Despite an overall inflation rate that seems low (although the federal government’s controversial exclusion of certain key components like gasoline makes its stats suspicious at best), we now have solid evidence that worldwide food cost increases are happening across the board.
Here’s a list of some of the most dramatic cost increases for key foodstuffs recorded since May 2010:
Coconut oil: +134%
Palm oil: +42%
Orange juice: +35%
Beef and pork: +20%
Considering that this represents a time period of just a little over a year, these increases are some the largest recorded in decades.
What caused it to happen? Poor weather and bad harvests are two of the reasons. But high demand from developing countries – particularly China – is another important factor.
“This is a pretty sustainable increase … A number of factors have been building over time in terms of the commodity increase: world economic growth, rising crude oil prices, increased Chinese import demand have all conspired,” is how Bill Lapp, president of commodity analytical company Advanced Economic Solutions, puts it.
Unfortunately, the problem promises to persist, since many of the items above are ingredients that go into other prepared food items. Initially, packaged food makers that had locked in purchases for some items over certain time periods were able to delay delay passing on cost increases because of those hedges. But the bulk of those contracts have run their course by now.
So, even if commodity prices don’t go any higher, we’re likely to see the ripple effects in pass-along price increases all throughout the “food chain” in the months to come.
This isn’t news anyone wants to hear, considering how fragile (non-existent?) the economic recovery is here in the U.S. and in many other countries as well.
The sober truth is, high food costs coupled with increased energy prices have a chokehold on the world economy that is more consequential than many would care to admit.
Fasten your seatbelts, folks. We may be in for yet another wild ride on the economic roller-coaster …