High Food Costs: Inflation or Manipulation?

[sjfan]

A direct correlation implies both will move up and down together. Correlation carries the same sign as beta and therefore works in both directions. Note that I'm using the word correlation in the statistical sense, not in what not common sense that you are used to using. Please look up what it is.

My point was exactly the same as the five that came after, who phrased as as downward inelasticity.

Quote from jprad:

Not only is that not what you wrote, you've now managed to contradict what you did write.

If rising input costs contribute to higher food prices then there is a correlation, if only in one direction.

 

[jprad]

Quote from sjfan:

A direct correlation implies both will move up and down together.

Not necessarily, as Anscombe proved...

That aside, there's certainly a strong correlation between the rise in input costs and the rise in the price of the product.

We see it frequently with the price of gas at the pump relative to the price of crude. Any spike in the later is quickly seen at the pump, there's little lag on the way up.

But, as we've also seen, there's quite a bit of lag on the way down, but it eventually does drop.

I assume that S&N's perspective is relative to that, as is mine.

I realize, and agree, that there's some inelasticity in the short term, but longer term the desire to capture increased marketshare should enter the picture and start to exert downward pricing pressure.

 

[trendlover]

Some food companies that sell to the grocery chain have the locked in price for futures contract of the past. So some food companies still pay high price for their food. This makes them pass that price to the grocery store chain, they pass that price to consumer.

 

[trendo]

Quote from jprad:

Not only is that not what you wrote, you've now managed to contradict what you did write.

Agreed.

 

[Anaconda]

Quote from short&naked:

Many commodities are depressed, yet I find that the grocery bills are as high as ever (if not higher). What is the root cause of this? Some assets and commodities are depressed whiles others are getting inflated...

You know all that bailout money, which ends in the trillions? Yeah, you can't stop it from getting to food. Inflation never went away, it's just simmering.

Also, Food Stamp program is expanded in the bailout, so all those printed dollars are finding their way to the grocery stores.

 

[sjfan]

Um.... I would argue otherwise; In the long run, there's definately no elasticity.

Fuel is a special case. The input price of oil is a major component of end product pricing. It also has a relatively elastic demand curve. That's why fuel prices are volatile and why it's excluded from inflation measures.

Something like luxury watches, on the other hand, is highly inelastic. The output price isn't a function of input price at all.

I will agree that food is somewhere in between on that line, and probably much closer to fuel than luxury goods (that's why it's excluded from CPI). But, in the long run, food prices, along with all prices, should not fall and only rise, assuming positive inflation.

Either way, we can argue about the short run supply demands of food pricing (and this will be different: fresh meats vs french bread, for example)... but to the original fella's question - it's very unlikely that it's a result of massive conspiracy

Quote from jprad:

Not necessarily, as Anscombe proved...

That aside, there's certainly a strong correlation between the rise in input costs and the rise in the price of the product.

We see it frequently with the price of gas at the pump relative to the price of crude. Any spike in the later is quickly seen at the pump, there's little lag on the way up.

But, as we've also seen, there's quite a bit of lag on the way down, but it eventually does drop.

I assume that S&N's perspective is relative to that, as is mine.

I realize, and agree, that there's some inelasticity in the short term, but longer term the desire to capture increased marketshare should enter the picture and start to exert downward pricing pressure.

 

[sjfan]

What part of "End consumer prices are not directly correlated with input commodities prices." can you not read?

Do we need to send you for some basic education on what "correlation" is? http://en.wikipedia.org/wiki/Correlation

Quote from trendo:

Agreed.

 

[stock777]

If I had to pay full retail for most things, I'd be on a rice and crackers diet.

The list price on cereals, and many other items is HUGELY inflationary , not to mention the SIZE SHRINKAGE on many things.

I pity those that are not smart shoppers or have no access to big city supermarket sales.

 

[dafugginman]

inflation hasn't even remotely begun yet, and we're already blaming everyone but the people responsible.

we'll be tar and fethering evil speculators and barring the holding of anything but paper before this is all over (aka, people who recognize that there is a huge amount of paper chasing the same amount of goods), rather than the people ordering and approving the running of the printing presses.

i'm going to go out a limb here and suggest this doesn't end, until people begin to recognize, then hold the people accountable for these bubbles and busts, and a newly fiscally responsible group of people are elected.

course, people still haven't figured it out, so perhaps these cycles will continue to rinse and repeat.