting ingredient costs and flagging sales. General Mills, maker of everything from flour and baking mixes to cereal and Yoplait yogurt, has said it, too, will raise some of its product prices in January. Experts said consumers can expect the same from Kellogg’s and Nestle.

The silver lining, Swanson said, is that retailers such as major supermarket chains and big-box stores are likely to push back at wholesalers to keep prices from jumping too much.

“Food is a high-frequency driver,” he said. “So if stores like Walmart and Kmart want to get shoppers in the door, it’s to their benefit to keep prices low.”

Source: Bloomberg

World food prices climbed for a fifth month, rising to the highest level in more than two years in November on higher costs for cereals, sugar and cooking oil, the United Nations’ Food and Agriculture Organization said.

The FAO’s index of 55 food commodities jumped to 205.4 points, the highest level since July 2008, the Rome-based agency said in a monthly report on its website today. The indicator rose from 198.1 points in October.

Food prices may rise further unless global grain production rises “significantly” next year, the FAO said in a Nov. 17 report. The cost of food rose to a record in June 2008, prompting deadly riots in countries from Haiti to Egypt.

The advance is the longest since January, when the price index rose for six months before declining in February. Prices climbed for an uninterrupted 18 months through March 2008, falling the next month before rising to a record.

The cereal-price index jumped to 224.9 points from 219.9, while the indicator for cooking-oil prices rose to 243.3 points in November from 220 points in the previous month. The gauge for sugar prices advanced to 374.7 points from 349.3.

The index for dairy prices rose to 207.8 from 202.6 points and the meat-price index was unchanged at 138.5 points, the FAO data showed.

The basis for the FAO index is 2002-04. The gauge includes commodity quotations that the agency considers representative for international food prices.

Source: Bloomberg

Cooking oils, left behind in this year’s surge in agriculture prices, are poised to catch up with grains as record demand cuts stockpiles by the most in 17 years.

Inventories of soybean oil and palm oil, used by Nestle SA and Unilever and in everything from Hellmann’s mayonnaise to Snickers candy bars, will drop 12 percent in the coming year as China and India increase consumption 11 percent, U.S. Department of Agriculture data show. Food prices climbed in September to the highest level since the crisis in 2008 that sparked riots from Haiti to Egypt, the United Nations says.

“China’s economy is growing and there’s no reason why the country will take any less food next week, next month, or next year,” said Steve Nicholson, a commodity procurement specialist at International Food Products Corp., a distributor and adviser on food ingredients in Fenton, Missouri. “We’ve been able to produce more food in the past 2,000 years, but can we do it fast enough to meet the demand from China and other emerging economies to stave off a crisis?”

Increasing wealth in Brazil, India and China is boosting demand for grains, dairy, meat and cooking oils. While Sime Darby Bhd., the world’s biggest listed palm-oil producer, is benefiting from rising prices, governments from Beijing to New Delhi are trying to curb food inflation by raising imports, limiting exports or selling stockpiles. Per-capita use of vegetable oils in China has more than doubled in a decade, said Bill Nelson, a senior economist at Doane Advisory Services Co., an agricultural research and advisory company in St. Louis.

Farm Costs Soar

The Standard & Poor’s GSCI Agriculture Index of eight futures climbed 30 percent this year, led by corn, wheat, coffee and cotton, as floods in Canada, Pakistan and China and drought in Russia and across Europe killed crops. The economies of China and India, the biggest consumers of cooking oils, are growing at three times the speed of the U.S.

Water scarcity, increasing global temperatures and the potential for dry weather may threaten farm production, said Nomura Holdings Inc. economists and strategists including Robert Subbaraman in a report dated Sept. 8. About 1.8 billion people will live in countries or regions with absolute water scarcity by 2025, according to the UN Food & Agriculture Organization.

The CRB/Reuters U.S. Spot Raw Industrials index, a gauge of 22 commodities including butter and soybean oil, rose to an all- time high on Oct. 25. Meat prices advanced to a two-decade high in August, according to a UN index.

Food Demand

Record demand for food and biofuel may combine with delays to planting in South America to extend gains in cooking oils, said Murali Krishna P.V., chief executive officer of TransGraph Consulting Pvt., an adviser to Bunge Ltd. and Cadbury Plc.

