Tuesday, August 7 2012

THE EDITOR: Our food inflation rate is now at 24 percent, year on year, ie in the last year food prices have risen on average 24 percent. Many including the Minister of Food Production are warning of more of this inflation based on the increase in price of grain in the world because of a drought.

Further, our chicken farmers are pointing to the increase in feed price which can result in higher prices in the supermarkets. Since most of our meat is imported we are also threatened with associated increases.

The problem though is whether the 24 percent increase in a year is due only to this imported inflation?

Listen to this quote from Bloomberg in an article by Alan Bjerja: “US consumers may pay three to four percent more for food next year as the effects of the country’s worst drought since the 1950s work their way onto the supermarket shelves, a forecast made by the US Dept of Agriculture for 2013. Also in the US beef may rise in price by five percent because of tight supply of corn since the price of grain has surged by 50 percent since June.

But the US Department of Agriculture has maintained its food inflation rate for 2012 at 2.5-3.5 percent!

Since we import grain and other products that depend on grain then surely the 24 percent inflation we have seen is not solely imported inflation. This has to do with something peculiar to TT. The answer is higher profit taking in a situation of high liquidity that drives inflation in prices of demand-inelastic products — food.

Victor Darceuil

via e-mail