This page has been archived and commenting is disabled.
Two Very Different Views On Soaring Food Inflation
Two rather amusing, and quite opposing views on surging food inflation (recall that as we first reported beef prices are at record high), which was confirmed by this week's PPI and CPI reports: one from Goldman, the other from IHS Global. We let readers decide which one is right... and which one will determine the Fed's "thinking" about soaring good inflation.
First, some unintended humor from David Mericle, the latest addition to Goldman's economics team, which lost all credibility some time in 2010 when Hatzius got his first (of many) tap on the shoulder.
Impact of Higher Food Prices on Core Inflation Should be Modest
Agricultural commodity prices have risen sharply in 2014, with the S&P GSCI Agriculture & Livestock Index up about 15%. In addition, concerns ranging from droughts in California and Latin America to political tensions in Ukraine threaten to push food prices higher this year. Today, we assess the implications of higher food prices for the inflation outlook.
In the aftermath of spikes in agricultural commodity prices in 2007-2008 and 2010-2011, both retail food prices and core and headline inflation increased substantially. However, those episodes differed from the current one in two key respects. First, the food price spikes were about four times as large. Second, there were simultaneous spikes in oil prices that likely accounted for most of the pass-through to core inflation.
Our statistical model suggests that while agricultural commodity prices show moderate pass-through to food goods and food services prices, they have little impact on non-food core inflation. Both our model and the US Department of Agriculture's projections suggest that food prices should boost core inflation by roughly 0.05pp and headline inflation by about 0.15-0.2pp by end-2014. While ongoing droughts pose upside risk, a reversal of recent increases in grain prices--in line with our Commodity strategists' forecast--poses downside risk.
...
Looking ahead, we do not expect the recent spike in agricultural prices to continue through 2014. Our Commodities research group expects prices for wheat, soybeans, and corn to fall later in 2014, and our food equity analysts expect their Cost of Goods Sold Index to rise only moderately this year. Projections from the US Department of Agriculture point to roughly 2.5-3.5% growth in both food goods and food services prices, a bit higher than our model would predict if the Agriculture Index were to remain flat from its current level.
If the USDA forecast proves correct, it would imply that food prices will contribute about 0.19pp year-over-year to core PCE inflation by end-2014 (vs. 0.13 as of February), 0.39pp to headline PCE inflation (vs. 0.17), and 0.45pp to headline CPI inflation (vs. 0.21). Overall, we expect higher agricultural commodity prices to contribute about 0.2pp to headline PCE inflation and about 0.05pp to core PCE inflation. Food goods and services prices could of course also rise for unrelated reasons as the labor market tightens and new state minimum wage laws take effect.
In terms of risks to our forecast, further tensions in Ukraine or worse-than-expected drought effects pose upside risk, while declines in grain prices expected by our Commodities team pose downside risks. In addition, the forecast for an El Niño weather pattern developing this summer creates additional upside risk to soft commodity prices (palm oil, cocoa, coffee, sugar) and to a lesser extent to wheat prices. However, the El Niño weather pattern is also typically favorable to US summer growing conditions, which would create downside risk to our Commodity strategists' already-bearish forecasts for these crops, which are among the largest components of the S&P GSCI Agriculture Index.
In other words, as we also predicted previously, soon everything will be El Nino's, aka the "Solar Vortex" fault. As for Goldman's statistical model saying that all should be well, who are we to dispute it.
In the meantime here is a completely different view, one actually somewhat grounded in non-model reality, from IHS Global via Bloomberg:
Limited inventory of cattle and other herds contributing to rising costs this quarter, Chris Christopher, economist at IHS Global, writes in note.
Rising prices “a kick in the stomach for those households that have a hard time making ends meet.” “Main story” of March CPI was food, with meat, dairy and fresh vegetables contributing to higher costs. Outside of food, inflation "relatively bland." However, "living standards will suffer as a larger percentage of household budgets are spent on grocery store bills, leaving less for discretionary spending."
But... core inflation will be untouched. Goldman's model said so. Which means nobody be concerned: certainly not Goldman partners and their live-in chefs.
The one thing that the two agree on, however, is that food inflation is surging. However there is good news:
- BERNANKE SAYS HOUSEHOLDS WEALTH HAS BEEN RESTORED
One thing is not quite clear - whose households? Dimon's and Blankfein's?
»
- 17465 reads
- Printer-friendly version
- Send to friend
- advertisements -
RE
Yeah, his fucking wealth.
If something doesn't make sense, ask yourself, "Is the government involved?" If the answer is "yes", then things start to make sense.
