Stephen Rushmore Jr.
By Simon Rabinovitch
LONDON (Reuters) – Food prices, historically as changeable as the weather, are often put to one side when central bankers and economists gauge inflation, but soaring prices for everything from corn to milk are forcing a rethink.
Calculations of ‘core’ inflation strip out food and energy prices, seen as volatile and therefore liable to skew any snapshot of consumer price levels. But some analysts now argue that a steep climb in the cost of food worldwide in recent months could be permanent, or at least long lasting.
Merrill Lynch has even coined a term to capture the phenomenon of food prices forcing up consumer prices more broadly: "agflation."
Corn prices are at 10-year highs, pushing up the cost of feed for livestock and therefore meat as well. Wheat and dairy prices are also up across the board.
The implication for global growth is potentially serious if the inflationary threat convinces central banks to set interest rates at higher levels than they would otherwise do.
Few countries, developing or developed, seem immune.
In China inflation was 3.0 percent in April, just off a two-year high, driven by food price inflation of 7.1 percent.
U.S. food prices, normally in line with broader price levels, are expected to outpace the general inflation rate by as much as 2 percent for the next two years.
Inflation in Turkey has jumped to 10.7 percent, partly the result of food prices rising four times faster than a year ago.
A leading culprit in Britain’s 3.1 percent inflation in March, famously beyond the Bank of England’s target zone, was food prices, up nearly twice as much.
Found the article I was looking for. It is from Feb 5.:
By Sue Kirchhoff, USA TODAY
U.S. wheat prices continued to soar Wednesday as export demand remained robust despite record high prices, with values in the United States rising by the maximum allowed in a trading day and helping to rally corn and soybeans.
Overall, wheat prices have doubled since last June at the Chicago Mercantile Exchange (CME), which owns the Chicago Board of Trade. Prices have been pushed higher by surging world demand and bad weather in some major producing nations.
"For the near-term price, it’s still heading higher," says Joe Victor, vice president of marketing at Allendale, a commodity research firm. He says prices will stay elevated until the markets get a better handle on potential production in coming months. "If we have good weather, plenty of plantings, then there’s likely a price correction," Victor says. "If it’s bad weather & (prices will) continue their upward trends."
There were fresh signs that record high prices for wheat had yet to dent demand from importing nations.
Egypt, one of the world’s largest importers of wheat, bought 150,000 tons of the grain, including 25,000 tons from the United States, the world’s top exporter of wheat.
"That is such an important factor in the wheat market," says grains analyst Bill Nelson of A.G. Edwards, referring to the purchase by Egypt.
"Egypt is being seen as a proxy for world grain buyers who are, in general, willing to buy grain even at record prices. This is evidence that day after day of record prices are not limiting demand," he says.
The May futures contract for Chicago soft red winter wheat, used in cakes and crackers, jumped by the daily limit of 30 cents to an all-time high of $10.50 a bushel. The nearby March contract rose its 30-cent daily limit to a high of $10.33. Wheat prices briefly jumped to more than $10 a bushel in December.
Minneapolis Grain Exchange March spring wheat also rose by the daily limit to $14.93 a bushel, the highest price for any U.S. wheat futures contract. High-protein spring wheat, prized by,21,374751.032,1,7288,220.127.116.11
374782,374751,374751,2008-02-27 14:24:38,RE: Are Increasing Food Prices Affecting You?”