The Standard-Examiner's Loretta Parks contributes an interesting article this morning, on the subject of the recent spike in wheat prices, and its immediate effect on our local Utah economy. With all due respect, we think Ms. Parks' article is evidence of the kind of myopia that results, when creatures of the world who haven't yet experienced inflation, fail to consider all variables in today's World Economic Environment.
Today's article is well researched, as Std-Ex articles go:
From LDS food storage people we get this:
LAYTON — Current wheat prices concern Carolyn Wade, who has practiced food storage for many years.
“I was shocked at how much it went up,” Wade said.
Wheat on Monday sold between $9.27 a bushel and $11.47 a bushel, depending on quality, according to the Utah Department of Agriculture Market News. The price is lower than it was a week ago, when a bushel of wheat was selling for between $10.29 and $13.19.
The Monday price is still much higher than in September, when the average price was $6.75 a bushel, according to the U.S. Department of Agriculture Web site. The price of wheat has been dropping during the week, and officials across the country expect it to continue to drop, but also expect it to be higher this year than last year.
In January 2007, the average price was $4.53, according to the Web site.
Wade, of West Point, said she is not overly worried because, as a member of The Church of Jesus Christ of Latter-day Saints, she has practiced food storage as her church leaders have recommended.
The last time Glade bought wheat, she paid $12 for 50 pounds. Her daughter in Layton called her recently and told her 50 pounds of wheat was selling for $36 at a local store.
“I have a lot, but I’ll need to get some now to simply do some baking and that’s going to be a real cost,” Glade said. “I just can’t believe it.”
Commercial bakers are also being hit hard:
Great Harvest in Layton increased its loaf prices in November by 25 cents a loaf and then had to raise it again a week ago, said Bourke Tarbet, the owner. Increasing wheat prices are increasing the price of flour, which in turn is increasing the price of bread.Further down the article, Ms. Parks quotes a Utah Department of Agriculture official, who echoes the sentiment of Mr. Tarbet, and characterises the recent spike in wheat prices as a mere supply/demand problem, which would, under general principles of economics, be ostensibly cured by a mere corresponding and inevitable increase in wheat production:
Other Great Harvest owners have also raised prices in order to pay for the increasing cost of flour.
“My flour prices have doubled,” Tarbet said. [...]
“I guess farmers will grow more wheat, and it will take a couple of cycles for us to get out of this,” Tarbet said.
Richard Kestle, director of Utah Agriculture Statistics, said on Dec. 1, the U.S. had 1.3 billion bushels of wheat available.All of these people myopically characterise the rise in wheat prices as a short-term supply-demand problem, which can be ultimately corrected once grain producers ramp-up production and bring more wheat to market. While it's probably true that the increase in wheat prices is at least partly the result of supply-demand disequilibrium, we believe there are more fundamental market forces at work, which will continue to propel the price of wheat, and all other world-traded commodities upward, regardless of the mitigating effect of production-side increases.
In 2003, the country had 1.52 billion bushels of wheat in storage, which is a 26 percent decrease, he said.
The decrease in supply of wheat equals an increase in price, or “basic economics,” which eventually translates to higher prices for bread, pasta and cereals, Kestle said.
Of course the recent upspike in wheat prices isn't unique. All commodities from corn, soybeans, steel, and precious metals are experiencing similar upward price-spikes.
The problem folks is the weak US Dollar, which continues to weaken each day that the US Government continues to resort to the printing press to create billions of more fiat paper dollars.
Nobody in the current generation has seen inflation. The last time inflation raised its ugly head was pre-Reagen... during the Carter Administration. Until now, the US Government and the Fed have kept commodities prices relatively stable -- until now, that is.
That leaves it to old fuddy-duddies like us -- who have lived through US recessions during our lives -- to spotlight the problem, and bring it to the forefront.
The ultimate problem is the weak dollar, however, folks -- and it's endemic in our current economy.
There are unmistakable signs that hyperinflation is in the air, for those who are paying attention, as a result of of seven years of US Government fiscal recklessness.
Here's a good article on this subject.
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