Are You Ready For The Price Of Food To More Than Double By The End Of This Decade?

Supermarket - Photo by AbrahamiDo you think that the price of food is high now?  Just wait.  If current trends continue, many of the most common food items that Americans buy will cost more than twice as much by the end of this decade.  Global demand for food continues to rise steadily as crippling droughts ravage key agricultural regions all over the planet.  You see, it isn’t just the multi-year California drought that is affecting food prices.  Down in Brazil (one of the leading exporters of food in the world), the drought has gotten so bad that 142 cities were rationing water at one point earlier this year.  And outbreaks of disease are also having a significant impact on our food supply.  A devastating pig virus that has never been seen in the U.S. before has already killed up to 6 million pigs.  Even if nothing else bad happens (and that is a very questionable assumption to make), our food prices are going to be moving aggressively upward for the foreseeable future.  But what if something does happen?  In recent years, global food reserves have dipped to extremely low levels, and a single major global event (war, pandemic, terror attack, planetary natural disaster, etc.) could create an unprecedented global food crisis very rapidly.

A professor at the W. P. Carey School of Business at Arizona State University named Timothy Richards has calculated what the drought in California is going to do to produce prices at our supermarkets in the near future.  His projections are quite sobering

  • Avocados likely to go up 17  to 35 cents to as much as $1.60 each.
  • Berries likely to rise 21 to 43 cents to as much as $3.46 per clamshell container.
  • Broccoli likely to go up 20 to 40 cents to a possible $2.18 per pound.
  • Grapes likely to rise 26 to 50 cents to a possible $2.93 per pound.
  • Lettuce likely to rise 31 to 62 cents to as much as $2.44 per head.
  • Packaged salad likely to go up 17 to 34 cents to a possible $3.03 per bag.
  • Peppers likely to go up 18 to 35 cents to a possible $2.48 per pound.
  • Tomatoes likely to rise 22 to 45 cents to a possible $2.84 per pound.

So what happens if the drought does not end any time soon?

Scientist Lynn Ingram, who has studied the climate history of the state of California extensively, told CBS News that we could potentially be facing “a century-long megadrought” in California.  If that does indeed turn out to be the case, we could be facing huge price increases for produce year after year.

And it isn’t just crops that are grown in the United States that we need to be concerned about.  As NBC News recently reported, the price of cocoa is absolutely soaring and that is going to mean much higher prices for chocolate…

As cocoa prices surge to near-record highs on demand for emerging markets, chocoholics brace for a hike in price – and maybe even a different taste, as chocolate makers hunt out cheaper ingredients.

Cocoa futures are up 10 percent so far this year, hitting almost £1,900 on ($3,195) a ton in March. Last year prices rose 20 percent.

In fact, experts are now warning that chocolate may soon become a “high-end luxury item” because it is becoming so expensive.

Meat prices are also starting to spiral out of control.

A virus known as porcine epidemic diarrhea has pushed pork prices up to new all-time record highs.  It has already spread to 27 states, and as I mentioned above, it has already killed up to 6 million pigs.  It is being projected that U.S. pork production will decline by about 7 percent this year as a result, and Americans could end up paying up to 20 percent more for pork by the end of the year.

The price of beef has also soared to a brand new all-time record high.  Due to the drought that never seems to let up in the western half of the country, the total size of the U.S. cattle herd has been declining for seven years in a row, and it is now the smallest that is has been since 1951.

If the overall price of food in this country increases by just an average of a little more than 12 percent a year, it will double by the end of this decade.

What would you do if you suddenly walked into the grocery store and everything was twice as much?

That is a frightening thing to think about.

Meanwhile, all of our other bills just keep going up as well.  For example, we just learned that the price of electricity hit a brand new all-time record high for the month of March.

If our incomes were keeping up with all of these price increases, that would be one thing.  Unfortunately, that is not the case.  As I wrote about earlier this week, the quality of our jobs continues to go down and more Americans fall out of the middle class every single day.

According to CNBC, there are hundreds of thousands of Americans with college degrees that are working for minimum wage right now…

While a college degree might help get a job, it doesn’t necessarily mean a good salary. According to a report released last month by the Bureau of Labor Statistics, some 260,000 workers with bachelor’s degrees and 200,000 workers with associate’s degrees are making the minimum wage.

The federal minimum wage is $7.25 an hour, and the minimum wage for tipped workers is $2.13 an hour. Some cities and states have recently raised their minimum wage, but the BLS report defines only those making $7.25 an hour or less as “minimum wage workers.”

And according to the U.S. Census Bureau, median household income in the United States has dropped for five years in a row.

This is why so many families are financially stressed these days.  The cost of living is going up at a steady pace, but for the most part our paychecks are not keeping up.  Average Americans are having to stretch their money farther than ever, and many families have reached the breaking point.

So what is going on in your neck of the woods?  Are you starting to see prices rise at the grocery stores where you live?  Please feel free to join the discussion by leaving a comment below…

Inflation Is Here – Just Open Up Your Eyes And Look At These 5 Financial Charts!

Despite what Federal Reserve Chairman Ben Bernanke says, rampant inflation is officially here.  The federal government is constantly monkeying with the numbers to keep the “official” rate of inflation below 2 percent, but it is becoming very difficult to deny that the cost of almost everything is really going up these days.  The American people are not stupid.  They notice the difference when they go to the grocery store or stop at the gas station.  The dollar is losing value rapidly now.  The price of gold set another new all-time record today and is currently hovering just above $1430 an ounce.  The price of West Texas crude has moved above 100 dollars several times recently and the price of Brent crude is currently above 116 dollars.  These higher oil prices are really starting to be felt in the United States.  The average price for a gallon of gasoline in the United States has now reached $3.38.  There are some gas stations in the U.S. where the price of a gallon of gas is already over 4 dollars.  But it is not just the American people that are feeling the pain.  The global price of food recently hit a new record high and almost every major agricultural commodity has absolutely skyrocketed in price over the past 12 months.  Meanwhile, Ben Bernanke just told the Senate Banking Committee that he really isn’t concerned about inflation at all.

