US food prices see historic jump and are likely to stay high
apnews.com
apnews.com
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.
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.
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.
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.
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.
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).
Edit: downvotes without response?
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.”
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.
There is now more pressure to produce and supply goods that are meant for in-house eating.
All the packaging and supply chain optimized for eating out has become useless and needs to be reoriented towards home eating. Until this is done on a massive scale, prices will remain high.
Also, as demand is rising for home foods, producers have a newly gained pricing power and they sure are fully utilizing it.
Also, production is low in general because of massive layoffs of farm work. Farm hands are not getting visas to come and actually harvest what farmers have been cultivating.
Altogether, the prices are rising fast and nobody knows where it'll go.
Basically it's a choice they have to make. Go to work, risk getting sick, but make $$$ and feed family. Or you can be safe, not go out to work , but family will have no food. It's an easy choice to make because your family needs to eat.
One, restaurant demand is switching over to consumer demand, and the packaging and distribution is very different -- you don't buy 50lb sacks of pancake mix, half a pallet at a time, I reckon.
Secondly, there have been food processing plant closures. This has a number of ripple effects. With the plant closures, farmers have been forced to destroy market-ready animals, dump milk, etc. So there is not only less processing capacity, but less input available when the plant opens again. I had a phone call from an aunt in rural Iowa yesterday -- she reported paying more than US$7/lb for ground beef... in a store literally 5 miles from my brother's beef finishing feedlot. The insanity of that situation boggles me.
Edit: better source: https://www.google.com/url?sa=t&source=web&cd=&ved=2ahUKEwiD...
One of the problems with modern agriculture is that sometimes the cost to bring your product to market exceeds the cost the market is willing to pay. In that case, its not that uncommon for product to be destroyed to bring supply and demand closer together.
Like, people want flour. There's probably plenty of flour, but at first the grocery stores didn't have a way to sell what the restaurants aren't using. There's a cost to changing how it is packaged and distributed.
This isn't inflation, because it isn't a new baseline.
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.
> 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%.