Officials at the Federal Reserve have said there is little cause for concern about inflation, but consumers, struggling with high unemployment during the pandemic, have seen food prices rise and they’re bracing for more.
Covid-19 disrupted food supply chains, infected frontline workers, stalled transportation and contributed to rising grocery prices worldwide in 2020. Now farmers — especially those who raise cattle, poultry and hogs — are being slammed by the highest corn and soybean prices in seven years, Bloomberg reported in February. Farmers’ costs of feeding their herds has increased by 30 percent+. Producers such as Tyson Foods are raising prices, and it will reverberate through supply chains, showing up soon on price tags for beef, chicken and pork.
U.S. inflation expectations have risen sharply in recent months while unemployment remains incredibly high, a potentially devastating combination for the economy, Axios reported.
Federal Reserve Chairman Jerome Powell “is trying to simultaneously raise inflation while keeping short-term interest rates low and stimulate the economy through unprecedented and extraordinary measures while convincing Americans the economy is doing well,” Dion Rabouin wrote for Axios.
The Fed is worried about expectations of a rapid economic expansion as the pandemic diminishes and businesses reopen, New York Times reported. Millions of people are still unemployed but pent-up spending seems inevitable for workers with secure jobs as the U.S. gets vaccinated and people start dipping into savings built up over the last year. Prices are expected to surge.
Central bank officials made it clear they’re not worried about the expected bounce in inflation. “There’s a difference between a one-time surge in prices and ongoing inflation,” Powell said this month, underscoring that he expected the coming increase to be transitory.
Bad weather, shrinking harvests and growing demand have helped drive the surging feed prices, Bloomberg reported. Corn futures in Chicago have risen 29 percent and soybeans 19 percent Since Dec. 1.
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China, the No. 1 buyer of commodities, is buying record amounts of available supplies to feed its expanding hog herds. In Brazil, the No. 1 poultry shipper, the cost of raising chickens rose 39 percent in 2020 due to feed costs. Poultry feed grain prices jumped 90 percent in the Ukraine.
There’s a lag between the feed-cost inflation and rising consumer prices, said Will Sawyer, animal protein economist at farm lender CoBank ACB.
Most mainstream economists doubt that sustained inflation is on its way, NYT reported.
“The inflation narrative has switched to concerns about rising prices,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “For the Fed, price response to the economy reopening is seen as transitory and is unlikely to cause too much angst, given inflation pressures are not expected to be sustained.”