Thursday, February 03, 2011

Food Inflation. Yup.

It's not news that food-inflation is here (albeit one combox contributor insists that it is NOT here--but then, he doesn't visit grocery stores, either.)

Sykes cites a Fortune column:

Here are the 6-month price percentage moves in some of the things people need to live with:

Sugar = +82.6%

Corn = +59.0%

Coffee = +41.4%

Rice = +40.5%

Oats = +36.6%

That's not the worst news. For THAT, we turn to Ritholtz:

The chart illustrates how the lower income groups in the U.S. really get squeezed when food and gas prices rise. In the U.S. the average annual income for the consumer units (households) measured is $62,857, where food expenditures consume a little over 10 percent of income

...Almost one third of the households in the U.S. spend close to or more than 20 percent of their annual income on food.

(Chart at the link)

IOW, when food inflation occurs, it does not 'hit' the upper-income class. It bothers the middle-income class.

And it is VERY serious for the lower income class.

4 comments:

Beer, Bicycles and the VRWC said...

Anyone who buys groceries has known this for a while. It's hitting my middle-income household rather hard, but I can stand to eat less, thanks. Lower income folks will be devastated. I blame Bush. Or maybe Reagan. Because it certainly can't be the fault of Prog policies like, oh...turning food into a crappy fuel or maybe "saving" a stupid fish at the expense of irrigating the most productive land on Earth. Nah...gotta be Bush.

J. Strupp said...

It's still too early to tell whether this move up in commodities is speculation driven or global demand driven. It wouldn't surprise me if it's a little of the former and a lot of the latter. We'll see. Commodity price volatility is nothing new. 2007-early 2008 comes to mind.

Either way, there's no doubt that higher commodity prices will translate into higher prices for the end user to some degree. But as I've said before, the uptick has been unremarkable to date.

Dad29 said...

Commodity price volatility is nothing new

Right-o, Struppster.

SIX MONTHS OF RISING PRICES is 'volatility.'

And 18" of snow is a minor bother.

J. Strupp said...

Six months of data is nothing. Expand your time line and you'll see I'm right. Commodities are volatile. No question.