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The rise in price of food. How long yet?

We continue reporting on the evolution of the difference between core CPI and the index for food (beverages not included). In the previous post we confirmed that this difference had been following a long-term (negative) quasi-linear trend since 2001. Since the very beginning of this study, the main question is when the difference will reach its bottom value and the trend will turn to a positive one. This pivot will manifest the change from increasing to decreasing food price. The importance of this event cannot be underestimated in the current political and economic situation in developing countries, where larger parts of population are literally starving.   
 Previously, we found that the remarkable rally in food prices in 2008 forced the index for food to grow faster than had been predicted by simple extrapolation of the 2001-2007 linear trend. The deviation from the trend estimated in 2007 reached ~7 units in 2008 [1]. Originally, the predicted difference (red line in Figure 1) intersected the zero line around 2014 and we expected this trend to be “reflected” by the zero line as by a mirror. In this case, the price of food would stop growing in 2014.  
In 2008, the trend line was much steeper than predicted and crossed the zero line. In the beginning of 209, the trend reached the bottom and turned to a positive one, although not for long. The growth in food prices restarted in 2010 and has been in place since. Therefore, the short term positive trend expressed a higher level of volatility during the transition to the positive trend not real turn.   This effect is a common feature of the transition process near the pivot point [1].
In March 2011, the (black line) trend crosses the zero line in the end of 2010. Therefore, Figure 1 demonstrates that the difference between the core CPI and the index of food has been slowly approaching to its original trend (red line) since 2009.
Here we suggest that the intercept with the zero line and the pivot to the decreasing food price now is expected to start any time in 2011 or 2012 depending on the bottom (resistance) level. Since the previous negative/positive pivot was at the level of -10, as displayed in Figure 2, one cannot exclude that the negative trend may change only after 2016. This case is less likely, however.

Figure 1. The difference between the core CPI and the price index of food. The pivot point to a positive trend is likely in 2011 or 2012. 

Figure 2. The difference between the core CPI and the price index of food between 1960 and 2011.
 
References
1. Kitov, I., Kitov, O., (2008). Long-Term Linear Trends In Consumer Price Indices, Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(2(4)_Summ), pp. 101-112.


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