"Mr Bernanke, have you ever heard the story of The Emperor's New Clothers? Can I hear your thoughts on the moral of its story?"
RE
Yeah, sure.....for $250,000 a pop.
The Yogi Bera Economy..theres no inflation, but everything costs more...
History is very clear on the consequences of a monetary (and political) system that allows a chosen few to print money and hand it out to their friends...
Hedge accordingly.
As a society, we have gone moneretarded.
Does he know that some bacon is now over $7 a pound? BACON!
They price me out of ice cream and fucking heads are gonna roll.
Joos don't eat pork or bacon and therefor are not worried about it's price !
But. but ,they told us there is no infation, except for gas, food and anything these dipwads want to not include in their " reporting"
fuck you ben ...
remember that special equation
food>income=civil unrest
unless you drug the masses
Isn't food excluded from the core CPI anyway? Wouldn't that mean that a 1000% increase in food prices would not contribute to core CPI increases? Or am I missing something?
Anything that increases CPI is excluded.
not in the eurozone. in fact, 70% of the "dreaded deflation" that makes the megabanks scream for Draghi action is because of decreasing energy and food costs. just saying
Press Release:
From your government today: We strongly deny that the lack of oxygen during the last week of May has anything to do with the millions of deaths of American citizens. By seasonally averaging oxygen availabilty we can clearly demonstrate that on average, there is sufficient oxygen. Anyone suggesting otherwise must be in the camp of the terrorists.
If the price of an iPad goes up - you can decide to not buy one -
If the price of food doubles you still must eat.
So a larger % of your income goes to food - which leaves (many people) with far less income to spend on other stuff.
So IMHO - that would put extra pricing pressure on other goods - causing their prices to stay flat or maybe even decline.
Extreme food inflation could actually cause the core measure to be negative.
So bullish for QE.
Exactly. Increases in the prices of the things you need and decreases in the prices of things you do not need.
And, because of the squeeze, cars loans are getting funny. Because most jobs aren't just walking distance and public transportation is not extensive enough to fill the void.
College is another example, but seen as a perceived need (at least for now).
Just wait until taxes and fees rocket up!
The net effect is deflationary though. And is self-reinforcing. Negative feedback loop.
Yeah, I get that. I'm just trying to wrap my mind around such an obvious propaganda piece being so obvious.
The argument as to why food and energy are not included is that food and energy are too volatile.
Now that, my friend, is the propaganda.
None of these cocksuckers have one ounce of credibility left.
Especially STANDARD AND POORS.........................
pretty soon the hedonics will be adjusted so that only soylent green is counted...
We raise the rats, and then feed them to the cats. We feed the cats in turn to the rats.
Some people are Rats
https://www.youtube.com/watch?v=TvgAL0gmXqA
Never go full retard....Bernanke went there, and liked it so much he bought the company and is now Fullretardville CEO and mayor.
That explains why he's walking aound holding a dildo like a scepter.
It takes a few years to rebuild a herd of cattle....I think its going to be another drought year....so higher prices forever....but the sizes will just get smaller....you will soon get one bowl of cereal in a huge box....they will call it settling of contents....
Talked to a guy who owns an HEB here, and he said something that shocked me, quote "no one knows it and they are trying to hid it, but there will be NO beef by 2020."
No beef by 2020? Good luck with that.
Just passing the information to you. I hope he's wrong.
Talked to a guy who owns an HEB here, and he said something that shocked me, quote "no one knows it and they are trying to hid it, but there will be NO beef by 2020."
He's talking about beef for the Trash Class. The Elysium Class and Elysium Support Class, the most-fit members of society, will definitely have holistic happy grass-fed meat available for purchase.
We've really got to stop treating the country as one nation; we're not all in this together. You can't have a fully functional survival-of-the-fittest society if you don't have enough losers to feast off of.
The masses will have to learn to like fake meat made from soy.
http://beyondmeat.com/
My guess is Moo-shelle is behind all of this "no more beef" stuff. Or Gandhi. Or those cows that Chick-fil-A employs.
There will be beef in our pasture. That's for damned sure. Nothing like nice grass-fed steaks on the grill when they were just out in your alfalfa last week. I need to grill soon.
Bullshit. It takes a lot less energy to let a goat roam around the yard compared to the energy required to make all the fake shit.
Sorry, not going to happen.
Of course the food inflation does not show in the official stats - the same food package now only contains half of the food it used to. So nothing to see here, no inflation, but fear deflation ? /sarc
I'm pretty sure we can print more meat.
