Sunday, May 24, 2009

Deflation vs Inflation

The great debate on what will happen: deflation due to falling demands or inflation due to the action of printing money? I think that whatever that will happen, it will test the decoupling theory. Remember, the decoupling theory didn't work in 2007 and 2008. Will it work in 2009? If the emerging market can generate enough demand to replace the falling US demand, then price will stay high. Let's see what does the chart says.

Cocoa Monthly Chart

The price of cocoa is still at high levels. No wonder the price of Milo didn't drop.

Coffee Monthly Chart

Coffee is starting to creep up. If this continue, instead of Starbucks and Coffeebean, we will end up at the apek's kopitiam.

Corn Monthly Chart

Corn is having a rebound now. The price is still double on what you get in 2006. Expect your meat (chicken, beef and pork) to go up.

Oats Monthly Chart

Oat is also having a strong rebound. No escape for an healthy heart here.

Rough Rice Monthly Chart

This is an anomaly. The price is going down! Good news to the rice eaters in Asia.

Soybean Monthly Chart

Soybean is up. More expensive taufu in the future.

Sugar Monthly Chart

Sugar is heading up too. Better stock up your sugar. Alternatively, drink kopi-o, better for your health too.

Wheat Monthly Chart

Wheat is having a strong rebound. Price is still double of 2001. Your bread will not be coming down soon.

So, my conclusion is, price is still high and heading higher. With more people that can afford eating a better meal, the price will stay high. From the perspective of food, the American consumer cannot not really reduce their demand significantly to cause a price drop. The inflation for food products will stay high and this will hurt us the most.

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