Bad weather means rising prices
Food is a necessity (and often a joy) in life. So when prices rise, the increased costs can be rapidly felt in the household budget.
This season, bad weather in the USA and elsewhere put pressure on the global food supply, with the Food Price Index from the United Nations Food and Agriculture Organization showing a six per cent rise between June and July. The hike was mainly due to a jump in grain and sugar prices.
In the USA, the price of maize (or corn) surged to an all-time high amid a major drought. The problem compounds as, writes the Financial Times’ Lex column, maize also plays an important part in the production of milk, meat and other products.
Where can I cut back?
As strange as it might sound, a thinking trap can make price rises in one area of spending have a much larger impact on the overall budget than would otherwise be the case. Known as “mental accounting”, it refers to the way people tend to separate money into “buckets” to budget for food, shelter, transport and other expenses. Research shows when prices rise in one area (such as food), people tend to cut back in that same area.
A better solution might be to assess the whole budget to see where savings can be made most effectively, whether it’s in food, shelter, transport or another area.