Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
the article mentions rising oil prices as the reason for overall inflation.  but is that one is behind rising processed food prices in particular?  is there any relation to the shift towards biofuel crops?

but if so, then why should we expect prices to "fall back down" to "the historical average":

The ECB expected food price inflation to increase in the short term before falling back towards the historical average.

the article does not offer any explanation for why France has escaped this processed food inflation, except the hint that (French?) retailers are using profit margins to avoid passing on price increases to customers:

France's relatively mild experience with processed food inflation is puzzling, given rising public concern about increasing living costs. <...>

The ECB suggested prices were likely to rise less in countries where retailers were prepared to use profit margins as a buffer, especially if fears about the economic outlook made them reluctant to pass on price increases.

and does the following paragraph mean that "German economic optimism" entails ever more processed food inflation?

In Germany, by contrast [to France], fierce price competition, especially among discount supermarkets, has probably reduced the scope for rises to be absorbed through lower profit margins - and German economic optimism remains upbeat.

i.e. optimism => demand + smaller profit margins => continuing inflation ?

Truth unfolds in time through a communal process.

by marco on Fri Dec 14th, 2007 at 03:15:44 AM EST
[ Parent ]
You are right, this article raises more questions than answers.

As regards Germany, the retail grocery market is a snake pit dominated by large discounters operating on narrow profit margins. They don't have nearly as much scope to absorb price increases as, say, UK chains. But as for optimism, well, where I live I'm registering more discontent with rising food (and beer!!) prices than any "optimism".

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt št gmail dotcom) on Fri Dec 14th, 2007 at 03:54:31 AM EST
[ Parent ]
The ECB suggested prices were likely to rise less in countries where retailers were prepared to use profit margins as a buffer, especially if fears about the economic outlook made them reluctant to pass on price increases.

I don't know about "fears about the economic outlook", but there's a rather particular situation at the moment in France WRT big retail distribution. On the one hand, Sarko is pushing for the big chains to reduce or moderate prices, and we hear (propaganda?) reports of cheating since the euro came in, etc. On the other the same retailers are hoping for liberalisation, especially of the rules re new store opening and Sunday trading. I'd expect a quid pro quo: they will take a hit to their margins if they get what they want on the liberalisation side.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Dec 14th, 2007 at 04:27:59 AM EST
[ Parent ]
is there any relation to the shift towards biofuel crops?

rising food prices is a world wide phenomenon right now and I saw an interview with Joseph Stiglitz where he said "if you turn food into fuel, then with rising fuel prices, the price of food will increase".

Why France ? Well, I'm sure a france-based commentator will know better than me but it may be a cultural thing. The french simply may not base their diet around imported processed food in the way that others do. Plus I was told that whilst the rest of europe uses canadian and American wheat for bread, the french tend to use local wheat as it gives it the preferrred texture.

It would be interesting to find out if other countries with strong local fresh food cultures such as Spain Italy or Greece are suffering. I know that Italy has a problem with durum wheat prices, but that is cos they import most of it now.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Fri Dec 14th, 2007 at 06:51:27 AM EST
[ Parent ]
Wheat in Italy was also hit with a big drought because of low snow in the Alps last year.

Never underestimate their intelligence, always underestimate their knowledge.

Frank Delaney ~ Ireland

by siegestate (siegestate or beyondwarispeace.com) on Fri Dec 14th, 2007 at 11:05:26 AM EST
[ Parent ]
Most wheat used in France is of local provenance, but that doesn't bring the price down - prices are pretty much global on grain markets, and are very high at the moment. Otherwise it's true that France is more an exporter than an importer of processed foods, and this may have some bearing on retail prices. Which are going up, all the same (even if less than elsewhere).

As to the price of grain, biofuels are part of the problem, but another is Global Warming and the unstable weather conditions it may bring. This year, only the US wheat harvest was a good one. Australian wheat production was hit by drought; overwarm conditions crippled the wheat harvest in Canada and Ukraine; the EU had a mediocre year with heat and rain at the wrong times. EU durum wheat had the same problems, while North Africa also had a bad harvest. Durum wheat makes two staples, pasta and couscous (bulgur etc), the prices of which have risen considerably.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Dec 14th, 2007 at 11:53:08 AM EST
[ Parent ]
Wheat production in the US is concentrated in Hard Red Winter #2 -- used for breads.  Durum wheat production is relatively small and barely grown outside North and South Dakota.

Hard Red plantings increased here for the 2007/2008 growing season.  If I'm reading the data correctly that acreage came at the expense of Soy (Soya) bean production.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sat Dec 15th, 2007 at 02:02:34 PM EST
[ Parent ]
well, i don't pretend to know, but could the fact that the french value their farms and fresh produce more than the germans have anything to do with it?

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Fri Dec 14th, 2007 at 08:54:38 AM EST
[ Parent ]
France is blessed with a larger area of agriculturally productive soils.  The Northern European plain, most of northern Germany, is comprised, primarily, of sandy soils good for stock raising but lousy for cereals.

The upshot is: the German agricultural sector is small and politically powerless.  As they cannot hope to feed themselves they spend their time on other matters.

France has a vibrant agricultural sector so matters 'ag' are of more interest, politically and economically.  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sat Dec 15th, 2007 at 02:08:35 PM EST
[ Parent ]

Display:

Occasional Series