Greedflation?

[lpetrich]

Here is the special case of N equally-sized entities: f = 1/N

Information: I = log(N)

Effective number (square measure, GG measure): N

For a power-law decline, \( f_k = (1 - u) \cdot u^k \) for parameter u and k starting at 0.

Information: \( \displaystyle{ I = - \log(1-u) - \frac{u}{1-u} \log(u) } \)

Effective number (square measure): \( \displaystyle{ <N> \ = \frac{1+u}{1-u} } \)

For this distribution, the GG measure too difficult to calculate.

 

[lpetrich]

Revealed: the true extent of America’s food monopolies, and who pays the price | Food & drink industry | The Guardian - Wed 14 Jul 2021 06.00 EDT

A handful of powerful companies control the majority market share of almost 80% of dozens of grocery items bought regularly by ordinary Americans, new analysis reveals.

...
Overall, only 15 cents of every dollar we spend in the supermarket goes to farmers. The rest goes to processing and marketing our food.

The Guardian and Food and Water Watch investigation into 61 popular grocery items reveals that the top companies control an average of 64% of sales.

We found that for 85% of the groceries analysed, four firms or fewer controlled more than 40% of market share. It’s widely agreed that consumers, farmers, small food companies and the planet lose out if the top four firms control 40% or more of total sales.

...
The consolidation runs deep: four firms or fewer controlled at least 50% of the market for 79% of the groceries. For almost a third of shopping items, the top firms controlled at least 75% of the market share.

For instance, PepsiCo controls 88% of the dip market, as it owns five of the most popular brands including Tostitos, Lay’s and Fritos. Ninety-three per cent of the sodas we drink are owned by just three companies. The same goes for 73% of the breakfast cereals we eat – despite the shelves stacked with different boxes.

Then going into detail about market concentration.

For shoppers, it might seem like choices galore at the store, but most of our favorite brands are actually owned by a handful of food giants, including Kraft Heinz, General Mills, Conagra, Unilever and Delmonte.

...
For example, while hipsters and old-school beer enthusiasts have contributed to a boom in local craft beers, the Belgian company Anheuser-Busch InBev acquired 17 formerly independent craft breweries between 2011 and 2020. It might not be clear to consumers from the labels, but the company owns more than 600 brands, including the mainstream favorites Budweiser, Michelob and Beck’s.

Then about spending a lot of money on financing politicians' careers.

 

[lpetrich]

More on market consolidation.

Until the 1990s, most people shopped in local or regional grocery stores. Now, just four companies – Walmart, Costco, Kroger and Ahold Delhaize – control 65% of the retail market.

...
A spate of mega-mergers means that meatpacking plants are now controlled by just a handful of multinationals including Tyson, JBS, Cargill and Smithfield (now owned by the Chinese multinational WH Group).

...
Consumers pay more while profits for mega meat processors are booming: in 2020, the Brazilian firm JBS reported $51bn in revenue – a 32% rise compared with the previous year. China is driving much of the company’s growth, and JBS accounted for 50% of beef exports from the US last year. The proportion of arable land dedicated to producing meat is expanding but this is largely to feed consumers overseas. Per capita meat production flatlined in the US between 2005 and 2020, while the value of exports almost doubled.

...
Farmers received $424.4bn in subsidies between 1995 and 2020, of which 49% were for just three crops: corn, wheat and soybeans, according to the Environmental Working Group. Corn subsidies are the largest by a long way – $116.6bn – accounting for 27% of the total. Very little corn grown in the US is eaten these days. Instead, more than 99% goes into animal feed, additives like corn syrup used in sugary junk food and, increasingly, ethanol, which produces toxic air pollutants when burned with gasoline.

It’s a cruel paradox, according to some campaigners, as subsidies incentivise farmers to grow just a handful of cash crops, a practice that floods the market, depresses prices and keeps them hooked on government aid.

Then a section on "Food industry workers: low pay, high hazards"

At least half of the 10 lowest-paid jobs in the US are in the food industry, and they rely disproportionately on federal benefits. Walmart and McDonald's are among the top employers of beneficiaries of food stamps and Medicaid, according to a 2020 study by a non-partisan government watchdog.

Even before the pandemic, farms were among the most dangerous workplaces in the country, where low paid workers have little protection from long hours, repetitive strain injuries, exposures to pesticides, dangerous machinery, extreme heat and animal waste. Between 50% and 75% of the country’s 2.5 million farmworkers are undocumented migrants who have few labor rights and limited access to occupational healthcare.

