If food prices are spiraling out of control throughout the world, driving inflation in China and even revolution in the Middle East, why do prices seem so stable down at our local grocery stores?


It comes down to two factors, writes Annie Lowrey. First, the weak position of the U.S. consumer has forced grocery stores to offer heavy discounts to keep shoppers flocking. (We'll see how that trend holds up when the economy improves.) Second, Americans consume more processed foods -- like potato chips and hot dogs -- whose price is more determined by marketing and packaging than simple food prices. As Prof. Mark Perry demonstrates with this simple and striking graph of the last 10 years in food prices, crude prices seesaw between plus- and minus-20% yearly changes, while finished goods rarely rise or fall more than 5%.

Read the full story at Prof. Mark Perry's blog.