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Inflation Pressures in Core Food Components
By EconMatters
Inflation Isn`t Moderating, It is Consolidating before the Next Leg Up
Inflation numbers of late have been helped by the drop in fuel costs, the agricultural grains have been brought down in the futures market by the overplanting of corn, but eating out for the weekend where shrimp, steak, other seafood and vegetables are consumed at dinner brings home the idea that restaurant costs are only going up on the whole, and expect menu prices to continue to be raised at your favorite restaurant.
Lean Hogs
Lean hogs are up 26% year over year even after a sizable pullback in the futures market, the pork industry really got hit by a killer pig virus, but the trend in other meats for the year indicates that costs for this segment are broader based than just the disease specific issues.
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Cattle Herds
For example, Live Cattle futures are up 18% year over year due to a multi-decade low in cattle herds, it seems it is much harder, and the margins are much lower raising livestock compared with planting corn for farmers which makes sense when you factor in all the underlying costs from veterinary bills, feed and electricity, to transportation and regulatory related costs.
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Milk Prices
The Dairy Industry hasn`t escaped the inflation pressures with a strong global demand for dairy and protein, producing cows are a robust asset these days. Milk prices have also been hurt by the drought for farmers on the West Coast to stronger demand for Greek Yogurt for alternative protein sources we see Class III Milk futures up a robust 40% year over year with no immediate pullback on the charts.
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Oil & Fuel Prices
Oil and fuel prices have dropped but the costs associated with getting it out of the ground are still inflationary from the equipment costs to skilled labor and regulatory related costs so it will be interesting to see how the price of oil shakes out many crosscurrents from stronger demand on an improving economy, geo-political concerns, robust production output domestically, higher fuel efficiency in developed countries, more cars on the road in china, and global pollution and infrastructure constraints with a price that basically has moved between $80 and $120 for WTI/Brent since the financial crisis.
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Normal Trading Range
It is too early to read anything regarding the recent pullback in prices because as just some of the shorts covering caused a $4 a barrel spike in prices off the recent bottom, and the oil market goes on runs both up and down in price that can be anywhere from $10 to $30 and can happen in and out of season although they usually center around seasonal demand as a rule of thumb.
The Bull & Bear Case for Oil Prices
I can make a case for the last 6 years being the pullback in oil prices, i.e., no real price breakouts. And similarly I can make an entire other case that oil will pull back even further on production increases globally, higher efficiency standards globally, alternative fuel technologies, and changing driving behaviors.
Oil Supply Chain Inflation Alive & Well
But the costs associated with the industry should continue to rise from an inflation standpoint because component parts, equipment, labor, medical, regulatory, transportation logistics and other costs in general are rising at a steady clip for the last 5 years, and look to continue rising going forward for the next five years.
Wages Will Never Keep Up With Inflation on the Average
For some places in the economy inflation is red hot smack in the face of the consumer, in other places it slowly creeps up on the consumer without them realizing, but regardless of what the official inflation reports that the Fed follows indicates, real inflation pressures in the economy continue to rise every year, and a good steak is going to cost consumers a higher hourly wage rate.
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Involuntary refugees evicted off the Grid to starve quietly in a fallow ditch.
They also serve who lie and wait .
Pity please those who serve, they only get what they deserve... - J. Ian
Prices are moderating and about to crash. Any food inflation has been of the cost-push variety, not demand-pull. Article is complete hogwash.
I agree. Europe is finally slipping into deflation after all of that currency creation attempted to delay it. The rest of the world will be dragged down with it.
If it causes the $1.5 quadrillion derivatives mess to collapse then things should get reeeally interesting.
Have you replaced you tires latetly, how about your ac or heating?
Agreed. Evidece of deflationary forces can be seen everywhere. Those that looks for rising lemon prices will probably find them somewhere, but while they're looking for expensive lemons their home prices are dwindling away. The Fed's new bubble has started to burst.
http://www.globaldeflationnews.com/anatomy-of-a-bubble-how-the-federal-r...
Even Billionaire's aren't immune...
http://www.globaldeflationnews.com/the-way-prices-have-fallen-in-sentosa...
Yep, prices down everywhere. Groceries, cars, lumber all so much cheaper than ten years ago. Not!
the writer knows little to nothing about the ag mkts. really not a good article. kinda pathetic attempt to link inflation (little to none) to dropping prices on a corn and bean market that is seeing record yields from perfect weather and perfected grain seeds.
Yes. Pathetic. There is no linkage in the demand/supply of physical commodities with inflation in the presence of the huge futures market and the distribution systems. Any novice commodity trader can tell you this.
"perfected grain seeds"??
In whose opinion Chop?
Beef, it's what's for dinner. plenty of inflation there...
Frankly I'm surprised that cattle prices are only 18% over. Drought has been a significant contributing factor to herd size, since farmers can't raise cattle that they can't water.
We've only begun to see the increases.
$11.99 !!!!!
No more steak for you !!!!!! (And yet gold continues DOWN)
Which begs the reminder ... you can't Eat gold!
And when the "full faith and credit of the US Government" is gone you will still have alot of cocaine laced $20 dollar bills to eat.
muy sabrosa
And when the "full faith and credit of the US Government" is gone you will still have alot of cocaine laced $20 dollar bills to eat.
muy sabrosa
Arrest Janet Yellen for treason.
Thanks Ben Bernanke.