Blogging from the Highlands of Scotland until I return to the Murcia region of Spain in the Autumn for a month or so
'From fanaticism to barbarism is only one step' - Diderot

Thursday, 26 July 2007

Can massive price inflation be far behind?

The current severe flooding in significant parts of England, including in many farming areas is focussing attention on the likely high levels of damage to crops - and the likely resulting increase in food prices. However, food prices have already been rising significantly for some time and further above-inflation increases are likely to continue once the immediate crisis of the flooding is over. My diet precludes me from eating bread, but most people do eat it and it seems prices have gone up by around 15 per cent in the past year. The price of eggs (which I do eat a lot of) has gone up by around 18 per cent and I have certainly noticed this - as indeed have I noticed a general and signficant increase in my monthly food bill over the past couple of years.

China has recently cut back on the land allocated for bio-fuel production (from maize), because the shortage of animal feedstock which has resulted has raised the price of pork by 43 per cent, the most commonly consumed meat there. Even products as mundane as ice-cream have not been unaffected as a result of the continuing push in the US to turn land over for the growing of bio-fuel crops at the epxense of reduced food-crop production.

I doubt if there will be actual food shortages in wealthier countries; we can still [for the moment, at least] outbid other countries bidding to source food from wherever it is produced, but it will certainly cost more - I think quite possibly a LOT more before too long. The fact that other major food-exporting countries such as Australia have also had their own problems for several years (drought in its case) is only exarcerbating the problem.

For food producers, though, the general increase in prices obtainable for crops and livestock has been good news - at least until the recent flooding during the peak growing season in England, although the overall economic impact is likely to be minor, given the small size of agriculture in the UK economy, even if the visible impact on daily life across parts of England has been huge and the clean-up costs and the impact on insurance and future insurability is likely to have longer-term effects.

However, painful as it is for those living through them, the current flooding in England is a side-show when compared with world-wide trends in food and energy resources, even if some feel (see at end) that the fears about the impact of bio-fuel production will blow over. Possibly it will, but I predict that the erosion of the value of money will have accelerated considerably for some years before that happy day arrives; individuals need to consider carefully their own strategies for living with this over coming years.

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