Thursday, April 5, 2012

Reuters: Food Inflation Seen Back on the Table as Prices Rise

The near global printing of money by central bankers around the world is having its impact.

Reuters reports:
World food prices are likely to rise for a third successive month in March...Food prices grabbed world policy makers' attention after hitting record highs in February 2011 and stoking protests connected to the Arab Spring wave of civil unrest in some north Africa and middle eastern countries.

Prices later receded, but an upturn which began in January, initally seen as a pause in the overall downtrend, has persisted....

"The food price index has an extremely high correlation to oil prices and with oil prices up it's going to be difficult for food prices not to follow suit," said Nick Higgins, commodity analyst at Rabobank International.

Energy prices affect the production of fertilizers as well as costs related to food distribution and farm machinery use.

"We really saw the (food index) declines in Q4 2011 as being anomalous and related more to sell offs from the threats posed by the European macroeconomic situation rather than agricultural fundamentals," he added.

The FAO Index [ The United Nations Food and Agriculture Organisation index] - which measures price changes for a basket of cereals, oilseeds, dairy products, meat and sugar - rose in February and January.

U.S. soybean futures rose about 7 percent in March and gained about 17 percent in the first quarter of this year spurred by concerns about tight supplies as drought hit South America and smaller U.S. plantings were expected.

On the physical markets, whose prices FAO uses to calculate its food index, the average monthly price of U.S. soybeans jumped to $519.43 a tonne in March from $487.31 a tonne in February, the FAO's database showed.

But if your only concern is diaper prices, don't worry.

1 comment:

  1. When people can't afford food, they will eat dirt, reducing the price of food.