Delayed Price Hikes: Food Inflation
I would be doing my readers a disservice if I did not at least warn them of the coming food inflation:
Looming Price Hikes on Food Set to Hit Americans This Fall
Higher inflation could force Fed action, leading to a ‘deeper recession’
In its effort to contain inflation, the Federal Reserve has begun what many expect to be a series of interest rate boosts, which are already taking a toll on stock and housing markets, with job losses likely to follow. While Americans grow weary of record high gas and grocery prices, however, another round of price increases is making its way through the food supply chain and is expected to reach consumers this fall.
“People don’t realize what’s fixing to hit them,” Texas farmer Lynn “Bugsy” Allen said. “They think it’s tough right now; you give it until October. Food prices are going to double.”
The 8.8 percent increase in food prices that Americans have already seen doesn’t take into account the dramatically higher costs that farmers are now experiencing. That’s because farmers pay upfront and only recoup their expenses at the point of sale, months later.
“Usually, what we see on the farm, the consumer doesn’t see for another 18 months,” said John Chester, a Tennessee farmer of corn, wheat, and soybeans. But with the severity of these cost increases, consumers could feel the effects much sooner, particularly if weather becomes a factor.
“Nothing that consumers are paying is going to bridge the gap for farmers right now,” according to Lorenda Overman, a North Carolina farmer who raises hogs and grows corn, soybeans, and sweet potatoes. She said the spike in fuel costs has put her farm into the red this year.
“The prices now have not hit the grocery stores yet,” but she expects they will start to by the end of summer.
Much of the cost of food hinges on the price of oil.
“They have no electric trucks delivering that food and there are no electric tractors,” Allen said. “It takes diesel to run all this.”
Chester said fuel and fertilizer together make up 55 percent of his total costs. The price of diesel fuel has more than doubled, to more than $5 per gallon today from $2.50 per gallon at the end of 2020. Farmers say the cost of fertilizer, an oil derivative, has tripled and in some cases quadrupled.
The industry I work in is related to macroeconomic analysis. We are seeing similar indicators as the farmers, but in relation to food manufacturing and distribution. Along with incomes and unemployment metrics. If both the farmer’s observations and ours hit, it will be ugly.
I encourage you all to do what you can to become slightly more sustainable, or at least prepared, before autumn.
With proper leadership, or just stupid luck, there is a chance that this could be mitigated. But it is looking increasingly unlikely that we would be so fortunate.
A sustained food shortage is not likely, at least from what I can tell. But massive price increases that will wreak havoc on the entire economy because of their economic ripples are definitely a possibility. Along with difficulty in affording food for an unknown duration for us poor/middle-class folk. I don’t think Musk will be hurting, which is probably why he isn’t too concerned about a recession.
Prepare where and how you can, no matter how small. It may make a large difference later on.
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