Monday, July 21, 2008

FT.com: US Food Groups Plan Hefty Price Increases

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Remember, my thesis for the 2nd half is food inflation, or what I call agflation, will replace energy inflation as the major gripe. (I've told readers to stock up on any foodstuffs that can be stored all year) That said, I need to qualify that with the provision that home heating costs this winter will be a "shock and awe" issue for American consumers, most who will be blindsided. If not for the fact this is a regulated market and does not reflect market supply/demand in full, it would go from a crisis to a disaster. Just do a google search on term 'natural gas prices' in the "news" tab, and you can see utility after utility submitting substantial price increases to their state regulators. Thankfully inflation is only 5% (cough) or I'd be worried.

Back to agflation the current trick if you are not in the know is the food companies have kept prices flat in many cases - while shrinking the boxes and/or amount of product in said packaging. Oh Mr. Lincoln, it does appear you can fool a lot of the people, a lot of the time - until it reaches a simply egregious stage.


If I could only buy a futures contract on American anger I'd be so long on that instrument..

  • US food companies are preparing another round of hefty price increases as soaring commodity costs force them to pass on rises to consumers.
  • Sara Lee, maker of meat products such as Jimmy Dean sausages, said costs would compel it to push up prices on meat lines by up to a fifth later this year.
  • Kraft Foods, Kellogg’s, ConAgra and Tyson are also pushing through increases, which are expected to contribute to inflationary pressures in the US. (but the type of inflation that does not matter - after all food is volatile and therefore doesn't count to the Federal Reserve)
  • The increase in food prices was steep in June, when they moved up 0.8 per cent compared with 0.3 per cent in May.
  • In June, meat prices surged to a 22-year high because of record costs for corn and soybean, food crops for livestock. The US Department of Agriculture expects pork production to fall 3 per cent in 2009, against a 1 per cent fall for chicken and beef.
  • Bill Lapp of Advanced Economic Solutions, an agricultural consultancy in Omaha, said higher prices looked set to prompt the biggest decline in meat consumption for 27 years. (demand destruction as the pooring of American rampages)
  • Kraft Foods, which has said it will push up its prices by 12-13 per cent this year, said some of its cheese categories could rise 25 per cent.

We have placed investments in certain food categories but thus far the commodities have not worked out anywhere as well as the fertilizer investments.


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