6 ms·

US food prices see historic jump and are likely to stay high

35 points by harambae 6y ago

robbyt 6y ago
This sounds like inflation. Didn't the economics say there wouldn't be any/much as a result of printing so much money?
- jldugger 6y ago
  It's not impossible to disentangle inflation from a general supply shock such as COVID. The price of oil, for example, hints that something besides the money supply is at play.
- dragonwriter 6y ago
  > This sounds like inflation. General inflation would, by definition, extend beyond food prices. Of course, it is, by definition, inflation in that specific sector. > Didn't the economics say there wouldn't be any/much as a result of printing so much money? And there isn't much sign of general inflation, which is what you'd expect if the key driver were money supply.
  - pdonis 6y ago
    > there isn't much sign of general inflation, which is what you'd expect if the key driver were money supply. It's too early for much of the newly printed money to have spread out into the economy. We won't know how much inflation printing the money caused for some years, since it will take a while for the rest of the economy to adjust to the new money supply.
    - dragonwriter 6y ago
      > It's too early for much of the newly printed money to have spread out into the economy No, it's not, though if it was that would be another argument against the claim that food prices were an effect of monetart-policy-driven inflation. > We won't know how much inflation printing the money caused for some years If monetary policy had that much lag there'd be little point to it at all.
      - pdonis 6y ago
        > No, it's not Why not? Money doesn't instantly magically transport itself to all parts of the economy. First the people who get the printed money have to spend it--and many of them haven't even gotten it yet. Then the ripple effects of the spending have to propagate through the rest of the economy. That can take a while. > if it was that would be another argument against the claim that food prices were an effect of monetart-policy-driven inflation At this point in time I would agree; there hasn't been enough time for people to have spent enough of the printed money on food. However, since a fair chunk of the printed money is going to people who need it for basic living expenses, I would expect a fair chunk of it to be spent on food over the next few months, which will probably drive food prices up further--or will offset at least some of the price decreases to be expected as supply chains adjust. > If monetary policy had that much lag there'd be little point to it at all. This would come as a great surprise to the Federal Reserve board members and all of the economists who are always pointing out that the Fed has to base policy on estimates of what things will be like some time in the future, since monetary policy has a time lag. Try Google searching on "federal reserve monetary policy time lag" and see what hits come up.
        dragonwriter 6y ago
        > Try Google searching on "federal reserve monetary policy time lag" and see what hits come up. Funny that when I did that I found pieces saying exactly what I already knew: that monetary policy changes tend to measurable effects quickly but still take a significant time to reach their peak effect (6-8 quarters), which is what the “policy lag” refers to, and then have reduced effect past that point. Policy lag doesn't mean that it takes a long time for monetary policy to start having noticeable impacts, which is what was suggested.
        pdonis 6y ago
        > monetary policy changes tend to measurable effects quickly Measureable effects on interest rates quickly. The reason for that is simple: the interest rates that are measured are usually tied directly to the Fed's rates (usually with an offset that depends on the particular kind of loan) and thus move with them. But we're not talking about interest rates here. We're talking about prices of commodities like food, which are part of the things that "lag". > it takes a long time for monetary policy to start having noticeable impacts, which is what was suggested. What was suggested is that it takes time for monetary policy to start having noticeable impacts on food prices (and more generally prices of commodities).
  - darkerside 6y ago
    Based on historic drops in US consumer spending, down 14% in April, maybe what we're seeing is the absence of what might be an expected deflation
- wbl 6y ago
  Making food just got a bunch harder due to COVID: prices will rise as a result!
- perl4ever 6y ago
  People have to do stuff in the short term to adapt to new conditions. There's a lot of disruption right now simply because people and stuff have to be moved around. That's not the same thing as a long term shortage of anything, but it has a real cost in terms of physical goods or labor or money. Why should this be permanent? If more flour needs to be allocated to home use than restaurants, restructuring the supply chain is not something that goes on forever, whether restaurants mostly reopen or not.
jldugger 6y ago
Before you get too worried: > The Labor Department reports that the 2.6% jump in April food prices was the largest monthly increase in 46 years. Prices for meats, poultry, fish and eggs increased the most, rising 4.3%.
- kayhi 6y ago
  This statement worries me more in that this is a significant increase worth noting.
  - jldugger 6y ago
    Food spending in general over the last 50+ years has represented an ever decreasing portion of US household budgets: https://www.npr.org/sections/thesalt/2015/03/02/389578089/your-grandparents-spent-more-of-their-money-on-food-than-you-do https://www.npr.org/sections/thesalt/2015/03/02/389578089/yo...
- voisin 6y ago
  Annualized rate?
claudeganon 6y ago
Has anyone squared the circle on why food prices are rising in spite of collapsed restaurant demand? I understand the constraints around meat packing (although given the monopolies in meat production, I’m still a little skeptical that it’s all based in reality), but why other goods?
- cheez 6y ago
  The food supply chain in US is heavily controlled by a few entities. They have been dying for a reason to raise prices. Google Tyson's full page ad. Edit: downvotes without response?
  - mistrial9 6y ago
    recent articles in US Media about a price-fixing investigation by the "Big Four" meat packers.. just what the parent comment says, minus the meat specific part.. https://www.bloomberg.com/news/articles/2020-05-08/meatpacking-giants-face-u-s-antitrust-inquiry-amid-shutdowns https://www.bloomberg.com/news/articles/2020-05-08/meatpacki... look for "Cargill the worst company in the world" written by a US Congressman (!) for more background “In my 40-year long career in Congress, I took on a range of companies that engaged in abusive practices,” former congressman and Mighty Earth Chairman Henry Waxman writes in the report. “I have seen firsthand the harmful impact of businesses that do not bring their ethics with them to work. But Cargill stands out.”
    - cheez 6y ago
      People don't want to believe the extent to which they are slaves.
- chiph 6y ago
  One reason is that the food supply system is comprised of retail and commercial sectors. The commercial demand collapsed as restaurants & institutions closed, while the demand at the retail level skyrocketed when people panic-shopped. The packaging needs of the two sectors are different - retail packaging must have the nutrition & ingredients panels on it, while commercial packaging would typically only have it on the carton.
wegs 6y ago
I predicted we'd see rising prices for anything provided by essential workers: food, shipping, etc. I think if the lockdowns and pandemic continues, we'll continue to see that. The limit case is everyone stays home. We print money to allow people to buy food and medicine. Only essential workers contribute to the economy and do productive work. In the limit case, we see high inflation, large economic gains to essential workers, and a big hit to everyone else. We're no where close to the limit case yet, but a modest rise is expected. With a big chunk of our economy shut down, the food sector is bigger, in relative terms.
Simulacra 6y ago
It sounds like they're raising prices in order to slow demand, so that the system can catch up. I'm curious if this will lead suppliers, etc. to go back to something like "just in time...but a few extra weeks just in case"
koolhead17 6y ago
Capitalism seems to thrive better along with pandemic.

