Food Price Hike Coming

This is a warning to all those out there on the grid to watch the price of food, especially those living outside most major cities.

I did a scan of indexes on the internet, and there are conflicting reports about the predicted price of food over the next two years. Some claim that the price of food will drop because the price of oil has dropped as well, well other claim that the cost of production generally has gone up and will effect the price of food as a result.

As I have said before, we are in an economic crisis unlike what we have seen before and the rules are being rewritten. The first thing you have to be aware of is that the price of food is based on several things at the same time. There is a level of supply and demand interaction taking place. For items such as oranges, if there is a bumper crop the price will go down proportionately. However, all commodities are also effected by the market...

“If the current price volatility and liquidity conditions prevail in 2008-09, plantings and output could be affected to such an extent that a new price surge might take place in 2009-10,” - Concepcion Calpe [1]

Corn, barley, wheat, oats and rice are considered industrial cereal grains. Grains are the largest agricultural crop in the world by weight, and are a significant component of diets worldwide. The price of corn is being effected by it's viability as a source of ethanol, with the arrival of Peak Oil, the price of corn and feed maize is on the raise. There is over 80 million acres of corn with the majority of it being used for cattle. Twenty five percent of the corn produced in the U.S. last year was used in ethanol production, this is expected to increase proportionately as the availability of oil decreases. This will effect the cost of beef, chicken, pork, milk, milk by-products, corn syrup, and sugars.

Other products which will see an increase as a result of an increase in the price of corn will be soft drinks, they use high-fructose corn syrup as the main sweetener. Ketchup, and breakfast cereals will likely also be hit hard, as well as snack foods such as corn chips.

Barely, Oats and other feed grains are used in both human and animal food production and as a grain are effected by the same factors as corn and wheat.

The cost of wheat per bushel as more then doubled in the last year, severe whether has been a major contributor over the last fiscal year. Wheat is also used for the production of ethanol, products that would be effected include breads, cereals, crackers, and pasta.

Rice is the most common staple form of food used threw out the world. The price of rice is effected directly by whether conditions, as well as floods, and disease through out Asia and China. Last year the price of rice jumped in North America by 100% in some grocery stores, and has not returned completely to it's previous levels as a result of extreme whether and crop loss. The majority of rice grown in China is a variant called 'Golden Rice' which has been selectively bread for high yields, but is continuing to show signs of being increasingly prone to blight. An increase in the price of rice also means an increase in certain types of pasta, plastics, paper, and glue. Any increase in foods with high levels of starch such as grains also means an increase in the price of sugars and other high starch source foods such as beets.

There was a television show on BBC for several years that I enjoyed called “Connections” which showed for example why our railway tracks where so many feet apart, and followed the historic path back to the Roman chariots. The size of the axles of the chariots caused grooves to be made in the Roman roads which created a standard that was passed on throughout history. Since the start of the industrial revolution we have made other connections that are not so far apart as Roman chariots and trains, now we deal with an increase in the price of corn effecting the cost of gas, which effects the cost of televisions, which effect the costs of things we never knew were connected in any way.

The price of oil maybe be dropping recently, but since gasoline is made with as much as 25% ethanol, that price may not drop at all, but rather increase, if that happens the cost of production and transportation of all other products will increase as well. The primary increase in prices are going to come from a chain reaction which ends with production costs and transportation, this is bad news for those that depend on grocery stores in rural areas.

Already there are reports that canned goods are going to see a 25% increase in price within the next few months, and that this price increase is effecting the profit returns for many production companies, that they may just stop making deliveries to rural areas. This creates yet another chain reaction with a call out to increase freezer capacity in supply depots within and without city areas as fresh produce and frozen foods become more common. Which in turns creates as greater demand on the electric grid, etcetera ...

There are two other major issues concerning the price of food that should bear a heavy weight on those preparing for the worse.

First, there is at the most a three day supply of food at any one time at the local grocery store for any given community. That means if the supply is cut off, your on your own. The second issue is the physical distance between the grocery store and the source of a given food. That means that oranges will increase in price in the north, and maple syrup will increase in the south.

My personal opinion is based not on facts and figures from the commodities indexes, but rather what I have seen as a steady increase in the cost of living over the last five years, with the speed of the increase getting faster recently. A sudden rise in the price of rice doesn't bother me much, because sudden shifts are temporary, but over the long run the steady increase has a greater impact. We are looking at an average of 50% increase in the price of food within 5 years at least. And I don't see an increase in wages coming soon, in fact I see a decease in wages hitting us hard and fast.

- Wolfe

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Food Price Hike Coming
Sunday, 09 November 2008
This is a warning to all those out there on the grid to watch the price of food, especially those living outside most major cities. � I did...

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