When it comes to inflation, the key is not to look at the official U.S. government numbers (they are highly manipulated) or how the U.S. dollar is performing against other major currencies (because they are all being devalued as well).  Instead, you can get a truer sense of what is really happening to inflation by looking at what the U.S. dollar is doing against precious metals, commodities and other hard assets.

So are we experiencing rampant inflation right now?  Well, just open up your eyes and look at these 5 charts….

1 – The price of oil is racing back up to record levels.  The chart below from the Federal Reserve is a couple weeks out of date.  As noted above, the current price of West Texas crude is about $100 a barrel….

2 – The price of a gallon of gasoline in the United States seems destined to hit a brand new all-time record at some point this year.  Was it really just a few short years ago when the average price of gas in this country was about a dollar a gallon?….

3 – The value of most precious metals is very consistent over time.  So when you see precious metals go up dramatically in price, it means that the dollar is being devalued.  The price of gold just set another new all-time high and it seems destined to keep going even higher….

4 – The chart below from the Federal Reserve is a measure of the price of all commodities.  These price increases are inevitably going to be passed along to consumers in the United States….

5 – After a couple of years of stable food price, the price of food is starting to take off yet again….

In fact, many analysts are warning that we could experience a major food crisis over the next couple of years.  The global demand for food continues to grow at a very brisk pace, but all of the crazy weather we have been having around the world has caused some very bad harvests.

Unfortunately, the global price of food has gone up substantially in recent months and it is likely to keep going up very rapidly.  Just consider the following five facts….

#1 The United Nations says that the global price of food hit another new all-time high during the month of January.

#2 The price of corn has doubled in the past six months.

#3 The price of wheat has roughly doubled since the middle of 2010.

#4 According to Forbes, the price of soybeans is up about 50% since last June.

#5 The United Nations is projecting that the global price of food will increase by another 30 percent by the end of 2011.

Ouch.

But isn’t there some good economic news?

Yes, there is, but before we cover it, it is important to keep in mind that in an inflationary environment almost all economic numbers go up.

For example, during the recent hyperinflation in Zimbabwe stocks went up like crazy and “economic growth” statistics were very impressive.

Why?

Because those numbers were measured in currency units that were being devalued at a blinding pace.

So please keep that in mind when you hear “good economic statistics” on the evening news.

The truth is that in an inflationary environment such as we have now entered into almost all economic numbers should be going up.

So what is the good news?

Well, last month all three major U.S. car companies reported strong sales gains.  Sales of GM vehicles were up 49%, sales of Chrysler vehicles were up 13%, and sales of Ford vehicles were up 10%.

But just because a few pieces of good economic news come floating our way does not mean that we should forget all of the horrific long-term economic trends that are tearing this country apart.

The truth is that we are still a nation that is absolutely drowning in debt.

For example, it was just announced that China now owns 1.16 trillion dollars of U.S. government debt.

The borrower is the servant of the lender.  We should never forget that.

Also, the U.S. economy is slowly but surely becoming of less importance on the global stage.

In 1985, America’s share of global GDP was 33%.  Today, it is just 24%.

Our nation is rapidly being deindustrialized and we are becoming deeply dependent on industrial production from other nations.

Did you know that the new World Trade Center that is being constructed on the site of the September 11, 2001 attacks is going to be made from German steel and Chinese glass?

That says a lot about where we are at as a country.

We have allowed so much of our industrial infrastructure to be exported to China where workers slave away in almost unbelievable conditions.

A reader named Rish recently described what things are like over there….

As a product developer I went to china and saw the way the factory workers lived and worked in person. 50$ a month is about right, but if you are a skilled quality control expert you might make as much as 150$. at least this was true about 2 years ago the last time I went. The barracks were pretty meager, bunk beds with just plywood, no mattresses, if you wanted you could go to a store just outside the factory gate and buy a thick comforter that they sell as a “mattress” .

It will be interesting to see how the next few years changes the face of the USA. Who knows? if the unemployment rate and lack of jobs keeps going and enough people become homeless, we might become the next Bangladesh, and people will be lining up of the 30 cents an hour corporate factory jobs, and living in barracks just like those…

The only way the U.S. has been able to “thrive” during this deindustrialization is by borrowing gigantic amounts of money.  But all of this borrowing is slowly but surely destroying the U.S. dollar, and we are getting closer to the point of absolute catastrophe.

Peter Schiff recently shook folks up when he talked about these issues during a recent interview on CNBC….

But it is not just the United States that is printing tons and tons of money.  All of the major industrialized nations have been firing out gobs of currency.  That is a huge reason why so many investors have been racing to get into hard assets recently.

Now Ben Bernanke and other top Federal Reserve officials have been dropping hints that more quantitative easing may be necessary.

Unfortunately, just like with any other addiction, once you give in a few times it becomes easier and easier to engage in destructive behavior.  Now that the Fed has gotten a taste for quantitative easing it is going to be really hard to stop.

Nor can the Fed stop at this point.  If they did it would be disastrous for the U.S. economy.  But if the Fed continues on this reckless course it will make the eventual collapse of our economy even worse.

Under our current debt-based system there is no way out.  The Federal Reserve can attempt to put off the inevitable for a while by pumping up the debt bubble even more, but at some point it is going to burst.

When that happens we are going to be facing a financial crisis which will blow what happened in 2008 completely out of the water.

So enjoy these good economic times while you still can.  This is about as good as things are going to get from here on out.

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