 

[lpetrich]

Environmental impacts:

About half of the planet’s land and 70% of freshwater withdrawals are for farming, which is increasingly industrialized.
Industrial agriculture is focussed on extracting maximum profits for minimum costs – an exploitative model with grave consequences for animal welfare, water, land and global heating.

Agriculture is responsible for more than a quarter of global greenhouse gas emissions, making food production a major contributor to the climate crisis. Across the board, the carbon footprint for animal-based foods – beef, lamb, chicken, cheese – is higher than for plant based food, which is mostly due to the consequences of deforestation to create space to grow feed crops, fertilizer used for these crops and methane emissions.

So to help make our planet more livable, eat lower on the food chain, with vegetarian fake meats, fake milks, and fake cheeses.

 

[Gospel]

Here is the special case of N equally-sized entities: f = 1/N

Information: I = log(N)

Effective number (square measure, GG measure): N

For a power-law decline, \( f_k = (1 - u) \cdot u^k \) for parameter u and k starting at 0.

Information: \( \displaystyle{ I = - \log(1-u) - \frac{u}{1-u} \log(u) } \)

Effective number (square measure): \( \displaystyle{ <N> \ = \frac{1+u}{1-u} } \)

For this distribution, the GG measure too difficult to calculate.

For those of you like me completely lost on the meaning above, here it is simplified as a haiku:

Numbers hard to hold
For as sand they slip and roll
Wisdom can't make whole

 

[Loren Pechtel]

Kroger News: Company Gouged Prices Above Inflation - Newsweek

While testifying to a Federal Trade Commission attorney Tuesday, Kroger's Senior Director for Pricing Andy Groff said the grocery giant had raised prices for eggs and milk beyond inflation levels.

And that's supposed to be meaningful???

Inflation was simply the mean of the supply chain shocks. Of course many goods went up more than that!

And note that milk specifically had a Covid-related market shift: more home demand, less institutional demand. The bottlers were unable to fully shift production instantly. (Which resulted in the paradoxical problem of pouring milk down the drain during a shortage.)

I haven't heard specifically about eggs but I wouldn't be surprised at the same sort of problem. And eggs have suffered from some disease-induced culls of flocks. Egg prices are all over the place anyway.

 

[lpetrich]

LaTeX rendered properly on the previous page, likely due to Derec's attachment, but it didn't render properly on this page.


Power-law decline: f(k) = (1-u) * u^k for some parameter u and number k from 0 on up.

Information measure: I = - log(1-u) - u/(1-u)*log(u)

Effective number (square measure): (1+u)/(1-u)


My overall point is that it is possible to quantify the amount of market concentration.

 

[laughing dog]

Kroger News: Company Gouged Prices Above Inflation - Newsweek

While testifying to a Federal Trade Commission attorney Tuesday, Kroger's Senior Director for Pricing Andy Groff said the grocery giant had raised prices for eggs and milk beyond inflation levels.

And that's supposed to be meaningful???

Inflation was simply the mean of the supply chain shocks. Of course many goods went up more than that!

And note that milk specifically had a Covid-related market shift: more home demand, less institutional demand. The bottlers were unable to fully shift production instantly. (Which resulted in the paradoxical problem of pouring milk down the drain during a shortage.)

I haven't heard specifically about eggs but I wouldn't be surprised at the same sort of problem. And eggs have suffered from some disease-induced culls of flocks. Egg prices are all over the place anyway.

If Kroger’s increase in prices increased their profit margin, then it is meaningful. If not then no.

 

[Derec]

Revealed: the true extent of America’s food monopolies, and who pays the price | Food & drink industry | The Guardian - Wed 14 Jul 2021 06.00 EDT

A three year old article and from Grauniad as well?
Also, the author does not understand what the word "monopoly means". They (it really took three writers to write this‽) were looking for "oligopoly".

A handful of powerful companies control the majority market share of almost 80% of dozens of grocery items bought regularly by ordinary Americans, new analysis reveals.

Handful > 1. We are off to a good start!

Overall, only 15 cents of every dollar we spend in the supermarket goes to farmers. The rest goes to processing and marketing our food.

Is that really surprising? Several steps are required to put food on the shelves even for food such as produce that requires minimal processing. Many require more steps. Wheat has to be milled into flour, and flour and other ingredients baked into bread, for example. Meat likewise has to be processed by butchering into cuts. Few people are buying a half of cow or hog these days. You may buy a whole chicken or turkey, but it will be plucked and cleaned. And there are also transportation costs to be considered.