Palm oil traded on the Malaysia Derivatives Exchange may rise 18 percent to 3,600 ringgit ($1,161) a metric ton by March, extending this year’s 15 percent advance, said Murali, based on the Oct. 29 close. Soybean oil traded on the Chicago Board of Trade may gain 16 percent to 57 cents a pound, adding to this year’s 21 percent rally, he said in an interview from Hyderabad, India. Palm oil advanced 1 percent today to end at 3,092 ringgit per ton, the highest finish since July 2008.

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Source: Time

Walmart has rolled back its rollbacks. Earlier this year, the retailer tried to spark sluggish U.S. sales by lowering its prices – already bargains – even further. One analyst called it “an initiative that screams: Price! Price! Price!” These rollbacks, as they are known in Walmartspeak and in the company’s advertising, were intended to overwhelm the shopper. In May, according to one shopping website, the price of a 40-oz. bottle of Heinz ketchup, which had been $2.42, was chopped to $1. Kraft mac and cheese, which had been going for $3.58, was reduced to $2.50. The rollback of a 50-oz. bottle of Tide laundry detergent, which was priced in the $7.48-$8.12 range, gave shoppers a $2.50 discount. Walmart expected a flood of customers to its stores, which would help lift the company’s stock out of its rut and get Walmart rolling again.

Instead, cutting prices depressed sales, as shoppers took the bargains and ran. For the quarter ending July 31, Walmart’s U.S. same-store sales fell 1.8%. The company’s same-store sales have now fallen for five straight quarters. Of the rollback strategy, Bill Simon, the president and CEO of Walmart U.S., told investors at a September conference, “It did not do what we had hoped it would do. It did, however, drive price perception. It did not drive sales or traffic.” As a result, Walmart rolled back the deeper discounts, and prices started inching upward this summer. According to a new report from J.P. Morgan, the price of a 31-item basket from a Walmart store in Virginia rose 2.7% in September alone. Walmart prices have jumped 5% since the start of the year and have been at their highest levels in the 21 months J.P. Morgan has tracked pricing data. (Read about Walmart’s March 2010 slump.)

While Walmart may have stopped giving away the store, that doesn’t mean customers will be facing sticker shock. “Walmart still stands for low prices,” says David Strasser, equity analyst at Janney Montgomery Scott. Of the five retail-store chains J.P. Morgan studied (Walmart, Kroger, Safeway, Whole Foods and Harris Teeter, a 192-store chain in the Southeast), Walmart still had the lowest prices. (The Walmart basket cost $95.75 in September; Kroger, at second lowest, came in at $101.93.) (See the first Walmart in TIME’s 50 authentic American experiences for 2009.)

Still, the move signals a shift in strategy. Since the rollbacks didn’t spur enough additional sales volume, Walmart needs to squeeze more revenues out of existing shoppers in order to satisfy analysts, institutional investors, shareholders and employees who are hungry for domestic growth. “Walmart is under unprecedented profit pressure,” says retail consultant Burt Flickinger III, managing director for Strategic Resources Group. Walmart stock, which traded at $53.57 as of the Oct. 4 market close, is essentially flat for the year and 15% off its high before the September 2008 market crash. With economic conditions not as dour as they were in late 2008 and early 2009, now could be a good time to pull off a price increase. (Comment on this story.)

The changes also reflect a shake-up in Walmart management. Under Project Impact, a strategy executed by former U.S. CEO Eduardo Castro-Wright, Walmart not only instituted more aggressive price-cutting but also moved to make its stores cleaner and better organized. Walmart’s so-called Action Alleys, the often cluttered thoroughfares laden with promotional deals, were streamlined. But in order to make the aisles more breathable, Walmart reduced the number of items offered in the stores by about 15%. (See the top 10 toy crazes.)

It turned out, however, that shoppers really liked the many brand choices, so they went elsewhere for variety. In March, Walmart began restoring 300 brands and package sizes. In late June, Castro-Wright was transferred to global sourcing, and Simon, the chief operating officer for Walmart U.S., took over as CEO. Under Simon’s direction, the price rollbacks were rescinded, even more items were stocked on the shelves and Action Alley was recluttered – though Simon insists the aisles will still be less cluttered than they were in the old days.

The company will meet with the investment community at its Bentonville, Ark., headquarters this week. There, executives might offer more hints about Walmart’s direction. Overseas expansion remains robust. International sales rose 11% last quarter, Walmart added almost 5 million sq. ft. (465,000 sq m) of overseas retail space during that period and the company plans to keep expanding outside the U.S. Things are looking up in places like Brazil and China. Now Walmart hopes to see if higher prices will prop up America.

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