LONDON -- 08/28/07 --
A combination of falling supply and rising demand
for basic food produce is set to bring serious inflationary pressures to
central banks later this year.
According to Brian Turner, executive editor of UK personal financial news
site, Finance Markets (http://www.financemarkets.co.uk), published by
Britecorp Ltd. (http://www.britecorp.co.uk/), the result is going to be a
dangerous increase in inflation this Autumn, and threatens consumer
spending for the Christmas season.
Extreme weather around the world has already cut harvest predictions among
the world's main food producers by between 10%-20%. Flooding in Western
Europe and Asia has already destroyed swathes of vegetable crops, while
drought in Australia, Canada, and the Caucasus has resulted in drastic
reductions of grain harvest predictions.
World demand for basic food produce has also grown sharply, especially in
India and China, where economic booms have created Western-style lifestyles
and diet. Demand has already forced the price of wheat to reach record
highs last week.
Brian Turner says, "The combination of falling supply with rising demand
means the inevitable increase in food prices. As these form a core basis of
the CPI in the UK for measuring inflation, we can be assured that this will
encourage inflationary pressures. Additionally, higher food prices can only
lead to lower consumer spending on gifts and other non-essentials for the
Christmas period.
"With Britain already experiencing record levels of debt, and a collapsing
lending market worldwide, there is no more redundancy left in the economy
to help bolster consumer spending. With retailers around the world facing
sharp profit falls, there is little room left in economic conditions to
encourage affordability through big price cuts, as occurred last
Christmas."
Brian Turner adds: "This isn't a problem that is just going to affect the
UK. World food prices will exert a global influence on national economies.
As many of these suffer from the same problems as the UK of debt and rising
interest rates, short-term and long-term, we can expect to see serious
inflationary pressures affect the USA and other major economies.
"The biggest danger is that what we are seeing now is not a temporary
incidence, but a general new economic trend as the era of cheap food
closes."
References:
Food prices on the rise and rise: http://news.bbc.co.uk/1/hi/uk/6909469.stm
Wheat prices reach record level:
http://www.investmentmarkets.co.uk/20070824-683.html
FM blog post:
http://www.financemarkets.co.uk/2007/07/31/farm-floods-to-fuel-uk-inflation/
Contact:
Brian Turner
Britecorp Ltd.
+44 1667 455512