They want us to believe that a real pig is just the same as a paper pig, but unfortunately some pigs are just more equal than other pigs. Just ask people in the PIGS countries for starters, they probably eat a bit less (or more expensive) pig now than they did a few years ago...
Actually, it's more of a soy extrusion process.
http://beyondmeat.com/
Fucking A....just get a 3D printer. Yum Yum.
"Non-food core inflation"?
WTF is that? Food & energy (& taxes) is 99% for most of us...
Yeah so rest easy. That last 1% ... it's not gonna cost a lot more this month.
Overall prices in my local market are +9 % already this year. Good thing my household wealth has been restored!
Well, I think they are talking about the effect of food inflation on the Elysium Class and Elysium Support Class.
I've got to admit that food inflation really doesn't affect my holistic grass-fed meet choices.
Now, I'm sure the Trash Class is being affected, but - seriously - a survival-of-the-fittest society means the Trash Class exists to be laughed at, right?
It is a problem. And it is a political problem amongst others.
And ... it is a Fed problem ... because while food prices will cause inflation to rise making untaper even more necessary, it's impact on stagflation will decrease demand. What's the Fed to do.
Oh ... I get it now ... WAR!!!!! Patriotic duty. to sit there and take.
This is a replay of 2010 and 2011. Fed tries to exit QE and the market taanks until the Bernak (it will always be the bernak) changes his mind and comes back in.
Keep the powder dry!
They may have found a temporary "solution" by using Belgium to pick up the slack...
If in fact it is the sort of circle jerk we think it is, that would make alot of sense. Not to mention the pump and dump opportunities for Wall Street... just a gift that keeps on giving and the muppets get run over again and again.
Moar sawdust in the "meat" please.
soaks up the pink slime.
http://www.thestreet.com/story/11012915/1/cellulose-wood-pulp-never-tast...
soaring good inflation. The inflation everybody wants.
Does this mean that if you are "doing God's work" you don't have to eat?
Everyone employed by Golman Sucks should be executed immediately before their DNA pollutes the pool any further.
Inflation??? If the presstitutes on the national and local "news" channels are not reporting on it, that means it doesn't exist!
Keynesian hack Krugman says there ain't no stink'n inflation....fixed.
Kenyan says obamacare is a stupendous success...fixed.
Keith says NSA doesn't spy on americans...fixed.
cambells chunky soup is near 2 dollars now.
Way too highbrow for this economy.
Alpo and water makes a nice stew.
My teenager likes Hungry Man tv dinners, doesn't eat a lot of them, but the fact that they're $2.80 each blows me away.
Is it time for the guillotines yet?!
Fed can't do shit about drought and rising costs due to oil prices....
Cost push inflation is a bitch...
In fact if was not for "free money" to drill the Bakken and Eagleford, the oil situation would be worse...
The feds are responsible because they have cut off almost all the water to the farmers in central California. The farms have turned into dust.
About the cattle business. We sold our 100 head beef cattle herd in 2008. Working all winter freezing weather then getting ass hosed by the packers. Cattle are high, but the Cost of Producing is through the roof as well. Most of the families in the cattle business here in So IL are getting too old to do it anymore, and the younger generation is saying ...I'd rather sit inside in the winter and watch the Kardashians. There are going to be a whole bunch of EBT Card types who will soon be getting nothing but Chicken in their Happy Meals....oh...and some really cool plastic Chinese garbage prizes to keep the munchkins in line. Just bought a butcher steer at salebarn to fill the freezer.....Looking forward to munching on some fine steak watching this thing go down in flames. Damn the Cholesterol...Full Speed Ahead..
BTW, there is no danger in eating cholesterol. It's brain food. Not to mention, it's when you don't eat enough of it, that your body produces it in excess, causing problems.
http://www.drperlmutter.com/about/grain-brain-by-david-perlmutter/
No danger from "Grass Fed" Cholesterol........Cow are not designed to eat grain.
Yes, that is correct.
(nor are humans)
somebody's been doing their homework. Statins? so sorry, no thanks.
Everything in moderation. The AMA has caused more heart-disease, diabetes, etc. than any normal process as a result of telling the public what is right and wrong over the last handful of decades (then selling everyone pills to make it better).
Half the stuff crackpots say is bad is essential on some level for proper brain function, metabolism, etc.
Most of all, we have millenia of generic evolution where dietary intake remained somewhat stable over long periods of time. The last 100 years (last 50 or less even more so) have seen a 180 degree change in dietary behavior... uptake of chemicals... genetically modified foods, and so on. Yeah, nature loves it when systems are turned on a dime. lol.
