Food Inflation now showing up even in official statistics

We have been saying for months now that there is a lag between the time that prices in the actual economy respond to changes in the prices reflected in the futures markets. While the CCI, the Continuous Commodity Index, has been knocked down rather rudely in the last few trading sessions as hedge fund money has flowed out of the sector due to risk aversion, it is still at extremely high levels. Even given the recent carnage inflicted to the commodity sector, the CCI has only dropped back to levels it had attained in January of this year. In other words, while prices have come off some, they are still elevated.

In my experience there is generally a lag of about 4 months or so before the prices being reflected in some of the futures markets impact the wider economy as a whole, particularly the retail level.  With this in mind, please note the following headline that came out this morning.

Wholesale prices up 1.6 pct. on steep rise in food

Wholesale prices rise 1.6 pct. due to biggest jump in food costs in more than 36 years

On Wednesday March 16, 2011, 8:57 am EDT

WASHINGTON (AP) -- Wholesale prices jumped last month by the most in nearly two years due to higher energy costs and the steepest rise in food prices in 36 years. Excluding those volatile categories, inflation was tame.
The Labor Department said Wednesday that the Producer Price Index rose a seasonally adjusted 1.6 percent in February -- double the 0.8 percent rise in the previous month. Outside of food and energy costs, the core index ticked up 0.2 percent, less than January's 0.5 percent rise.

You can read the entire story here:

http://finance.yahoo.com/news/Wholesale-prices-up-16-pct-on-apf-3777454020.html?x=0&.v=1