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  • Commodity prices are falling: a bad news?

    Commodity prices are falling, and economists expects that these low commodity prices are likely to continue. That obviously affect agriculture, because their selling prices affect the whole food supply chain. Sure, food supply chain have the tendency to adapt from that, given they often deal with rising or falling prices for many goods, but still, it is going to impact the agriculture world in general.

    This is at the same time a good news for food companies selling final products to consumers since, like with oil, they can make the price fall without loosing margins, while for farmers, it looks less good for them. Do you feel like it's a good news?

  • #2
    Re: Commodity prices are falling: a bad news?

    The price of goods is double-bladed, an advantage or disadvantage depending on where you sit. A lowering of price for any reason - recession, deflation or even sale and bargains - is advantageous to the consumers or buyers and disadvantageous to the manufacturers and sellers. But when the economy is down like the recent recession experienced by the US, prices of goods are going down simply because the people have to money for buying such. Economists would say that the government should stir the economy by spending, the government should engage in relentless spending to revitalize the economy and raise the prices.

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    • #3
      Re: Commodity prices are falling: a bad news?

      I think any extreme on either side will prove to have a negative effect one way or another. The optimal state would be to have balance, so I think it's not specifically the price cuts that are causing damage but mostly just the imbalance. It happens a lot though and as long as it doesn't snowball too much and it still has a good chance for recovery then I don't think it's that bad.

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      • #4
        Re: Commodity prices are falling: a bad news?

        Originally posted by AutomaticPete
        As a consumer it's great news, I can really pay off my mortgage faster and save more when gas and other staples of my lifestyle are as cheap as they are.
        The economies of the world can also buy more and put that to work, I see infrastructure as a huge winner as the cost of materials is low & that borrowing money for projects is also at an all time low.
        Yes but as a supply chain manager, you're often on both sides of the problem: you're at the same time buyers (and want the best buying prices, meaning the lowest prices possible) and sellers (and want the best selling prices, meaning the highest prices possible). But because businesses can't be too much unreasonable, they have to still apply prices that can be brought and sold.

        Originally posted by Corzhens View Post
        The price of goods is double-bladed, an advantage or disadvantage depending on where you sit. A lowering of price for any reason - recession, deflation or even sale and bargains - is advantageous to the consumers or buyers and disadvantageous to the manufacturers and sellers. But when the economy is down like the recent recession experienced by the US, prices of goods are going down simply because the people have to money for buying such. Economists would say that the government should stir the economy by spending, the government should engage in relentless spending to revitalize the economy and raise the prices.
        I think an economy should do enough about the wealth and the well-being of the country to not need stimulus. Stimulus profits in two cases: when a too heavy recession happens (and they happens often because of bad management), and for short term traders. No one else should like that. Not at all.

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        • #5
          Re: Commodity prices are falling: a bad news?

          If commodity prices are falling, especially within the agriculture sector, then why in the world are food prices so high? I went to Safeway last week to get some ingredients for a salad. A pack of baby spinach was $5 and ONE tomato was $3. Why is a tomato $3? I couldn't believe it. I thought for sure it had been priced wrong, but it wasn't. Normally a cluster of tomatoes or a few tomatoes on a vine would be $3, but not one individual tomato. That is robbery in my eyes. I am all for capitalism and making money, but to use it in a way that plain and simply takes advantage of people is wrong in my eyes.

          Safeway has always been pretty expensive, but I refuse to shop there now. I head back over to Trader Joe's where everything is far cheaper, and better quality. An organic tomato at Trader Joe's is only $0.89 and a pack of baby spinach is $1.99.

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          • #6
            Re: Commodity prices are falling: a bad news?

            Originally posted by Kathryn View Post
            If commodity prices are falling, especially within the agriculture sector, then why in the world are food prices so high? I went to Safeway last week to get some ingredients for a salad. A pack of baby spinach was $5 and ONE tomato was $3. Why is a tomato $3? I couldn't believe it. I thought for sure it had been priced wrong, but it wasn't. Normally a cluster of tomatoes or a few tomatoes on a vine would be $3, but not one individual tomato. That is robbery in my eyes. I am all for capitalism and making money, but to use it in a way that plain and simply takes advantage of people is wrong in my eyes.

            Safeway has always been pretty expensive, but I refuse to shop there now. I head back over to Trader Joe's where everything is far cheaper, and better quality. An organic tomato at Trader Joe's is only $0.89 and a pack of baby spinach is $1.99.
            That's also my question on the opposite - why are food prices so high? Mine is why are world food prices so low that our local agricultural products are being put at a disadvantage. For example the rice which costs around $40 per sack is selling for half that price in the underground market (read: smuggled). Likewise with sugar, the 2,200 pesos per sack is being sold at only 1,200 in the underground. I wonder why world food prices are going down and in our country they remain high.