I just came back from the local "healthy" food store. The shit they try to pass off as food is no different than any other store.
The single exception? Most of the poison is 'organic." (cuz that makes it okay somehow)
It sounds like in a few years the market for Bison - which is much cheaper to produce - may come into its own.
Producer's would still have to deal with the meat packers. But veterinary and and fodder costs are lower with Bison.
Bison are just better adapted to North America and hence easier to raise.
Got a friend running 300 head- works 18 hour days, 7 days a week and during calfing gets zero sleep. His parents, now in their early 80's help when they can and the hired help is, let's say, less than helpful.
Lot's of small farmers and ranchers don't even make minimum wage.
What did you pay per pound for the steer? I have been amazed that prices never went up despite higher feed prices. I could pay $0.80/lb for beef at auction up until recently but in the last 2-3 years have not been watching the deal.
BERNANKE SAYS ASSHOLE WEALTH HAS BEEN RESTORED
After the GE, AIG, JPM bailout.
Gas is going through the roof too. But you don't hear the left screaming about BIG OIL or Obama being in with oilmen. And you don't see the bumperstickers on the cars of leftwingers complaining about the price of gas which is double what it was when they were complaining during the Bush years.
Watch the argument for high gasoline prices now change to being beneficial because it keeps people off the roads and helps the environment and besides, Obama is trying to do his best and Bush is a liar and Palin's an idiot. Or some such crap.
ok...
OK! Absolutely! If we're going to complain about the high price of food, we better include the high price of gas since it takes gas to get the food to us. And if we're going to complain about the high price of gas, we better do it the same way we had it beat over our heads for eight years, which is BIG OIL and the Republicans are responsible. But since the left run things now, they can fix it. Or they can take the blame for it.
The fact is, they CAN fix it simply by declaring an immediate tax holiday on the gasoline which would bring the price down a whole lot. And this could be done by Executive Order. God knows, Obama's used it for everything else. And he could score points too by saying that when gas DID spike under Bush, Bush did nothing but stand back and wait for it to slowly fall back down in price.
What if this left and right nonsense doesn't really exist. It's just the Red and Blue Team creating bullshit for their dumbasses while the co-owners of the two Team win. The left and right "words" are just words used to confuse stupid people. There is no left and right, just survival-of-the-fittest.
" survival-of-the-fittest."
Survival of the filthiest. Corrected it for ya.
They care not how much food costs, when EBTs are used...
1Step, you may have hit the nail on the head with that one.
Let's see the fed print some more water for California and Texas.
Of course it might be nice if farmers got somewhat higher prices, as the rest of the food chain should stay the same - but of course it won't work that way.
Food inflation is coming from such a low base in the US that of course it won't have a big impact on general INFLATION but that's not the question, the question is whether it will have a big impact on general SPENDING, and there the answer is yes. For maybe half the US population the cost of food *is* a major budgetary factor, and OK it's the lower half, but we don't care about them anymore anyhow, do we. In fact it's their struggle to pay for food the mitigates the overall inflationary effect.
OTOH when the peasants are starving they might just revolt. But no, don't worry about inflation.
Without a rise in wages the increased costs will act more like deflation as spending on other items will slow.
Retail beef prices are high -- and the quality keeps dropping. Since the first of the year it has really tanked. Much junk out there now.
Time for the bankers to come see Dr. TheReplacement. Your health will be restored in a fashion similiar to how you have restored household wealth. Now, on your knees.
Try and execute the moneychangers and their co-conspirators, for crimes against the nation.
Can your homebrewed beef stew while you still "can".
It is truly amazing that it has taken more than three years for the Quants to figure out that food prices are going higher. Truly fucking amazing. Food prices have been reaching skyward since October 2011. The same bag of groceries that averaged 22.00 then is 37.00 now. I admit to being a foodie. I refuse to serve my family yoga-mat bread, we stay away from processed foods as much as possible. Thankfully I can afford decent quality food for my family, based on the rationale that better eating means better health. I'd rather pay my grocer than my doctor. That said, the evening meal cost, which i have tracked for more than three decades, has a curve which suspiciously resembles the S&P 500 curve over the past three years. 28.00 to 42.00 average cost per supper for a family of three. I can hardly wait to see where it is by November this year.
So people are happy their fucking house costs $400k but they complain about paying 10 bucks for lunch?
Food, housing costs rise sharply in March; overall inflation low <==== ha ha ...that is the best description of OXYMORON
If the price is out of line don't pay it. Your money is your only, last, effective vote.