Wednesday, November 11, 2009
Reality behind cheap food
A possible explanation for the lack of food inflation is the existence of food production matching demand at a certain price point. This price point has collapsed with the economy. Accordingly fresh produce producers(!) have struggled on making a loss. Over the New Year will be a shakeout as these losses become unsustainable. This will reduce competition amongst the survivors. As competition is reduced prices will again reflect the costs of production and not the current over-supply. Probably this will be reflected in many sectors of the global economy, the days of global over-supply masking the dramatic fall of sterling may well be coming to an end.