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Why Are Food Prices Rising So Fast?

If you do much grocery shopping, you have probably noticed that the cost of food has been rising at a very brisk pace over the past year.  So why are food prices rising so fast?  According to Federal Reserve Chairman Ben Bernanke, inflation is still very low and the economy is improving.  So what is going on here?  When I go to the grocery store these days, there are very few things that I will buy unless they are on sale.  In fact, I have noticed that many of the new “sale prices” are the old regular prices.  Other items have had their packages reduced in size in order to hide the price increases.  But with millions of American families just barely scraping by as it is, what is going to happen if food prices keep rising this rapidly?

The food prices are especially painful if you are trying to eat healthy.  Most of the low price stuff in the grocery stores is garbage.  Eating the “typical American diet” is a highway to cancer, heart disease and diabetes.

But if you try to stick to food that is “healthy” or “organic” you can blow through hundreds of dollars in a heartbeat.  In fact, the reality is that tens of millions of American families have now essentially been priced out of a healthy diet.

Soon there will be millions more American families that will not even be able to afford an unhealthy diet.

Some recent statistics compiled by the Bureau of Labor Statistics are absolutely staggering.  According to a recent CNBC article, over the past year many of the most popular foods in America have absolutely soared in price….

Coffee, for instance, is up 40 percent. Celery is 28 percent higher while butter prices rose 26.4 percent. Rounding out the top five are bacon, at 23.5 percent, and cabbage, at 23.3 percent.

Unfortunately, it looks like the trend of rising food prices is accelerating.  Just look at what the CNBC article says happened in the month of April alone….

Just in April—the most recent month for which data is available—grapes went up nearly 30 percent, cabbage jumped about 17 percent and orange juice surged more than 5 percent.

Meat is becoming more expensive as well.  Since March 2009, livestock prices have risen by 138%.

So when Ben Bernanke tells us that inflation is very low, that really is a lie.  On the stuff that people spend money on every day (like food and gas), prices have gone up dramatically.

Sadly, this is not just a phenomenon that is happening in the United States.  The truth is that the entire planet is rapidly approaching a horrific global food crisis.

Over the past year, the global price of food has risen by 37 percent and this has pushed approximately 44 million more people around the world into poverty.

When food prices rise in the U.S. it may be painful for millions of American families, but around the world a rise in food prices can mean the difference between surviving and not surviving.

That is why it has been so alarming that the global price of wheat has approximately doubled over the past year.

But it is not just wheat that has been soaring.  Check out what a recent Bloomberg article had to say about what has been happening to many key agricultural commodities over the past year….

Corn futures advanced 77 percent in the past 12 months in Chicago trading, a global benchmark, rice gained 39 percent and sugar jumped 64 percent. There will be shortages in corn, wheat, soybeans, coffee and cocoa this year or next, according to Utrecht, Netherlands-based Rabobank Groep. Prices also rose after droughts and floods from Australia to Canada ruined crops last year. European farmers are now contending with their driest growing season in more than three decades.

Even before this recent spike in food prices the world was struggling to get enough food to everybody.  It has been estimated that somewhere in the world someone starves to death every 3.6 seconds, and 75 percent of those are children under the age of five.

So what is going to happen if food prices keep on rising at the current pace?

That is a very good question.

We really are starting to move into unprecedented territory.  Nobody is quite sure what is going to happen next.

So why is all of this happening?

Well, a lot of people are blaming the Federal Reserve.  All of the “quantitative easing” that the Fed has done has flooded the financial markets with money.  All of that money had to go somewhere.  Much of it has pumped up the prices of hard assets such as oil, gold and agricultural commodities.

But it is not just the Fed that is to blame.  The truth is that central banks all over the world have been recklessly printing money.

When the amount of money in an economy goes up, the purchasing value of all existing money goes down.  In the United States, that means that your dollars will not go as far as they did before.

But it is not just monetary policy that is affecting food prices.  In 2010 and 2011 we have seen an unprecedented wave of natural disasters and crazy weather.  This has caused problems with crops all over the globe.

In addition, U.S. economic policies are also playing a role.  At this point, almost a third of all corn grown in the United States is used for fuel.  This is putting a lot of stress on the price of corn.

Also, there are some long-term trends that are not in our favor.  For example, the systematic depletion of the Ogallala Aquifer could eventually turn “America’s Breadbasket” back into the “Dust Bowl”.  If you have not heard of this problem I would encourage you to do some research on it.

Things are going to get a lot worse, but already America is having a really hard time feeding itself.  According to Feeding America’s 2010 hunger study, more than 37 million Americans are now being served by food pantries and soup kitchens.

