Saturday, December 17, 2022

If commodity prices are falling why aren't grocery bills?

See Food Commodities Are Getting Cheaper—Unlike Grocery Bills: Prices have pulled back, but higher energy costs and production worries are keeping costs for consumers high by Yusuf Khan of The WSJ. Excerpts:

"Global prices for commodities such as wheat and sugar have fallen back to where they were a year ago, but consumers are still likely to feel the pinch at the checkout.

The disconnect is because of extraordinary uncertainty about future production of key foodstuffs such as wheat, and because price pressures elsewhere—including for energy and wages—can have a major impact on grocery bills.

The widely watched Food Price Index, produced by the Food and Agriculture Organization of the United Nations, dropped to 135.7 in November"

"Even in less volatile times, commodity price changes can take three-to-six months to filter through to grocery bills"

"A key reason for elevated checkout prices is that traders aren’t sure how much grain, and of what quality, will be produced next year"

"The war in Ukraine, a major grain exporter, has resulted in something akin to a drought, with little planted for the coming year"

"Supermarkets have more incentive to freeze than to lower prices . . . since that gives them more flexibility if other input costs such as energy rise further in the coming months."

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