The talk of the town these days is inflation. Treasury yields are flying higher than Cheech and Chong. The main worry for institutional investors today is higher prices, as the Federal Reserve admits that inflation is on the horizon. This was inevitable after a year of trillions of dollars in money-printing and historically low interest rates in every corner of the planet. But while the affluent can survive price destabilization, everyone else has to bear the brunt of reckless fiscal and monetary expansion.
One of the most significant effects of this neo-Keynesian experiment concerns your trip to the supermarket and nightly dinner plate, following 12 months of supply interruptions, shortages, and the creation of new dollars, euros, yuan, yen, and pounds. So, how bad is food inflation in 2021?
Hungry for Relief
The Food and Agriculture Organization (FAO), a wing of the United Nations, saw its food price index average 113.3 points in January. This is up from 108.6 in December. The monthly reading saw upward changes in everything in your shopping cart: cereals, oilseeds, dairy products, meat, and sugar. In one month, these were the driving factors of higher overall food inflation across the globe:
- Meat: 1%
- Sugar: 8.1%
- Wheat: 6.8%
- Cereal: 7.1%
- Corn: 11.2%
Weather conditions, container shipping costs, production expenses, government policies, and record-breaking Chinese consumption of hard and soft commodities have been some of the other leading aspects of rising prices. Rabobank, a global presence in food and agriculture financing and sustainability-oriented banking, thinks it is hard to foresee easing anytime soon:
“Although the speculative appetite for agri-commodities may seem exaggerated, it is hard to see it going down too much. Low interest rates, potential further fiscal stimulus packages, global demand (not so much for the plate but for storage and animal feed), and potential adverse weather are likely to sustain high prices in agri-commodities through 2021.”
When prices of every other non-agricultural-commodity are surging, the cost of food output grows, too. From lumber to steel to textiles to nitrogen fertilizers, global food companies and farmers are being bombarded with sticker shock. And this is spawning a broad array of other problems for a billion people. The World Bank is warning that this is leading to greater concerns than the impact on your wallet, particularly on aggravated chronic and acute hunger for vulnerable households worldwide.
Beefing Up Food Insecurity
It is easy to quantify global food price inflation. Throwing everyone into the same pot can mask the issue since the U.S. economy is vastly different from, say, India’s marketplace. So, assessing grocery costs on a national level can emphasize just how much of a crisis is brewing.
While a 3.9% spike in food prices could significantly affect a typical American household, a double-digit surge can spark a humanitarian crisis in affected developing markets. Iran is facing food inflation of 67%, Nigeria’s rate soared to 17.33%, and prices skyrocketed 402% in Lebanon. Their problems were already severe before the COVID-19 public health crisis, but governments’ responses to the pandemic have created an environment of food insecurity.
Here are the year-over-year numbers from several countries worldwide in January or February (the latest reading):
The Fed, the European Central Bank (ECB), the Bank of Japan (BoJ), and the central banking powers have employed disastrous monetary policy experiments that could eventually result in currency, financial, and humanitarian crises. But the smartest men and women in the room know better than you do. As long as asset prices on the New York Stock Exchange are through the roof, then nothing else matters. Politicians, bureaucrats, and statist advocates in the Swamp can withstand an inflationary environment. It is everyone beneath them who will endure the hunger pains.
Read more from Andrew Moran.