retail news in context, analysis with attitude

The Wall Street Journal reports that “2011 is shaping up as the year of the food fight. In one corner of the ring: companies desperate to pass along higher food and commodity prices to consumers, and ease up on profit-killing discounts. In the other: consumers with a questionable ability to absorb them.”

According to the story, “Producers are, on average, paying 19.7% more for farm products like dairy, meat and grains than a year ago, and about 6% more for processed supplies such as butter and sugar. Yet U.S. consumers are only paying about 1.7% more for their groceries than at this time last year, Labor Department data show.

“Food companies - much like Federal Reserve policy makers - would prefer a little more consumer-price inflation in the U.S. right now. Such a landscape of gradually rising prices and incomes makes it much easier for food companies to pass along costs and at least maintain profit margins ... The food industry is planning gradual price hikes to help expand profits in 2011. But its pricing power, especially at the low end, remains limited. It doesn't help that average U.S. gas prices are inching back up toward $3 a gallon, adding to the squeeze on household budgets.”
KC's View:
This story points to a larger truth, I think, and one that envelops commerce and government.

Americans, in general, have no idea what anything costs. They have been so dazzled by promotions and discounts, so confused by budgetary sleight of hand tricks, that they simply cannot connect costs to prices.