We found that for 85% of the groceries analysed, four firms or fewer controlled more than 40% of market share. It’s widely agreed that consumers, farmers, small food companies and the planet lose out if the top four firms control 40% or more of total sales.

So what is to be done about that concretely? Break up every company above a certain market share?

For shoppers, it might seem like choices galore at the store, but most of our favorite brands are actually owned by a handful of food giants, including Kraft Heinz, General Mills, Conagra, Unilever and Delmonte.

That is certainly true of packaged foods. Not so much with fresh and whole foods.
For example, meats tend to be packaged by the grocery store itself.

For example, while hipsters and old-school beer enthusiasts have contributed to a boom in local craft beers, the Belgian company Anheuser-Busch InBev acquired 17 formerly independent craft breweries between 2011 and 2020. It might not be clear to consumers from the labels, but the company owns more than 600 brands, including the mainstream favorites Budweiser, Michelob and Beck’s.

I like Sweetwater. In 2020 it was bought by a Canadian weed company of all things. So yes, companies own other companies.
The real question is: what is the combined market share of all the beer brands Anheuser-Busch owns?

 

[Derec]

LaTeX rendered properly on the previous page, likely due to Derec's attachment, but it didn't render properly on this page.

LaTeX rendering should not be affected by attachments. But you are right, it does seem broken.

Power-law decline: f(k) = (1-u) * u^k for some parameter u and number k from 0 on up.

\(f\left( k \right) = \left( 1-u \right) u^{k}\)

Attaching an image did indeed fix the renderer. I'll be damned!
Is RayJ (sp?) still fixing tech around here?

However, this equation looks like exponential decay to me, not power law.

 

[Derec]

I haven't heard specifically about eggs but I wouldn't be surprised at the same sort of problem. And eggs have suffered from some disease-induced culls of flocks. Egg prices are all over the place anyway.

Yeah, the 2022 egg price increase had a lot to do with avian flu, on top of overall inflation.

 

[ZiprHead]

Is that really surprising? Several steps are required to put food on the shelves even for food such as produce that requires minimal processing. Many require more steps. Wheat has to be milled into flour, and flour and other ingredients baked into bread, for example. Meat likewise has to be processed by butchering into cuts. Few people are buying a half of cow or hog these days. You may buy a whole chicken or turkey, but it will be plucked and cleaned. And there are also transportation costs to be considered.

Those same steps were required in the past. It's not as if this is all new. What's new is smaller number of buyers bringing leverage over farmers and ranchers.

 

[Derec]

You can find the same article on Bloomberg which Yahoo has made available to the unwashed masses. This is a quote from a top Kroger executive to the FTC so it being in Common Dreams has nothing to do with it.

I do not dispute the quote, but the spin Jake Johnson of CD put on it. And I doubt Bloomberg ran the same article. Did you mean a different article that mentions the same quote?
I think you meant this article:
Kroger, Albertsons CEOs Tout Deal to Counter Amazon, Walmart
Far less inflammatory.

I can't imagine demand side changes much for perishables like milk and eggs so we can discount that.

Why not? I might want to eat eggs more often if I have more money. Also go for fancier, more expensive eggs.

This "temporary increase in profit margin" is the crux of it. They see this opportunity. They know their costs are rising and may continue to do so for some time and bake in a healthy price to consumer buffer to insure their costs are well covered.

Again, I think you are reversing cause and effect. It is the disequilibrium between supply and demand and resultant market price increase that led to increased profit margin, at least temporarily until costs also increased. The alternative would be to not allow supply and demand to equilibrate by keeping prices artificially low, but that would lead to shortages.

It is the height of naivete to consider these as honest mistakes. Beyond their cost increases, they are looking to their competitors pricing and raising theirs in conjunction with. This favorably skews their profit margin as the people at each company in charge of raising prices on individual items are going to ensure they are not caught after the fact that they did not raise prices enough.

It was not a "honest mistake", it was just a natural response to market conditions.
Note that other market actors also try to maximize what they make. For example, Boeing workers are now striking and demanding 40% more pay, even though they have been making shoddy products lately. Is that also "greed"?

One other point, if this temporary increase in profit margin is an honest mistake (not generated by greed)

I think it is a false dichotomy that it is either a "honest mistake" or else "greed".

wouldn't it more likely be found in processed foods where there's more labor, utility (cold storage), and transportation inflation to try and factor in? Milk and eggs are nearly farm to table and should reflect the greatest accuracy between retailer cost and consumer pricing.

