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World food prices edging to all-time high
The index of global food costs advanced 1.1% last month
A new report by the Food and Agriculture Organization (FAO) of the United Nations showed that global food prices soared last month, led by a jump in vegetable oils and dairy. The index of prices, up by 1.1%, is edging closer to 2011’s all-time high, the research showed.
The fallout from an energy crisis, reduced export availability, and other supply-side constraints, especially labor shortages and unfavorable weather, have pushed prices higher, the FAO said.
The vegetable oils index surged 4.2% month-on-month in January to reach record levels. Quotations for all major oils rose, supported in part by rising crude oil prices. The dairy price index also increased 2.4%, its fifth consecutive monthly rise, with the steepest gains registered by skim milk powder and butter. The cereal price index was up just 0.1%, with maize posting a 3.8% gain on the month, according to the FAO.
Meat prices edged up in January, while the sugar price index decreased 3.1% from the previous month due partly to favorable production prospects in major exporters India and Thailand, the report said.
Meanwhile, world wheat prices dropped 3.1% on the back of large harvests in Australia and Argentina. “For 2022, global wheat plantings are expected to expand, buoyed by mostly conducive weather conditions in the northern hemisphere, although high input costs could deter a larger expansion,” the FAO said.
The UN body has raised its projection of global cereal production in 2021 to 2.793 billion tons from a previous estimate of 2.791 billion tons.
Higher food prices have contributed to a broader surge in inflation as economies recover from the Covid-19 crisis. The FAO has warned that higher costs are putting poorer populations at risk in countries reliant on imports.
In Canada, our hair-brained governments are increasing carbon taxes in the hope that we will use our vehicles less and cure global warming. It seems to matter not one whit that this will increase the price of every single thing that moves by truck, train, or ship, which is just about everything.
In a country the size of Canada, the movement of goods and people is not a trivial expense, but a necessary one. Meanwhile, Canada's contribution to anthropogenic global CO2 amounts is trivial.
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Major carmaker to slash output
Key vehicles and eight factories in US, Mexico and Canada will be affected
Major US carmaker Ford will suspend or cut production at eight of its factories in the US, Mexico and Canada for at least one week, a spokeswoman told Reuters on Friday.
Factories in Michigan, Chicago and in Cuautitlan, Mexico will stop work, while the Ford factory in Kansas City will run only one shift for the production of Ford Transit cargo vans. The carmaker also plans to reduce the schedule at factories in Dearborn, Kentucky and Louisville, and has slashed overtime at the Oakville factory in Canada. The changes will lower the output of vehicles such as Ford Bronco and Explorer SUVs, as well as the Ford F-150 and Ranger pickups, the Ford Mustang Mach-E electric crossover and the Lincoln Aviator SUV.
The company says the semiconductor chip shortage is to blame for the changes, which are planned to be in place for one week, starting on February 7.
Also due to the chip shortage, Ford missed Wall Street expectations when it reported fourth-quarter earnings results earlier this week. The carmaker’s shares plunged 9.7% on Friday, but started to crawl back up in the after hours trading, regaining 0.67%. Ford warned that the persistent shortages would lead to a further drop in its vehicle production in the current quarter, ending in March. The company has forecast a slower recovery in car production in the first half of 2022, but was hopeful that output volumes will increase by year’s end.
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Costs of food, shelter & fuel in US continue to soar
Consumer prices rise at highest rate in 40 years
US consumer price inflation rose 0.6% in January and propelled annual inflation up to 7.5%, its highest rate since 1982, the Labor Department reported on Thursday.
The rise in nearly every spending category was driven by increases in food and energy costs, as well as growing costs for cars and rents. The rent index rose 0.4%, while food prices jumped 1% amid lingering supply-chain issues and a tight labor market, led by strong increases in the prices of cereals, bakery products, dairy, fruits, and vegetables. Electricity prices jumped 4.2%.
The inflation indicator overshot the US Federal Reserve’s 2% target, and analysts say is likely to affect the current economic agenda and lead to a large interest rate hike in the months to come.
“This inflation data today came like a punch in the stomach for [Fed chairman] Jay Powell and his colleagues,” Citi Bank chief economist Nathan Sheets told CNBC. He noted that the inflation data may bring about “increasingly aggressive” action by the Fed, including an interest rate hike of “50 basis points for March.”
When those in charge of the economy get a gut-punch when the data comes in, you know that no one is in charge of the economy.
Other experts say this may not be enough, with James Bullard of the St. Louis Federal Reserve Bank telling Bloomberg News he supports raising interest rates by a full 1% by July 1. Goldman Sachs’ and Bank of America’s bids are even higher, with the banks’ analysts forecasting “seven consecutive 25 basis points rate hikes” in 2022.
Some see other ways to ease the inflation spike.
“If the Fed is going to get an assist on inflation, it’s got to come from improvements in the pandemic, some rebalancing away from the red hot goods sector into services, and we need to see some attenuation of the still intense pressures in supply chains,” Nathan Sheets said.
Experts polled by Reuters also say inflation could slow in the coming months if the Covid-19 pandemic subsides, easing supply bottlenecks and shifting spending from goods to services.
We can always hope. But I have been saying, for 14 years now, that the American economy could crash beyond repair in this decade. This could be the beginning.
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