Blog > Gold and Resources > Blog article: Food Inflation: The increased cost of survival
 | Email This Article Email This Article  | 

Food Inflation: The increased cost of survival

Posted March 25, 2008

"News wires reported several incidences of food-related riots last week. A riot in Haiti or Cameroon is nothing new, but when folks are fighting to get their hands on something to eat in Italy, I get worried. " – Andrew Snyder 

By Andrew Snyder

Baltimore (TFN) — We are in the midst of a very scary situation.  The United States is not the only country up to its neck in economic confusion.  Much of the rest of the world is danger of suffocating as well.  Just a few years ago, we were bragging about the strength and unity of a global economy.  Now that economy is sinking fast and we are all tied to it. 

While many pundits are worried about the financial impact of the sub-prime mortgage industry collapse, I am kept up at night worrying about soaring inflation rates.  Crude prices are triple what they were just a few years ago, yet few folks are doing anything more than complaining.  Our streets are still jammed with big cars and trucks, oil-rich plastics are still being manufactured at record rates, and the nation remains off limits to any new drilling.  The country’s economy will remain in jeopardy as long as its citizens remain nonchalant.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Receive The Daily Reckoning FREE today!

The Daily Reckoning, a FREE daily e-letter offers a "uniquely refreshing" perspective on the global economy, investing and the ability to live well in uncertain times.

Learn what you can expect from today’s markets — and how to prosper in the face of uncertainty. Sign up today, and discover why our readers regularly say, "The Daily Reckoning offers more sense in one e-mail than a month of CNBC."

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

If the fact that the average American pays over $200 in fuel costs each month just to get to and from work does not force them to curb their fuel usage, the impact on soaring energy prices on the food they need to survive will. 

Across the globe, food prices are soaring.  In some instances, grocery bills have increased by 50% or more.  You do not have to drive to the beach for the weekend, but you have to eat.  We have a real problem on our hands.

Fighting for survival

News wires reported several incidences of food-related riots last week.  A riot in Haiti or Cameroon is nothing new, but when folks are fighting to get their hands on something to eat in Italy, I get worried.  According to the United Nations, this problem will last for at least another ten years.

So what exactly is the problem? Foremost, rising energy prices are the culprit.  Just head down to any major port and look at the amount of food being shoved in the back of a tractor-trailer.  Those drivers are paying $4.25 for a gallon of diesel that will pull that load just a few miles.  When the total fuel bill is paid, it costs thousands of dollars just to transport our food from its source to our stores. 

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

On August 18, 2008, the world’s foremost experts on curing disease will meet in Las Vegas to reveal dozens of astonishing new breakthroughs. From a rainforest cancer cure that’s 10,000 times stronger than chemo… to the natural miracle that rubs out arthritis pain on contact… and more underground health discoveries revealed to a small, private group by invitation only.

This exclusive event is usually reserved only for members of the Health Sciences Institute. For the first time, we are opening up the event to a limited number of non-members. This is your invitation to join us.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Another source of food inflation is rising biofuel demand.  Commodities like grain and sugar are perfect examples of the impact of supply and demand on price.  Just a few years ago, the only demand for these products was the world’s stomachs.  Now demand has risen multifold as these crops are transformed into fuels and additives.  Supply remains static, while demand soars.  Soon, it may look profitable to turn all those barren housing developments back into cornfields.

Americans are having a tough time realizing the troubles of global growth because it is happening on the other side of the earth.  Here in America, things do not look too terribly bad.  But in Asia, where consumers can finally afford fine steaks and piles of pork, the problems become obvious.  Hundreds of millions of people are fleeing a life of subsistence and moving to urban areas where they compete for the same food sources you and I need to survive.

As if a shift in consumer buying power and energy demand was not enough to cause trouble, there is one more major wild card in the equation, weather.  With prices soaring and demand topping supply, all it will take is one major flood, drought, or hurricane to shoot prices through the stratosphere.  That is when we see the riots on our home streets.

The buck stops… nowhere?

Investors are left pondering where the profit opportunity lies.  Who is profiting from this global food deficit? 

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

New Century Financial
BANKRUPT!

American Home Mortgage
BANKRUPT!

Two Bear Stearns Hedge Funds
BANKRUPT!

The bad news just keeps on coming. And it keeps getting worse.

Except for those savvy investors who know how to make these "disasters" work for them.
Give me 10 minutes and I’ll show you how you could turn financial bloodbaths like these
into gains of as much as 467%, 594% and 640%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

That is the problem with inflation.  Nobody wins.  It is merely a destructive cycle where all parties involved — the farmers paying the high fertilizer prices, the truckers filling their fuel tanks, and the grocery stores reselling the food — all pass their costs onto the next victim in line.  The "buck" continues to be passed until it reaches the consumer where it can be passed no more. 

It may be tough to get rich from this particular situation, but there are plenty of ways to protect yourself from it and put some coin in your pocket.  The equities markets are, like always, your best bet.  As the price of all goods in our economy rises, so will the prices of the companies that make those products.  The margins will remain the same, but their revenues will increase inline with normal inflation rates.

Some of the best companies to be looking at are near the top of the global food chain.  Rail transport companies, oil producers, and even some grain growers will do well.  The more efficient a company is, the better its chances.  That is why railroads are grabbing a lot of investor attention.

The cost of survival is on the rise.  Prepare now for the tough times ahead. 

****Make sure you sign up for our free TFN News Feed for breaking news, special reports and new financial videos. You can pick your favorite reader . Or if you prefer, you can have the feed delivered to your email. 

 


Related Articles


Posted by Andrew Snyder · Filed Under Gold and Resources 

Comments

close Reblog this comment
Powered by Disqus · Learn more
blog comments powered by Disqus