Western countries are not immune from public discontent at rising food prices – although, unlike in North Africa, it is speculators and supermarkets which may end up feeling the heat.
It is a "myth that commodities matter to food prices" in industrialised nations – unlike in developing countries - UBS said, citing Western consumers' preference processed foods.
"Food is about labour costs, and not much else," he said, noting that labour costs accounted for about 70% of food price inflation in nations, such as France, the UK and US, included within the Organisation of Economic Co-operation and Development (OECD).
"An OECD farmer is quite unlikely to be the cause of significant increases in [retail] food price inflation," the investment bank said, adding that this was the reverse of the case in developing nations, where consumer were more likely to purchase their foods unprocessed direct from the grower.
Croissant vs television
Even so, food prices "still have political resonance" in developed countries, thanks to the large number of poorer people for whom even small price changes matter, and to the dominance of food in consumers' shopping experience.
"The morning croissant is something that dominates the customer's image of inflation," UBS said.
"The fact that the flat-screen television purchased three months ago was discounted in price is not remembered.
"Consumer food price increases will unduly shape the perception of inflation, regardless of the reality of inflation."
'Politically fashionable'
Such ideas meant that retail food prices, and by association commodity prices, were likely to matter to Western politicians too – and at a time when they had a growing tendency to act on them.
"Government involvement in the economy is politically fashionable in a way it was not three years ago," the report said.
The results were likely to be more moves, such as those implemented in France and the US, to increase regulation in commodity markets "because the myth that commodities matter to food prices is perpetuated in the popular consciousness".
Such clampdowns were, however, "likely to be largely ineffective" in stemming retail price inflation.
Supermarket squeeze
Supermarkets were another likely target, if it appeared – as it does in the UK – that retail prices were rising faster than even increasing labour costs would imply.
Inflation in processed food in the UK is rising at about 6% a year, faster than the 3.5% that a UBS model justifies.
"At a time when food prices have heightened political importance, it seems unlikely that this position will continue to be ignored," the briefing said.
It was "noteworthy" that in Germany, antitrust authorities were already investigating the sector, in which four supermarket chains have an 85% market share.
No comments:
Post a Comment