35 points by harambae 6y ago

robbyt 6y ago

This sounds like inflation. Didn't the economics say there wouldn't be any/much as a result of printing so much money?

jldugger 6y ago
It's not impossible to disentangle inflation from a general supply shock such as COVID. The price of oil, for example, hints that something besides the money supply is at play.
dragonwriter 6y ago
> This sounds like inflation. General inflation would, by definition, extend beyond food prices. Of course, it is, by definition, inflation in that specific sector. > Didn't the economics say there wouldn't be any/much as a result of printing so much money? And there isn't much sign of general inflation, which is what you'd expect if the key driver were money supply.
- pdonis 6y ago
  > there isn't much sign of general inflation, which is what you'd expect if the key driver were money supply. It's too early for much of the newly printed money to have spread out into the economy. We won't know how much inflation printing the money caused for some years, since it will take a while for the rest of the economy to adjust to the new money supply.
  - dragonwriter 6y ago
    > It's too early for much of the newly printed money to have spread out into the economy No, it's not, though if it was that would be another argument against the claim that food prices were an effect of monetart-policy-driven inflation. > We won't know how much inflation printing the money caused for some years If monetary policy had that much lag there'd be little point to it at all.
    - pdonis 6y ago
      > No, it's not Why not? Money doesn't instantly magically transport itself to all parts of the economy. First the people who get the printed money have to spend it--and many of them haven't even gotten it yet. Then the ripple effects of the spending have to propagate through the rest of the economy. That can take a while. > if it was that would be another argument against the claim that food prices were an effect of monetart-policy-driven inflation At this point in time I would agree; there hasn't been enough time for people to have spent enough of the printed money on food. However, since a fair chunk of the printed money is going to people who need it for basic living expenses, I would expect a fair chunk of it to be spent on food over the next few months, which will probably drive food prices up further--or will offset at least some of the price decreases to be expected as supply chains adjust. > If monetary policy had that much lag there'd be little point to it at all. This would come as a great surprise to the Federal Reserve board members and all of the economists who are always pointing out that the Fed has to base policy on estimates of what things will be like some time in the future, since monetary policy has a time lag. Try Google searching on "federal reserve monetary policy time lag" and see what hits come up.
      - dragonwriter 6y ago
        > Try Google searching on "federal reserve monetary policy time lag" and see what hits come up. Funny that when I did that I found pieces saying exactly what I already knew: that monetary policy changes tend to measurable effects quickly but still take a significant time to reach their peak effect (6-8 quarters), which is what the “policy lag” refers to, and then have reduced effect past that point. Policy lag doesn't mean that it takes a long time for monetary policy to start having noticeable impacts, which is what was suggested.
        pdonis 6y ago
        > monetary policy changes tend to measurable effects quickly Measureable effects on interest rates quickly. The reason for that is simple: the interest rates that are measured are usually tied directly to the Fed's rates (usually with an offset that depends on the particular kind of loan) and thus move with them. But we're not talking about interest rates here. We're talking about prices of commodities like food, which are part of the things that "lag". > it takes a long time for monetary policy to start having noticeable impacts, which is what was suggested. What was suggested is that it takes time for monetary policy to start having noticeable impacts on food prices (and more generally prices of commodities).
- darkerside 6y ago
  Based on historic drops in US consumer spending, down 14% in April, maybe what we're seeing is the absence of what might be an expected deflation
wbl 6y ago
Making food just got a bunch harder due to COVID: prices will rise as a result!
perl4ever 6y ago
People have to do stuff in the short term to adapt to new conditions. There's a lot of disruption right now simply because people and stuff have to be moved around. That's not the same thing as a long term shortage of anything, but it has a real cost in terms of physical goods or labor or money. Why should this be permanent? If more flour needs to be allocated to home use than restaurants, restructuring the supply chain is not something that goes on forever, whether restaurants mostly reopen or not.