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            • #7
              Re: Commodity prices are falling: a bad news?

              Originally posted by Corzhens View Post
              That's also my question on the opposite - why are food prices so high? Mine is why are world food prices so low that our local agricultural products are being put at a disadvantage. For example the rice which costs around $40 per sack is selling for half that price in the underground market (read: smuggled). Likewise with sugar, the 2,200 pesos per sack is being sold at only 1,200 in the underground. I wonder why world food prices are going down and in our country they remain high.
              So are you saying that it costs 2,200 pesos to produce the sugar, but it is only being sold for 1,200 pesos? If that's the case, then there is some manipulation going on somewhere in the supply chain. Either it does not really cost 2,200 pesos to produce the sugar and the price is much lower, or theft is happening in the supply chain and the thieves are selling it on the black market for half the price.

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              • #8
                Re: Commodity prices are falling: a bad news?

                Originally posted by Kathryn View Post
                So are you saying that it costs 2,200 pesos to produce the sugar, but it is only being sold for 1,200 pesos? If that's the case, then there is some manipulation going on somewhere in the supply chain. Either it does not really cost 2,200 pesos to produce the sugar and the price is much lower, or theft is happening in the supply chain and the thieves are selling it on the black market for half the price.
                This price of sugar is a good prototype for students studying economics. The local price of 2,200 is almost double that of the 1,200 price of imported sugar. But the Philippine government is banning the importation to protect the local sugar farmers. My first question is this - why is it so expensive to produce sugar here? My second question is this - is it not practical to just import and let our sugar farmers do something else? That would save us a lot of money. Thailand sells cheap sugar and the Philippines cannot.

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                • #9
                  Re: Commodity prices are falling: a bad news?

                  It is generally good news for consumers who will be more than happy to take a breather from high inflation rates. If farmers grow a variety of crops instead of specializing in a few, they would be able to overcome price drops or deflation. The ones that will greatly be affected are the businesses that resell goods and mark them up with a higher price.

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                  • #10
                    Re: Commodity prices are falling: a bad news?

                    The continual decrease of oil prices is a gift to the consumers. Here in the Philippines, gas prices were around 54 pesos per liter but now it is less than 40 pesos. So you can imagine the glee of the consumers. But for the business, I think that is bad news since their revenue gets smaller even when the demand is stable because the price is lower. But importers are getting a premium in the exchange rate since the peso is also increasing in value against the dollar.

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                    • #11
                      Re: Commodity prices are falling: a bad news?

                      For me personally it is very good news. I hope that this trend will be keep up long time.

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                      • #12
                        Re: Commodity prices are falling: a bad news?

                        Originally posted by hades_leae
                        It's only bad news when the reason for falling prices is not related to economic growth.
                        I think that's what happened in the depression in America a decade ago. The prices of real estate kept tumbling down and home owners who were selling experienced the difficulty of slashing their asking price for their home just to have it sold. So many real estate firms went bankrupt but most of those who suffered were homeowners who were forced to sell at a discount.

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                        • #13
                          Re: Commodity prices are falling: a bad news?

                          This seems to be an old thread topic. So my response will be an update with regards to the current situation as is. Following the Brexit vote last year, there was rising confusing and uncertainty about its effect on commodity prices. But it seems to have rebounded. Supply outages in various countries have led to tighter markets in various commodity sectors but especially in oil. Also, Chinaís stimulus package increased metal demand prospects and prices. There has been a spike in food prices due to unfavorable weather conditions.

                          So in all, the overall picture doesn't really look that great. When oil prices change, this has a direct and correlated effect on food.

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                          • #14
                            Re: Commodity prices are falling: a bad news?

                            It is common for prices to go up. That's why when the price of gasoline some 5 years ago started falling, the public was astonished and some wouldn't believe. And the decline of prices kept on going such that from 54 pesos per liter, it was down to 35 pesos per liter in a year's time. You can imagine the surprise of the gasoline consumers. Generally, when the prices fall, it is good news for the consumers and general public. I just don't know if the business industry is happy with the falling prices.

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                            • #15
                              Re: Commodity prices are falling: a bad news?

                              Originally posted by bolo1696 View Post
                              For me personally it is very good news. I hope that this trend will be keep up long time.
                              Even though, none of us can complain since this is beneficial to all of us and will help deal with the tough economy but i think it will not stay for long

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