Are you noticing food prices going up?
Food prices didn't go up as much as some people said they would a couple of years ago. That's just a fact. Not that food doesn't cost more than it used to. It's just that what people perceive and what's really going on are sometimes two different things.
Do you remember when milk and eggs spiked up a couple of years ago? Everyone was howling. And they were right. In my area, a dozen eggs (not the fancy organic, cage-free, etc types, just the regular stuff) shot up from about $1 to about $2.50 in the course of a few weeks. Ditto milk. It certainly did seem like eating was going to get a whole lot more expensive.
But guess what? Prices drifted down for some months until they settled down - not as low as they were, but not all that much more. So what's going on?
One theory - and it's a good one - is that as the economies of emerging market countries (which includes China) grow, their people want to eat more than just rice and vegetables. Demand for more and "better" food increases. Increased demand will drive prices up unless supply increases too. Remember: prices are a function of supply/demand. If demand increases and supply doesn't, prices go up.
But what if supply increases too? Then, sure, prices probably won't go up. There's enough to go around. But this supply/demand analysis, much as it does explain the movement of prices, doesn't catch everything. Perception is important too.
The fact is, if consumers and officials become concerned about supplies - whether current or future supplies - then prices will probably go up.
LATE BREAKING BULLETIN:
Wheat Prices just increased the most in 51 years! Now this isn't just a temporary spike. It's because of reduced supply. So now we have a situation where the increased demand we described above has run up against reduced supply.
Weather problems around the world have apparently significantly reduced available supply of wheat. Combined with the factors mentioned above, we may be looking at a serious and permanent rise in prices. Remember, wheat and other grains are used to make not only products like bread and cereal, but it's also used for feeding animals. That covers a big part of our total food supply.
Now, food prices haven't reacted to all this yet. It may take weeks, maybe months, if these wheat prices hold.
But there's a bigger danger here. The way prices work, as I mentioned above, has as much to do with perception and anticipation as it does with the actual supply and demand. It's not just a matter crunching numbers: so much supply/so much demand. If people begin to fear that wheat prices - and other grains - are going to continue to rise, possibly rise dramatically, then consumer food prices may soar.
We'll have to keep our eye on this one.
Do you remember when milk and eggs spiked up a couple of years ago? Everyone was howling. And they were right. In my area, a dozen eggs (not the fancy organic, cage-free, etc types, just the regular stuff) shot up from about $1 to about $2.50 in the course of a few weeks. Ditto milk. It certainly did seem like eating was going to get a whole lot more expensive.
But guess what? Prices drifted down for some months until they settled down - not as low as they were, but not all that much more. So what's going on?
One theory - and it's a good one - is that as the economies of emerging market countries (which includes China) grow, their people want to eat more than just rice and vegetables. Demand for more and "better" food increases. Increased demand will drive prices up unless supply increases too. Remember: prices are a function of supply/demand. If demand increases and supply doesn't, prices go up.
But what if supply increases too? Then, sure, prices probably won't go up. There's enough to go around. But this supply/demand analysis, much as it does explain the movement of prices, doesn't catch everything. Perception is important too.
The fact is, if consumers and officials become concerned about supplies - whether current or future supplies - then prices will probably go up.
LATE BREAKING BULLETIN:
Wheat Prices just increased the most in 51 years! Now this isn't just a temporary spike. It's because of reduced supply. So now we have a situation where the increased demand we described above has run up against reduced supply.
Weather problems around the world have apparently significantly reduced available supply of wheat. Combined with the factors mentioned above, we may be looking at a serious and permanent rise in prices. Remember, wheat and other grains are used to make not only products like bread and cereal, but it's also used for feeding animals. That covers a big part of our total food supply.
Now, food prices haven't reacted to all this yet. It may take weeks, maybe months, if these wheat prices hold.
But there's a bigger danger here. The way prices work, as I mentioned above, has as much to do with perception and anticipation as it does with the actual supply and demand. It's not just a matter crunching numbers: so much supply/so much demand. If people begin to fear that wheat prices - and other grains - are going to continue to rise, possibly rise dramatically, then consumer food prices may soar.
We'll have to keep our eye on this one.
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