Expert Zone

Straight from the Specialists

Food prices matter: here’s why


(The views expressed in this column are the author’s own and do not represent those of Reuters)

Investors are cautiously starting to examine the topic of food price inflation once again. The United States recently saw a sharp rise in producer price food inflation. Further down the economic development ladder, producer prices for the food manufacturing industry of China have been steadily creeping higher from the lows reached two years ago.

A vendor weighs potatoes for a customer at a vegetable wholesale market along a roadside in the old quarters of Delhi April 15, 2014. REUTERS/Anindito MukherjeeFood prices in Japan have increased at the fastest pace in four years, helped by the weaker yen. Korean producer price inflation for food products has been rising for a year. Food producer price inflation for Malaysia has edged up.

So far only the United Kingdom and the Euro area have clearly defied this drift towards higher prices. In the Euro area, the economic recovery is still relatively weak so labour costs and consumer demand are both subdued. The stronger Euro has also helped to lower agricultural commodity prices in Euro terms. That combination suggests more subdued domestic food price inflation. The United Kingdom does not have quite the same situation (although the pound sterling has been relatively strong), but food price restraint receives the added incentive of a general election next year – food pricing is a politically sensitive topic.

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