Noon International: Food Trading Import Export

Is this a New Era? Is food inflation temporary or is it here to stay? As an importer of frozen vegetables we are looking at increasing costs on all our vegetables across the board. After years of being fairly stable, food prices are on the rise.  Food inflation is happening on a global basis.  Even in Europe, where they have been insulated by the strong Euro because most food items are priced in dollars, they are facing rising costs.  Inflation is being caused by increased transportation cost, ocean freight, truck rates, fuel cost, weather problems around the world -  all having an impact on our food pricing.  Even in China with its low cost of labor is having to contend with higher food inflation.

In the USA we are seeing a push for biofuel which competes with our normal food supply.  As we see the shift to use corn, soybean, sugar as biofuels, this will put upward pressure on the food costs.  These grains not only will increase in cost but also the feed meal that is fed to livestock will experience an upward bias in cost as well, creating a rippling effect to the table.  We will experience incremental upward food costs across the board.  Some may argue that over the past 10 years as we have shifted to a global economy, this should help to abate the inflationary pressure.  In my humble way of thinking, from the perspective of  an importer, this will not be the case.  As I have pointed out above, increasing labor cost, increasing energy cost, and the dollar losing value are good reasons for us to expect continued increased food costs from abroad.

It is not only in the United States that food inflation is being felt but it is global in nature.  One key factor will be China, once again, just as its demand for oil has impacted global oil prices, the same will occur in the food arena.  China with growing per capita income and their love of food will be buying more and better food.  For the Chinese eating out is their largest form of socialization.  This will put added pressure on food cost as they seek out new and better food domestically as well as globally. 

Not only China, but Europe is also experiencing food inflation in light of their appreciating Euro.  In Germany butter may increase 50% this year, in Italy pasta is up 20% and in the U.K. food inflation is running  at 4.9%

Everywhere we look we see food inflation on the rise.  Expect it.  It’s not when but how much it will  impact our pocketbooks.  How much of an inflationary increase can we expect?  Ask the economists, they certainly can tell us, since they have predicted 26 of the last 2 recessions.

Food Inflation because:

• Move to produce Biofuel puts upward pressure on food.  Food must compete with  Biofuel.
• Food in U.S. up 6.7% annualized since beginning of the year.
• Dramatic increase in Biofuels is going to fuel inflation for the next several years.
• Food sources today are more global – for us in the U.S. with a weakening dollar our import cost will rise.

In China this year according  to Asian Wall Street Journal August 14:

• Eggs up 27% from a year ago.
• Meat and Poultry up 45% this year.
• Fresh Vegetables up 18.7% this year.

Will food cost take a larger part of our spending?  The answer is yes.  Expect  it, it will happen.

Resources:

• http://www.agorafinancial.com/pasttakes/crisis_opp/QucikTakes_Crisis_052407.html
• http://www.agecon.purdue.edu/extension/pubs/paer/2007/august/hurt.asp
• http://www.thisismoney.co.uk/consumer/bills/article.html?in_article_id=421989&in_page_id=&ito=1565
• http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=a3yEcAuL0JGA
• http://www.terradaily.com/reports/Chinese_Prosperity_Will_Set_Off_Global_Food_Inflation_999.html
• http://bonddad.blogspot.com/2007/09/food-inflation-is-here-to-stay.html

Technorati Tags: Noon International, food inflation, biofuel, China, Europe, global, inflation

Bookmark to:

Hide Sites