cross-posted from: https://lemmy.ca/post/6714742
The FAO Food Price Index* (FFPI) averaged 121.5 points in September 2023, 14.6 points (10.7 percent) below its corresponding level a year ago and 38.3 points (24.0 percent) from the all-time high reached in March 2022.
It took around a year see the world price gains show up in the grocery store. Most food is sold on futures contracts, so it stands to reason that there will be lag (in both directions). We’re just on the cusp of those high priced contracts phasing out and making way for newer contracts at lower prices.
So, yes, you would have seen the grocery store price start to decline soon. But the government has just allowed them to freeze prices, locking them in at the market high. Very, very clever, all with no pushback because it is billed as “Now the prices won’t go higher! What a great deal for you, the consumer!”.
Grocer profitability is about to become insane when they’re into buying futures at a 24% discount and still selling to consumers at the frozen high price. Good time to be a Weston.
Holy shit, you might be right. Did the government get played?
Governments watch agriculture very closely. There is no way they don’t realize that the cost of food has plummeted.
But deflation has been a big worry. Falling food prices is an excellent catalyst to set that in motion. When the price of food is rising people go into “Oh shit, I need to start making more money or I’m going to starve” mode. But once people are no longer fearing going hungry they can sharpen pencils and become more competitive again, seeing their prices fall too.
It could be that the government is using this to try and moderate those effects – to not send us into a deflationary situation. Deflation is something they have a lot of motivation to avoid.