People have to do stuff in the short term to adapt to new conditions. There's a lot of disruption right now simply because people and stuff have to be moved around. That's not the same thing as a long term shortage of anything, but it has a real cost in terms of physical goods or labor or money. Why should this be permanent? If more flour needs to be allocated to home use than restaurants, restructuring the supply chain is not something that goes on forever, whether restaurants mostly reopen or not.
It's not impossible to disentangle inflation from a general supply shock such as COVID. The price of oil, for example, hints that something besides the money supply is at play.
Has anyone squared the circle on why food prices are rising in spite of collapsed restaurant demand? I understand the constraints around meat packing (although given the monopolies in meat production, I’m still a little skeptical that it’s all based in reality), but why other goods?
One reason is that the food supply system is comprised of retail and commercial sectors. The commercial demand collapsed as restaurants & institutions closed, while the demand at the retail level skyrocketed when people panic-shopped.
The packaging needs of the two sectors are different - retail packaging must have the nutrition & ingredients panels on it, while commercial packaging would typically only have it on the carton.
Well, there are two supply chain disruptions in play.
One, restaurant demand is switching over to consumer demand, and the packaging and distribution is very different -- you don't buy 50lb sacks of pancake mix, half a pallet at a time, I reckon.
Secondly, there have been food processing plant closures. This has a number of ripple effects. With the plant closures, farmers have been forced to destroy market-ready animals, dump milk, etc. So there is not only less processing capacity, but less input available when the plant opens again. I had a phone call from an aunt in rural Iowa yesterday -- she reported paying more than US$7/lb for ground beef... in a store literally 5 miles from my brother's beef finishing feedlot. The insanity of that situation boggles me.
In Canada, the potato and/or dairy farmers associations are destroying their crops to prop up prices since fast food demand disappeared and there was such excess. Not sure what the difference between that and price fixing is but it seems to be a common practice. I first heard about it after reading the Grapes of Wrath
There's so much more demand for groceries, dairy and poultry because people aren't eating out.
There is now more pressure to produce and supply goods that are meant for in-house eating.
All the packaging and supply chain optimized for eating out has become useless and needs to be reoriented towards home eating. Until this is done on a massive scale, prices will remain high.
Also, as demand is rising for home foods, producers have a newly gained pricing power and they sure are fully utilizing it.
Also, production is low in general because of massive layoffs of farm work. Farm hands are not getting visas to come and actually harvest what farmers have been cultivating.
Altogether, the prices are rising fast and nobody knows where it'll go.
Doesn't it make sense that the costs of changing how supply chains work are factoring in to everything?
Like, people want flour. There's probably plenty of flour, but at first the grocery stores didn't have a way to sell what the restaurants aren't using. There's a cost to changing how it is packaged and distributed.
This isn't inflation, because it isn't a new baseline.
cant explain why this is happening but can confirm meat industry workers are getting boned hard. Family in indiana working at tyson plant, my family and co-workers are getting sick but still have to work.
Basically it's a choice they have to make. Go to work, risk getting sick, but make $$$ and feed family. Or you can be safe, not go out to work , but family will have no food. It's an easy choice to make because your family needs to eat.
I predicted we'd see rising prices for anything provided by essential workers: food, shipping, etc. I think if the lockdowns and pandemic continues, we'll continue to see that.
The limit case is everyone stays home. We print money to allow people to buy food and medicine. Only essential workers contribute to the economy and do productive work. In the limit case, we see high inflation, large economic gains to essential workers, and a big hit to everyone else.
We're no where close to the limit case yet, but a modest rise is expected. With a big chunk of our economy shut down, the food sector is bigger, in relative terms.
It sounds like they're raising prices in order to slow demand, so that the system can catch up. I'm curious if this will lead suppliers, etc. to go back to something like "just in time...but a few extra weeks just in case"
> The Labor Department reports that the 2.6% jump in April food prices was the largest monthly increase in 46 years. Prices for meats, poultry, fish and eggs increased the most, rising 4.3%.
[+] [-] robbyt|5 years ago|reply
[+] [-] dragonwriter|5 years ago|reply
General inflation would, by definition, extend beyond food prices.
Of course, it is, by definition, inflation in that specific sector.
> Didn't the economics say there wouldn't be any/much as a result of printing so much money?
And there isn't much sign of general inflation, which is what you'd expect if the key driver were money supply.
[+] [-] perl4ever|5 years ago|reply
[+] [-] jldugger|5 years ago|reply
[+] [-] wbl|5 years ago|reply
[+] [-] claudeganon|5 years ago|reply
[+] [-] chiph|5 years ago|reply
The packaging needs of the two sectors are different - retail packaging must have the nutrition & ingredients panels on it, while commercial packaging would typically only have it on the carton.
[+] [-] dbcurtis|5 years ago|reply
One, restaurant demand is switching over to consumer demand, and the packaging and distribution is very different -- you don't buy 50lb sacks of pancake mix, half a pallet at a time, I reckon.
Secondly, there have been food processing plant closures. This has a number of ripple effects. With the plant closures, farmers have been forced to destroy market-ready animals, dump milk, etc. So there is not only less processing capacity, but less input available when the plant opens again. I had a phone call from an aunt in rural Iowa yesterday -- she reported paying more than US$7/lb for ground beef... in a store literally 5 miles from my brother's beef finishing feedlot. The insanity of that situation boggles me.
[+] [-] gentleman11|5 years ago|reply
Edit: better source: https://www.google.com/url?sa=t&source=web&cd=&ved=2ahUKEwiD...
[+] [-] nine_zeros|5 years ago|reply
There is now more pressure to produce and supply goods that are meant for in-house eating.
All the packaging and supply chain optimized for eating out has become useless and needs to be reoriented towards home eating. Until this is done on a massive scale, prices will remain high.
Also, as demand is rising for home foods, producers have a newly gained pricing power and they sure are fully utilizing it.
Also, production is low in general because of massive layoffs of farm work. Farm hands are not getting visas to come and actually harvest what farmers have been cultivating.
Altogether, the prices are rising fast and nobody knows where it'll go.
[+] [-] perl4ever|5 years ago|reply
Like, people want flour. There's probably plenty of flour, but at first the grocery stores didn't have a way to sell what the restaurants aren't using. There's a cost to changing how it is packaged and distributed.
This isn't inflation, because it isn't a new baseline.
[+] [-] cheez|5 years ago|reply
Edit: downvotes without response?
[+] [-] jim_and_derrick|5 years ago|reply
Basically it's a choice they have to make. Go to work, risk getting sick, but make $$$ and feed family. Or you can be safe, not go out to work , but family will have no food. It's an easy choice to make because your family needs to eat.
[+] [-] wegs|5 years ago|reply
The limit case is everyone stays home. We print money to allow people to buy food and medicine. Only essential workers contribute to the economy and do productive work. In the limit case, we see high inflation, large economic gains to essential workers, and a big hit to everyone else.
We're no where close to the limit case yet, but a modest rise is expected. With a big chunk of our economy shut down, the food sector is bigger, in relative terms.
[+] [-] Simulacra|5 years ago|reply
[+] [-] jldugger|5 years ago|reply
> The Labor Department reports that the 2.6% jump in April food prices was the largest monthly increase in 46 years. Prices for meats, poultry, fish and eggs increased the most, rising 4.3%.
[+] [-] kayhi|5 years ago|reply
[+] [-] voisin|5 years ago|reply
[+] [-] koolhead17|5 years ago|reply