jldugger 6y ago

Before you get too worried: > The Labor Department reports that the 2.6% jump in April food prices was the largest monthly increase in 46 years. Prices for meats, poultry, fish and eggs increased the most, rising 4.3%.

kayhi 6y ago
This statement worries me more in that this is a significant increase worth noting.
- jldugger 6y ago
  Food spending in general over the last 50+ years has represented an ever decreasing portion of US household budgets: https://www.npr.org/sections/thesalt/2015/03/02/389578089/your-grandparents-spent-more-of-their-money-on-food-than-you-do https://www.npr.org/sections/thesalt/2015/03/02/389578089/yo...
voisin 6y ago
Annualized rate?

claudeganon 6y ago

Has anyone squared the circle on why food prices are rising in spite of collapsed restaurant demand? I understand the constraints around meat packing (although given the monopolies in meat production, I’m still a little skeptical that it’s all based in reality), but why other goods?

cheez 6y ago
The food supply chain in US is heavily controlled by a few entities. They have been dying for a reason to raise prices. Google Tyson's full page ad. Edit: downvotes without response?
- mistrial9 6y ago
  recent articles in US Media about a price-fixing investigation by the "Big Four" meat packers.. just what the parent comment says, minus the meat specific part.. https://www.bloomberg.com/news/articles/2020-05-08/meatpacking-giants-face-u-s-antitrust-inquiry-amid-shutdowns https://www.bloomberg.com/news/articles/2020-05-08/meatpacki... look for "Cargill the worst company in the world" written by a US Congressman (!) for more background “In my 40-year long career in Congress, I took on a range of companies that engaged in abusive practices,” former congressman and Mighty Earth Chairman Henry Waxman writes in the report. “I have seen firsthand the harmful impact of businesses that do not bring their ethics with them to work. But Cargill stands out.”
  - cheez 6y ago
    People don't want to believe the extent to which they are slaves.
chiph 6y ago
One reason is that the food supply system is comprised of retail and commercial sectors. The commercial demand collapsed as restaurants & institutions closed, while the demand at the retail level skyrocketed when people panic-shopped. The packaging needs of the two sectors are different - retail packaging must have the nutrition & ingredients panels on it, while commercial packaging would typically only have it on the carton.

wegs 6y ago

I predicted we'd see rising prices for anything provided by essential workers: food, shipping, etc. I think if the lockdowns and pandemic continues, we'll continue to see that. The limit case is everyone stays home. We print money to allow people to buy food and medicine. Only essential workers contribute to the economy and do productive work. In the limit case, we see high inflation, large economic gains to essential workers, and a big hit to everyone else. We're no where close to the limit case yet, but a modest rise is expected. With a big chunk of our economy shut down, the food sector is bigger, in relative terms.

Simulacra 6y ago

It sounds like they're raising prices in order to slow demand, so that the system can catch up. I'm curious if this will lead suppliers, etc. to go back to something like "just in time...but a few extra weeks just in case"

koolhead17 6y ago

Capitalism seems to thrive better along with pandemic.