The rise in the dollar reinforces inflationary expectations on food prices

The rise in free dollars (the combination of the blue, the CCL and the MEP) in recent days, accelerated – through an increase in expectations – the inertia of price increases which was already coming overwhelmingly in the gondolas.

Only in the last month, before the rush to exchange, the increase in the products of the Total Basic Basket (CBT) that INDEC measures to measure poverty, showed an average increase of 4.6%. That already high level of increases was surpassed in the first two weeks of July. According to some private measurements, food has accumulated a 4% increase during that time, something that in monthly terms it is equivalent to a variation greater than or close to 8%.

According to the consultancy Ecolatina, which expects a monthly inflation rate of 7.5%, “the Food and Beverage category is unlikely to reach 7% in July,” according to its analysts. Meanwhile, the survey of the prices of the article carried out by the consultancy firm LCG every week in supermarkets, reflects a 4% increase in the first two weeks of the month. That is, it is equivalent to 8.2% per month. Based on this information, the consultancy adjusted its inflation projection for the end of the year to an annual low of 90% in December.

In theory, explains economist David Miazzo, of the Agricultural Foundation for Development of Argentina (FADA), “a free dollar movement” shouldn’t directly alter food prices so much because Argentina is an exporter and uses the official exchange rate ”, he clarifies.

“But the truth is that a movement in the currency like it has happened in the last 45 days (when it went from $ 205 to $ 330) Scare all the links in the supply chain. And it generates the same price increase, even if the food is exported according to the official dollar. “It happens that all the actors try to protect themselves. For this, in the latter part of July and in August, inflation will be important,” according to the economist. there is no anchoring for inflationary expectations and for the exchange rate “summary.

This escalation of expectations is what traders are experiencing in awe when they try to replace the commodity, if they can. “Today, for example, we do not find sugar prices on the wholesalers pages “, says Yolanda Duran, head of the chamber that brings together Chinese self-service shops (CEDEAPSA).

According to the leader, merchants – who source from wholesale distributors – experience daily shortages in delivering products such as sugar and oil. And they also receive price lists that have gone from a double figure of “one week for the next”Duran says.

“Suppliers deliver us drop by drop and prices rise due to expectations or increased inputs, such as polyethylene or transportation,” says the head of CEDEAPSA. “As a result, sales are paralyzed by such price pressure,” he adds.

Production houses are extremely cautious when it comes to pricing. But they are concerned about the impact of the cost of their inputs on the final price of the products. “Today it is difficult to diagnose the real impact on prices, but it is clear that to some extent they will have an impact,” said a source at a major food company.