So is that number unusual?

Yes, it sure is.

The number of Americans that are going to food pantries and soup kitchens has increased by 46% since 2006.

That is not a good trend.

Another stat that I talk a lot about in this column is the number of Americans on food stamps.

Right now, there are 44 million Americans on food stamps.  Nearly half of them are children.

How did we ever get to the point as a nation where more than 20 million children end up on food stamps?

It is estimated that one out of every four American children is currently on food stamps, and it is being projected that approximately 50 percent of all U.S. children will be on food stamps at some point in their lives before they reach the age of 18.

So what is going to happen if the economy gets even worse?

What is going to happen if there really is a major food crisis in this country someday?

Food prices have been going up for decades and they are going to continue to go up.  But the frightening thing is how fast they are increasing now.

As the U.S. middle class continues to be destroyed, the number of Americans that can’t afford to buy enough food is going to continue to rise.  Food prices are rising much faster than wages are, and that is not likely to change any time soon.

Food is rapidly becoming one of the most important global economic issues of this decade.  The farther one looks down the road, the bleaker things look for the global food situation.

I hope you are prepared for that.

  • JabbaDaHut

    Drought prices are pushing food levels to even higher levels. It is anticipated that grocery bills will rise another 20% minimum by the end of the year. I’ve read some of the comments blaming corporate control and that is true but the bigger problem is the exportation of food and gas combined with commodities speculation and ethanol mandates.

    Lobbyists and the government are selling the average Joe out in the name of the almighty dollar. Write your congressmen and demand immediate action. No more exporting commodities, gas or mandating ethanol in gasoline please!

    • JabbaDaHut

      Should be “drought levels are pushing food prices” above – I was in a hurry :)

  • Mark

    Food prices will continue to go up as long as we keep growing government control of commodities, printing money, and regulating trade. Try this experiment. Go to the poorest neighborhood in your metropolitan area. Maybe a security risk. Look at the price of the groceries. Anyone in their right mind would not buy it. Unless of course you realize why they can get away with it. 99 percent of their patrons are on food stamps. As long as uncle sam buys it, they can charge whatever they want. Now if 1 out of 4 children are on food stamps, why not just keep pumping up the prices. This is a socialistic disaster in the making. One solution. Small scale farming, backyard gardening. One small plot of land can raise more food than you could imagine. It is possible. Another solution.. Get the government out of the business of regulating food production to control prices. Vote for small government politicians. It’s what this country was founded on.

    • Sakonya

      Prices for groceries and other goods have always been higher in poorer neighborhoods. I remember my parents going into neighboring communities to shop because in our area things were priced higher. It is not because of “food stamps” that the prices are higher and everyone living in “poor” areas is not on them. Many people work and because of the low wages paid, their earnings do not allow for them to move. They, however, make too much to even qualify for any government assistance programs. It is wrong to blame and label all government programs as socialism. Ask companies like GE, Apple and other corporations why they are not paying any taxes, instead of demonizing the poor. Just hope that you don’t ever need “food stamps”, because with attitudes like yours and the Republicans, there may not be any such programs.

      • WakeUp

        No, he is right. Prices are being jacked up, not because of food stamps and housing assistance, but because scum prey on the poor and steal from the government. Housing especially. A three bedroom in the worst slum costs the same as a nice rental house in the suburbs! But you can’t live in the suburbs with housing vouchers. This is a predatory nation. Now, if he is blaming people ON foodstamps, then he is human waste. There are no jobs to be had in the inner city.

    • WakeUp

      You have a point. Due to subsidies, people jack up prices to cheat the government. They do this in housing as well, creating a vicious cycle where people can’t get housing WITHOUT help, because it’s so overpriced. There are also are thousands of small business owners who actually buy their food at “wholesale” chains like Costco, then sell it at a high price, and this is the entire business model. There is very little healthy food, and kids are getting really sick. There are ZERO job opportunities in the inner city, and the surrounding suburbs don’t have jobs either, or they discriminate by zip code. These so-called companies put out fliers for ridiculous minimum wage job fairs, list a paragraph of necessary qualifications and disqualifiers. People are starving to death on empty calories. It’s a true crisis, as well as the *canary in the coal mine* for the rest of America.

  • WakeUp

    As long as people like you don’t have the guts or the education to mention climate change–the giant ELEPHANT in the room–things have no hope. For how many disastrous years will you mention “strange weather” without admitting the truth, that this is becoming normal weather? And why not talk about the hoarding of wealth that the so-called *elite* engage in? In a few years, I predict Americans will also be dying of starvation.

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