And even as Bernanke continues to believe he can take away inflation with a 15 minute wave of his magic wand, the downstream effect persist. The UN's Food and Agriculture Organization reported that April food prices rose once again, from 231 to 232.1, putting it at the second highest compared to the all time high peak hit in February. Bloomberg reports: "“There seems to be some easing for a lot of commodities, but whether this is demand rationing, we have to wait and see,” Abdolreza Abbassian, a senior economist at the FAO, said before the report. “If the weather is good, if plantings expand, I think we could see some relief in food prices." Granted, in April various food commodities have seen their prices drop: "Sugar prices slumped 18 percent in New York last month, while milk futures fell 1.8 percent in Chicago, U.S. wholesale beef prices dropped 3.4 percent and pork declined 2.2 percent. Wheat prices rose 5 percent in Chicago after falling the previous two months and corn jumped 9.1 percent." Yet the drop has not been uniform: "Corn has almost doubled in the past 12 months on speculation that more planting in the U.S., the world’s largest grower, won’t be sufficient to rebuild global stocks. Wheat surged 57 percent over the same period and soybeans gained 39 percent as flooding ruined crops in Canada and Australia and drought reduced harvests in Russia and Europe. Of the grains, corn “is the most worrisome,” Abbassian said in a statement. “We would need above-average, if not record, yields in the U.S.,” however, “plantings so far have been delayed considerably due to cool and wet conditions on the ground,” he said." On the other hand, as most know, a far bigger issue is that prices tend to be sticky on the upside once they begin rising. And a cursory check in local retail stores confirms that any price drop has yet to impact the US proper.
Unfortunately, the chance of a sustained price drop even on the margin seems rather distant for now:
World grain stocks will probably slide for a second year in the 12 months through June 2012 as corn consumption outpaces production and dry weather hurts wheat prospects in the U.S. and the European Union, the International Grains Council said in a report April 20.
“With demand continuing strongly, prospects for a return to more normal prices hinge largely on how much production will increase and how much grain reserves are replenished in the new season,” David Hallam, the director of FAO’s Trade and Market division, said in a statement.
The FAO’s food-price index fell for eight months in a row after reaching its previous peak in June 2008, a situation that probably won’t be repeated this year, Concepcion Calpe, an economist at the UN agency, said last month. “Very strong” demand for food, feed and biofuel may mean prices will climb in coming months, she said.
The index of meat prices, which make up 35 percent of the overall index, was little changed at 172.8, up 0.5 percentage point from the March level.
The FAO index of sugar prices fell to 347.8 points, the lowest level in seven months, from 372.3 in March. Cooking-oil prices slipped to 259.1 points in April from 259.9, while the dairy index fell to 228.7 from 234.4 in March.
Food output will have to climb by 70 percent from 2010 to 2050 as the world population swells to 9 billion and rising incomes boost meat and dairy consumption, the FAO forecasts. Producing 1 kilogram (2.2 pounds) of pork can take 3.5 kilograms of feed, U.S. Department of Agriculture data shows.
About 44 million people have been pushed into poverty since June by the “dangerous levels” of food prices, World Bank President Robert Zoellick said in February. Another 10 million may join them should the UN food index rise another 10 percent, the World Bank said April 16. The number of hungry people in the world globally declined last year to 925 million from more than 1 billion in 2009, according to the FAO.
“A sliding dollar and increased oil prices are contributing to high food-commodity prices,” Hallam said.
Full release can be found here.