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NY Times

[but fuel prices are dropping] For more than a year, food manufacturers have been shaving package sizes and raising prices, declaring that they had little choice because of unprecedented increases in the cost of raw ingredients like corn, soybeans an

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Comment by Brock Lorber
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Keep in mind that Andrew Martin has won a Pulitzer for Explanatory Journalism as you count the number of contradictions in this piece. This is pseudo-economic drivel at its worst.

You could write an entire text on the mistakes and blatant falsehoods contained in this article, except it is so poor there**Q**s no handle to grab. What in the world is **QQ**food inflation**QQ**? Pathetic.

Powell, historically food and fuel do not track, for the simple reason that the consumer is sovereign. The family budget is finite; the portion spent on fuel cannot be spent on food and vice versa.

If fuel prices rise, it affects the selections you make from grocery shelves and restaurant menus. You select cheaper substitutes for the same amount of calories. Likewise, if the price of a particular food rises, you select cheaper substitutes.

Per calorie, then, the consumer sets the price - the grocery, distributors, and producers are price takers. The cost of the factors used in putting food on the shelves (including the fuel to transport it) has no short-run bearing on the shelf price.

Now, it is true that, in the long run, marginal producers will be forced out, reducing supply and putting upward pressure on prices (but downward pressure on commodities). Every producer that fails, however, opens the door for another producer to use the productive capacity (feed lots, farm land, processing plants) and bring the supply back up.

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