Western countries are not immune from public discontent at rising food prices – although, unlike in North Africa, it is speculators and supermarkets which may end up feeling the heat.
It is a "myth that commodities matter to food prices" in industrialised nations – unlike in developing countries - UBS said, citing Western consumers' preference processed foods.
"Food is about labour costs, and not much else," he said, noting that labour costs accounted for about 70% of food price inflation in nations, such as France, the UK and US, included within the Organisation of Economic Co-operation and Development (OECD).
My comment: UBS rather simplistic argument appears to refer to retail sector, where labour costs indeed are the main component (about 3/4 of total costs). However what matters most to retailers are not labour cost inflation but food inflation, esp when "food" costs creep up by over 10% pa while labour costs advance by around one pc. It is enough to listen to a Sainsbury's boss threats against suppliers at times of rising prices to understand where the pressure comes from. To retailers salaries are one component of fixed costs (real estate is another), and their main lever to increase net profit is to contain variable costs, expand market share and optimise tax. The real issue is the food industry, not distributors.
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