In January of this year, olive oil prices fell to 2009 levels. Four months later, prices have fallen to ten year lows. Consumption has plummeted in olive oil producing nations Greece, Spain, and Italy, together responsible for 70% of the world’s production. In parallel, a supply glut has hit the market due to a bumper crop in Spain. Meanwhile, struggling consumers have substituted cheaper oil like sunflower oil.
This price drop has put additional pressures on some of Europe’s poorest regions.
For more details see “Europe’s (olive) oil crisis“
Last year, my company raised prices 4-5% on food in its cafeterias. With the ink on those price hikes only 10 months old, my fellow employees and I are getting hit with another substantial price hike. The planned 4% hike is once again well ahead of the general (reported) rate of inflation.
To add insult to injury, the cafeteria will now be charging by the ounce for frozen yogurt. I am sure this is a “Dr. Duru” policy given I am guilty as charged for piling on the chocolate good stuff as high as I can.
The inflation accountants may be relieved to know that we have also received expanded meal service in recent months. Perhaps a hedonic adjustment evens everything right out…
Global supplies of agricultural products are expanding, perhaps in response to past shortages. These forces are driving down prices and discouraging hedge funds from making bullish bets in agricultural commodities. According to Bloomberg in “Funds Reduce Bets on Rising Food Costs to Lowest in 27 Months: Commodities“, the bullishness of hedge funds has reached lows not seen in over two years.
Here is a key quote that describes the situation:
“World food prices tracked by the United Nations retreated for a fifth consecutive month in November, the longest decline in more than two years. The U.S. government said Dec. 9 that combined global inventories of corn, soybeans and wheat will be 3.2 percent larger than anticipated a month earlier. Cocoa capped its longest slump in 50 years last week on increasing supplies from Ivory Coast, the world’s biggest producer.”
DBA, the PowerShares DB Agriculturae Fund ETF, tells the story. the ETF has now sunk to 14-month lows. Today’s price marks the previous post-recovery high in 2009.
On Thanksgiving Day, NPR’s Marketplace included a follow-up segment to a story from 2009 on Jennifer Reese, a San Francisco woman who set out to determine when it is really cheaper to make things at home versus buying in the store. She has now published a book about her experience called Make the Bread, Buy the Butter: What You Should and Shouldn’t Cook from Scratch — Over 120 Recipes for the Best Homemade Foods.
Her general conclusion is that it is cheaper to do the “non-glamorous” things at home, but glamorous activities like raising chickens, goats, and turkeys cost too much in infrastructure to make it worthwhile. It is definitely cheaper to make your own bread and muffins but more expensive to make candied ginger. It is cheaper to buy lemonade than make it – not to mention all the effort it takes to squeeze the lemons. Reese also addresses convenience, food quality, and moral choices.
The book looks like a worthwhile read for those considering to beat higher food costs with homegrown and homespun creations.
DemandTec (DMAN) sells software to help companies optimize the pricing of their products. The company specializes in the retail space.
On a day in which commodity prices and stocks took another plunge, DemandTec released the results of a poll of 16,000 leading retail and consumer products users that asked about pricing expectations:
“Nearly 50 percent of respondents agree that shelf prices will rise moderately as both retailers and manufacturers absorb some margin compression in the coming six months.”
Although it is not 100% clear, the poll seemed to focus on shelf prices of food products. A lot of the margin compression will be coming from commodity prices.
CNBC reports on food inflation in the context of the typical BBQ. If your typical BBQ is a cheeseburger, baked potato, and beer, you are paying 8.4% more this year than last year.
Other points from the video on year-over-year price changes:
Ground beef up 16.7%
Sirloin steak up 6.9%
Boneless chicken breast down 4.0%
American cheese up 3.6%
Head of lettuce up 14.9%
Tomatoes down 6.5%
White bread up 8.3%
Potatoes up 21.4%
Wine up 0.4%
It had to happen eventually. My company recently announced that prices in the company cafeteria are increasing 4-5% in early April. No across the board wage increases have yet been announced though… 🙂