Flash in the Pan

I've been hearing stories of late about rising food prices, driven by higher fuel prices, increased use of corn for ethanol production, and a low exchange rate on the dollar, making it cheaper for foreign consumers to buy grain. On a local NPR station this morning, the estimates being tossed about were around 5%. But then the same report was talking to a local grocery chain, where a representative was talking about 5-pound bags of flour starting at $4.

But it seems to me that the price even six months ago was maybe $3.60. Add 5%, and you get a bit under $3.80. I'd figure that if wholesale prices were going up a set percentage, then you could expect retail prices to go up by the same percentage. But clearly the percentage is being doubled. So, are the experts deliberately making their estimates too low to try and stave off political heat? Or is someone jacking up the price even higher to skim extra profit? Or is my memory of pricing going wrong? Maybe it's me, but something seems odd. I will note the following about Archer Daniels Midland Company (or ADM, as they've tried to rebrand themselves) - one of the world's largest grain processors:

Fiscal Year	Revenue	Gross Profit	Percentage Profit
2007	44,018.0	3,237.0	4.9%
2006	36,596.1	2,965.8	3.6%
2005	35,943.8	2,431.3	2.9%

In other words, the company's revenue has jumped 22.5% from 2005 to 2007, but gross profits are up 33%. Maybe it's not me.

Labels: ADM, Archer Daniels MIdland, business