I read with sadness how one quarter of Britons have resorted to skipping meals amid crippling inflation in the U.K. [article]
One caterer even commented how schools are facing difficult decisions on whether to shrink food portions for students or use lower quality ingredients.
Spiking food inflation is one of the worst outcomes to befall on a nation, especially for importing countries. British grocery inflation hit 5.9% in April. In Singapore, the MAS reported a YoY increase of 3.3% in food inflation in March. [data] Looking at the current world situation, no country will be spared.
Wheat prices have risen sharply because of the Russo-Ukrainian War. Russia and Ukraine are both major wheat producers, and the war has caused their output to drop significantly. India has also banned wheat exports to meet their own domestic demand. Wheat is a staple used to make various foodstuffs like bread and noodles. A supply constraint means prices for these items will rise correspondingly.
Indonesia has also banned the export of palm oil, another important ingredient used in processed foods.
Similarly, global energy prices have shot up. Persistently high crude oil prices mean electricity and even plastic packaging will incur higher base costs. The business of manufacturing, transporting and serving food has gotten more expensive.
Then there is the wage-price spiral. As workers demand higher salaries to handle the rising expenses, companies have no choice but raise their product prices. Workers have to spend more of their paycheck per item, thus they demand higher salaries...and the death spiral goes on.
Consumers are forced to choose cheaper alternatives and dial back on non-essential spending. Companies, already facing margin pressure, suffer from lower revenue. Cost cutting takes place, layoffs happen and before you know it, a recession comes knocking.
Granted, such an apocalyptic scenario does not occur overnight, and there is a possibility we can avert this crisis if higher interest rates can curb demand to cater to the reduced supply.
However, it is a fact that interim higher prices on basic necessities will cause more hardship for families living just above the poverty line. Woe to the household who has to decide between buying groceries or footing the utility bill.
I hope the children will not have to go to bed hungry at night.
One caterer even commented how schools are facing difficult decisions on whether to shrink food portions for students or use lower quality ingredients.
Spiking food inflation is one of the worst outcomes to befall on a nation, especially for importing countries. British grocery inflation hit 5.9% in April. In Singapore, the MAS reported a YoY increase of 3.3% in food inflation in March. [data] Looking at the current world situation, no country will be spared.
Wheat prices have risen sharply because of the Russo-Ukrainian War. Russia and Ukraine are both major wheat producers, and the war has caused their output to drop significantly. India has also banned wheat exports to meet their own domestic demand. Wheat is a staple used to make various foodstuffs like bread and noodles. A supply constraint means prices for these items will rise correspondingly.
 |
| Price of wheat futures at CBOT. (Source: Yahoo) |
Indonesia has also banned the export of palm oil, another important ingredient used in processed foods.
Similarly, global energy prices have shot up. Persistently high crude oil prices mean electricity and even plastic packaging will incur higher base costs. The business of manufacturing, transporting and serving food has gotten more expensive.
 |
| Price of Brent crude oil futures at NYMEX. (Source: Yahoo) |
Then there is the wage-price spiral. As workers demand higher salaries to handle the rising expenses, companies have no choice but raise their product prices. Workers have to spend more of their paycheck per item, thus they demand higher salaries...and the death spiral goes on.
Consumers are forced to choose cheaper alternatives and dial back on non-essential spending. Companies, already facing margin pressure, suffer from lower revenue. Cost cutting takes place, layoffs happen and before you know it, a recession comes knocking.
Granted, such an apocalyptic scenario does not occur overnight, and there is a possibility we can avert this crisis if higher interest rates can curb demand to cater to the reduced supply.
However, it is a fact that interim higher prices on basic necessities will cause more hardship for families living just above the poverty line. Woe to the household who has to decide between buying groceries or footing the utility bill.
I hope the children will not have to go to bed hungry at night.
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