‘Unwelcoming’ Food Inflation Outpaces Incomes With Destabilization Risks For Emerging Markets


Food prices are undeniably soaring faster than inflation and incomes around the world. As everyone’s favorite permabear, SocGen’s Albert Edwards, who, unlike Goldman, has already sounded the alarm on rising food inflation.

As a reminder, the Food and Agriculture Organization’s Food Price Index surged to a seventh consecutive month in December.

With the FAO food index rapidly rising, Edwards noted that “annual inflation in cereals reached 20%, the highest annual rise since mid-2011 when the Arab Spring was in full flow!.”

With this in mind, tofu prices in Indonesia are 30% higher than it was in December. Brazilian prices of turtle beans are up 54% over the last year. Russians are paying 61% more for sugar than one year ago, according to Bloomberg.

Emerging markets are far less insulated from soaring raw commodity prices than developed economies. An unprecedented amount of fiscal and monetary policy by governments and respective central banks has flooded the world with liquidity. Edwards makes the point that expansive monetary policies by central banks, more importantly, the Federal Reserve, was to blame for the global tidal wave in food inflation back in 2011: “Despite Ben Bernanke’s denials that the Fed’s QE policies caused rampant food price inflation in 2011 (link), many economists such as myself believe that was absolutely the case.” – READ MORE

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