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Grocery deflation threatens the global economy?

In some countries, food can be more expensive, but in the whole world falling prices. It's good for consumers, but for everyone else is a disaster like this.

The cost of water for farmers is growing, more expensive labor, fuel becomes more expensive, and the whole chain from producer to store must still make a profit.

To do this, when demand decreases, quite difficult.

In 2016, the price blow was particularly strong, especially amid a drop in consumption in China due to a strong dollar and the weakening Chinese economy.

This situation has led to massive surpluses in several groups of goods from major suppliers, including the United States. In general, the American market products, given the size of the economy and the corresponding demand is often used as a global indicator. In regions of the world the situation can vary greatly, but global trends generally repeat what is happening in the United States.

If you look at prices, almost all product groups cheaper YoY.

Protein products, which account for almost 20% in the basket of a typical consumer, 2016 was dropped once on 8%.

Most interesting is that egg producers in the past year have created tons of excess capacity on the background of the bird flu outbreak in the United States.

Fresh fruits and vegetables are more stable, as in the US is less dependent on the consumption of the export market.

But the prices for alcohol are the most stable.

If we consider the impact of low prices on the US, the most affected by this phenomenon became farmers themselves. The situation is very similar to the crisis in the real estate market: farmers attract loans secured by land, as well as the cost of food products began to decline and they could not pay the loan, it turned out that the cost of land is not enough to pay off the debt.

For some products, such as milk prices have dropped so much that farmers sell millions of liters at dumping prices. This USDA provided $ 20 million to support cheese producers.

loss chain is rapidly spreading to other items: grocery forced to reduce spending in order to save at least a small margin. But further deflation will lead to the fact that work is simply unprofitable. Roughly speaking, prices are falling so fast that they have to further reduce the price tags on the shelves, because the new shipment arrived already at a lower price.

If shops do not adhere to this tactic, they will not be competitive. At least six national retailers of food products, including Costco Wholesale Corp. and Whole Foods Market Inc., and four of the five largest public distributors of food products, including Sysco Corp. and US Foods Holding Corp., reported that suffered in the last quarter due to food deflation.

Analysts note, Vesti writes, that they can not remember another such period when large retail chains identified deflation as the main problem.

See also ... 08/07/2016 The US Senate approved the labeling of products with GMOs 22/02/2012 US companies do not undertake to forecast their financial results in 2012 12/09/2012 Living standards in the US were measured using “sushiomy” 09/10/2013 Founder Starbucks urged businesses to react more actively to the political crisis in the United States10 / 04/2012 Large US companies brilliantly emerged from the crisis26 / 01/2012 FRS worsened the forecast for the growth of the American economy 28 Canadian economy losses on Black Friday could reach up to $ 04 billion2015 / 26/11 American industry shrank for the first time in three years2012 / 5/04 The US delegation of experts of the Union of Agriculturalists didn’t allow07 / 2012/04 Belarus Ministry of Agriculture relies on the United States 03/2014/15 The United States put forward “chicken” claims to China in the WTO GMO products06 / 2015/11 Confidence in the US economy rose to 05 points in December - better than predicted2016 / 04/05 Iran banned American chewing gum

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