Comments on: Wheat panic raises spectre of food crisis http://blogs.reuters.com/breakingviews/2010/08/06/wheat-panic-raises-spectre-of-food-crisis/ Mon, 26 Sep 2016 03:26:00 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: ERhoades http://blogs.reuters.com/breakingviews/2010/08/06/wheat-panic-raises-spectre-of-food-crisis/comment-page-1/#comment-3295 Sun, 08 Aug 2010 21:16:15 +0000 http://blogs.reuters.com/columns/?p=3702#comment-3295 While developed economies fret about Japanese style deflation it is worthwhile to remember the inflationary pressures that were occuring prior to the financial meltdown. Those inflationary pressures weren’t an illusion, they were the result of developing markets getting their share of the global pie. Now since the the crisis we have had a spate of over capacity due to a roll back in demand, still the tipping point is there and could be quite dramatic when it happens, we could easily move from worrying about deflation to having strong inflation in the blink of an eye. This is especially troublesome for economies that are struggling to find their economic footing after the crisis.

This also illustrates a shortcoming of free markets in that while they are very good at setting prices and allocating resources they only create what current demand requires. This means in times of production shortfalls there is little spare capacity to draw on. The lack of wheat wont be due to a lack of arable land, it will be due to a lack of utilization, or preparedness for a production disruption.

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