Foreign media reports, the recent general rise in commodities, at the same time, food prices are also rising, which also leads to a major problem of people’s livelihood – should be worried about soaring food prices?
At present, it is obvious to see two schools of thought, one represented by Goldman Sachs, believe that the impact of rising food prices is limited, but Albert Edwards, a famous friend of Societe Generale, often warns that U.S. stocks will plunge, but believes that soaring food prices is not a trivial matter, the future will continue to rise, and cause more, more serious problems.
Goldman Sachs released a report this week that inflation in major emerging markets has been on the rise in recent months, driven in part by food inflation, especially the prices of key agricultural commodities such as grains, oil and soybeans have risen sharply. Nonetheless, Goldman Sachs believes that food inflation is more typically driven by local rather than global factors. What’s more, food inflation is still on the downward trend in most emerging markets this year, while food has typically been much less volatile than before over the past 10 years, and the current rally is less severe than between 2006 and 2012.
In short, Goldman Sachs is not very concerned about the risk of a surge in food inflation, especially in emerging markets, there are other factors are suppressing inflation, unless agricultural price increases continue to expand further, before inflation and monetary policy in most emerging countries, causing significant and sustained impact.
However, Goldman Sachs was equally dismissive of soaring food prices 10 years ago, but this background culminated in the “Arab Spring” in early 2011, when protests were sparked by clashes between fruit traders and police.
Edwards is clearly much more worried about the current situation. He believes that the food price bubble in 2010-2011 was not unrelated to the second round of quantitative easing (QE) by the US Federal Reserve at the time. Especially in the rich-poor divide continues to grow in the environment, once the food prices rise, will bring more serious consequences.
He pointed out that the 2011 “Arab Spring” is often explained as driven by other reasons, but the spike in food prices is the most primitive fuse. And now central banks are frantically injecting liquidity, in addition to bringing commodity spikes, should also be worried about the rise in food prices. From the Food and Agriculture Organization of the United Nations (FAO) food price index, including cereals, oil, dairy products, meat and sugar prices, has risen for six consecutive months, and stood at a new six-year high, especially cereals by 20% year-on-year, which is the highest annual increase since mid-2011.
He stressed that the impact of rising food prices on some emerging market countries is often greater – first of all, their food is mainly imported, and the proportion of household spending on food in emerging countries is greater, representing a more serious impact. He fears that food inflation may have just begun, and that the recovery in cyclical assets, combined with an extremely accommodative global monetary environment, could cause food prices to hit their highest in a decade.
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