Expert Commentary

Food Price Deflation Trend Still Intact

Despite current concern, the downtrend in food prices has not been broken.

The numbers are mind-boggling. African swine fever has wiped out 100 million pigs in China, a third of the population, and some 50 per cent of pigs on the entire planet have either died of the fever or have been killed in an effort to stamp it out. This has resulted in a supply shock, putting upward pressure on prices and China has imported almost 50 per cent more pork and chicken this year. Cue dire predictions about unabated food price inflation, the latest excitement surrounding November's United Nations Food and Agricultural Organisation's (FAO) monthly food price index which showed a jump of 9.5% on an annualized basis. That's the largest rise since July 2017. You might be inclined to think that the world is on the brink of rampant food price inflation but the data tells a different story.

The chart below shows the long-term chart of the FAO's Food Price index as well as the Meat Price index. You can clearly see the surge in meat prices that has occurred over the past year, yet the index is still below its 2014 peak. Overall food prices topped out in 2011 and declined sharply into 2016. The bounce since then has not come close to threatening the downtrend. That could change, of course, but given our still bearish Elliott Wave outlook for the Commodity Research Bureau (CRB) index, of which agricultural products are a key component, we don't see it as likely anytime soon.

191206 - MG Deflation