I think the problem with milk and eggs is that they are perishables. More processed foods (incl. those that have milk and eggs as ingredients) usually have significantly longer shelf lives. Perishables are more susceptible to supply fluctuations because you can't buffer them through storage.

 

[Derec]

In order for market prices to be based on supply and demand, there must be sufficient competition in the market.

And there is competition in the market. Not that it would not be good that there were more players in the, for example, meat packing sector, but you leftists will twist yourself into pretzels to deny that profligate spending by federal government had any role to play in inflation and rising prices of groceries.

When there is market power, market prices are not subject to the moderating forces of competition on market price. When there is market power, then there is certainly an element of "greed" in the setting of market prices.

There is always an element of "greed" (for lack of a better word). And there wasn't a sudden dearth of grocery store and food companies in 2021 and 2022 compared to 2019. So something else (or multiple something elses) must have been the driving force.

 

[Derec]

And there was no small profit increases for a short time. It was record profits across the board for a long time.

Because there were, on the supply side, shortages of many products, and, at the same time, consumers were flush with cash due to all the spending by the federal government that continued well past the point of economy reopening after the initial shock of COVID.
For example, extended unemployment benefits (that gave people hundreds of dollars of extra unemployment benefits per week and extended the eligibility period) were not discontinued until September 2021.

Derec is using Economics 101 that covers the basics. Greed is a market force that's part of the field of economics too.

You accuse me of using "Economics 101" (when I actually took ECON2105) but the arguments that discount the role of government spending on increasing prices ignore even those basics. And yes, greed is always there as a motivating principle. What was different for this spike in inflation was the one-two punch of supply chain disruptions and almost unprecedented consumer stimulus. That threw the supply/demand equilibrium off kilter in a significant way.

 

[Derec]

I don't believe in Catholicism but a book in the Catholic version of the Bible says "The rich think of the poor as their field to go and take from".

What book is that from?

We have a command and controlled economy

No, we don't. At least not yet.

but it is by the rich for the rich.

Disagree.

The FED throwing people out of work to lower inflation makes me sick.

The only people the Fed can throw out of work are Fed employees.
What the Fed can do is increase interest rates so the economy runs cooler and inflation comes down. That can lead to less employment.
However, this countercyclical intervention is a good thing, as John Maynard (not Milton, sorry AOC!) Keynes figured out. Cool down hot parts of the cycle, stimulate in a recession. That way the business cycle curve is smoothed out and you do not have the boom-bust roller coaster.

Why does that make you sick?

 

[Derec]

 Market concentration is a recognized effect.

No doubt. But it a different issue than the combined effect of government largess and supply chain shortages.

We can definitely talk about what the government can do to encourage more competition in the food sector however. But market concentration should not be misused as an excuse to ignore the effects of government spending on inflation.

Remember the baby formula shortage a couple of years ago? One of the reasons for it was that the sector had very few players. And a major reason why it had so few players was the high level of regulation.

 

[Derec]

One can measure the degree of market concentration using formulas also used for political parties and for populations of organisms:  Effective number of parties and  Diversity index and  Herfindahl–Hirschman index

Interesting. I took some grocery store market share data from this article and applied the Herfindahl-Hirschman to it. I combined Walmart and Sam's Club as the latter is owned by the former.
Got 0.178. So Metro Atlanta grocery store marketplace appears to be pretty diverse.

 

[Derec]

Those same steps were required in the past. It's not as if this is all new.What's new is smaller number of buyers bringing leverage over farmers and ranchers.

Certainly not between 2019 and 2021/22, which means it is not the cause of the recent high inflation.
I am not opposed to addressing food industry (e.g. meat processors) being too concentrated. For example, the government should be reducing barriers to entry for new players.

But neither should this issue be used as a smokescreen to distract from the effect of government spending on inflation. If Kamala wins (highly likely) and has House and the Senate (less likely) she will almost certainly try to pass another version of Spendapalooza, even bigger than Biden's. So this is a very relevant issue.

And my point still stands even if the share that went to farmers was a little higher 20 years ago. Given the complexities of the US food systems, of course the first link in the chain will not get nearly as much as if you could but from the farmer directly.

[Robert Reich video]

Sigh. Another one who does not understand the meaning of the word "monopoly". If four companies control 65% of the market share or whatever it was, that is by definition not a monopoly.

 

[DBT]

Inflation as an opportunity to profit.....'oh, look, others are raising their prices, let's get in on the action.'