It's both increased wholesale food costs and price gouging. Profits have never been higher all along the board. Everyone in the chain is "passing the cost on" and also taking a little extra cut.
gouging is an incredibly unhelpful context in a macroeconomic sense. In cases of shorter term scarcity (e.g. toilet paper during early covid), you can have instances of gouging. But over a longer-term period where prices are calibrating to demand/supply dynamics, price increases simply reflect the shifting balance between supply and demand.
Should we be concerned about why there are shifts in demand/supply? Sure.(In the case of food, part of this is driven by the UA war and likely other trends in food productive)?
But it is eminently unhelpful to simply attribute increases to 'gouging' and expect that to be the final say.
In the US, M2 increased 70% in 2 years. Of course prices are going up. Anything less than a 70% increase means companies have a ways to go to catch up.
and i don’t think you’d expect it to. the increased supply needs to hit the market first. depending on how that money is distributed, that could take a long time. also remember that QE has been central fiscal policy in the UK and US since basically 2007. and it’s safe to say that concentration of this wealth is.. very high.
> has UK M2 declining [..]
it becomes a bit more sobering when you look at the full scale on that graph (when the y-axis starts from 0). it’s a metaphorical deck-chair-thrown-off-of-the-titanic amount of decrease.
The contention was that the rich always want high inflation to stiff the poor. I’m just pointing out that’s not berm the case for, I said 20 years, but it’s actually been 30.
Yes we have high inflation now, but that’s just been a plain old cockup. The massive inflation reduction act stimulus for example.
I'm not sure about 70%, I can only see 33% in open sources, but either figure is huge and now everyone is with Pikachu face and blames everything but helicopter money.
Increased prices and price gouging are not the same thing. If production costs are up, and they are up, then prices can go up without anyone making any more money. You have to actually look at why prices are going up.
The other factor is that rising prices often mean an increased need for investment by producers. That investment capital has to come from somewhere, so what look like increased profits based on current cost structures can actually be entirely justified if the company then needs to invest that money in order to get production volumes up and cope with increased capital costs.
I don't know enough about the food industry to be able to say which of these is happening, in which sector or country, but these are much more complex issues that the knee jerk reactions here imply. What I can say is, it seems to me that if the reduced supply from Ukraine and Russia is going to be made up, somebody somewhere is gong to have to ramp up food production an awful lot, and I can't imagine that's going to be cheap.
> Increased prices and price gouging are not the same thing
Considering that's the explicit context of this comment thread, obviously, the difference is exactly what we're talking about here.
> I don't know enough about the food industry to be able to say which of these is happening, in which sector or country, but these are much more complex issues that the knee jerk reactions here imply.
That's what I mean about sparing a company's feelings. You have no material objections, but it's important we not use the word "gouging" for companies whose profits are rising considerably faster than inflation and it's consumers being hurt. Tone policing is the least important (and least interesting) part of this conversation.
I think the point is a little finer than you think. Yes, profits are up, but can you necessarily conclude from that single fact that the issue is price gouging? In a scenario where every company is trying to maximize profit, "price gouging" cannot explain why prices are increasing now in particular. Other things can, such as the elements pointed above. In an industry with a lot of competition, I find it much more productive to discuss what are the macroeconomic elements that cause inflation than whether the selfishness of corporations has increased recently.
Increased prices (and sufficient demand to justify the price increase - e.g, overall profit increase) is part of the interaction between demand and supply. Sure, demand for food is inelastic, but there are plenty of different suppliers at each level of the supply chain (different food brands, different grocery stores, etc.) who are individually acting to support the price search function (via individual profit maximization).
Price is a signal of scarcity. Food is more scarce due to supply chain issues, therefore food is more expensive. Is that bad? Sure, let's address the supply chain issues, overall macroeconomic inflation and, uh, other disruptions (incl. the UA war).
Unless you are specifically alleging direct conspiracy between food producers to raise prices (e.g., monopolistic action), (also already an illegal thing), there doesn't seem to be a clear call to action here.
if any given step in the value chain is increasing their prices beyond what is necessary to cover increases in costs (they are), that additional margin purely for the purpose of wanting more money is, imo, pretty shameless when it's hurting so many people down the line
Those are nominal profits, everyone is trying to take "an extra cut" to stay ahead of inflation. Grocery has razor thin margins to begin with and the usual direction of prices is downward. Inflation will absolutely put a grocer out of business if they can't stay ahead of rising prices.
After tax profit margins for grocery retailers in the US range from 1-3%, some places like Whole Foods approach 5%. Gross margins are higher, but net margins are what determine whether or not you go out of business.
I've seen a convincing argument that this is energy price inflation being passed on down the pipe. Certainly for out-of-season foods grown in greenhouses, leading to the UK tomato shortage of last month. (Anyone else see "max 3 per customer" on various fresh fruit and veg?)
>Profits have never been higher all along the board. Everyone in the chain is "passing the cost on" and also taking a little extra cut.
This feels correct, but if that were the case, if companies are generating record profits, why aren't we seeing that reflected in stock prices? At the very least, why isn't price / earning ratios cratering?
the dollars are lower as a result of their actions increasing profits
they only need to increase prices to deal with the increase in costs, and profits represent an increase above and beyond that necessary amount, which in economic terms is "not cool, dude"
All well and good except for the fact that these companies have gone on the record in their earning calls to say this is just them squeezing the end consumer as much as they can. But go ahead and makeup some false justification to defend them against the truth of their own words.
Dude, did you even read my post? Yes that is happening in the US, I said as much. In the UK, profits are down. For the most part in both cases, I'm sure there are exceptions.
Here's wholesale food prices in the US: https://fred.stlouisfed.org/series/WPU578101
In fact you'd expect reduced sales from the higher prices to put pressure on profits. That is what seems to be happening in the UK:
https://www.grocerygazette.co.uk/2023/01/31/food-companies-p...
But not in the US, where it does look like there may be some gouging going on, but we'd need to see their profit reporting to be sure:
https://accountable.us/wp-content/uploads/2023/02/2023-02-10...