Deutsche Banc Provides Color on Food Prices

March 24, 2011

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  • 2000 pounds of grain must be supplied to livestock in order to produce enough meat and other livestock products to support a person for a year, whereas 400 pounds of grain eaten directly will support a person for a year.
  • Changing diet patterns also contribute to unsustainable water usage: bovine meat production requires roughly 8-10 times more water than cereal production
  • There’s ample room for farm productivity increases in Africa and Asia.
  • Less than half of the food produced is available for human consumption, as the result of harvest and post-harvest losses as well as use of grains for animal feed
  • The food sector uses about 10% to 15% of all energy in the industrialised countries

  • The weakening dollar allows commodity importers to buy more product, since all prices are quoted in US dollars
  • Average peak to trough move has been 140% since 1972 and average about 20 months. Suggests prices for ags could move higher though autumn.
  • Average Peak to trough for oil and metals has been 300% and is about 2-3 years due to slower time to market
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  • Holding stocks are a key indicator. Corn Stocks are quite low at the moment.
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  • Agricultural prices have a limited impacted on US retail food prices, accounting for 20-25% of costs in the US food basket, according to the USDA. Wheat prices only account for 6% of bread prices.
  • Past experience shows that a 50% increase in commodity prices translates to a 10-15% increase in food price inflation.
  • Example : if commodities increase 15%, food inflation may  increase 5%, and headline inflation 0.5%
  • But it varies by country :

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Where Are Food Prices Heading by Deutsche Bank

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