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The Little Known Causes of Rising Food Prices
The cost of food has been rising dramatically over the last year and while the obvious doesn’t need to be pointed out, a voice of warning needs to be raised so we can understand the contributing factors to the problem. By becoming aware of the different “levers” that affect the price of food, one can read the news with a more discerning eye and understand the real truth beneath the sanitized information given us in an attempt to lull and pacify us so we won’t do anything. By educating and preparing yourself, you empower yourself to predict your own future—a future that affords you peace of mind.
Right now, there are three main contributing factors to why the price of food has gotten out of control. While you may be able to do little about the factors themselves, when understood, you can create a strategy so as not to be held hostage by their effects.
The price of oil and fuel is a major cause of food price increases and one of the most volatile. Differing ideologies, terrorism, and just plain greed cause the price of oil to jump in an instant. In fact, Iran’s recent retaliation for recent U.S. and EU sanctions is driving an oil price increase that already has 2012 starting off with some of the highest gas prices we’ve seen for this time of year.
Due to the transportation costs associated with making and moving your food, it makes sense that as soon as gas prices rise, food prices will be close behind. In fact, if you chart food and oil prices together, you will see that they march in step with one another.
While you can’t control the price of oil, you can anticipate how turmoil on the other side of the world will impact your food budget.
Another contributing factor to rising food prices is the worldwide famine. Droughts and floods have decimated food crops the world over. China and India are buying up food and farm land at an alarming pace in the wake of their recent crop failures. Add to this the fact that commodities markets can manipulate global prices for their gain and you can see how a global food problem impacts what you buy at your corner grocery store.
Now you may think that U.S. farmers would benefit from their crops being sold for top dollar overseas, but as you’ll see in a moment, there is only so much land to farm with and if it is used for other purposes than growing food then the benefit of exporting isn’t fully realized. What else would farmers be using their land for? That brings us to our final factor.
Ethanol production takes away farmland that benefits food production and contributes to a vicious cycle that most of us are unaware.
Ethanol, which is made from agricultural feed stocks, is used as a biofuel additive for gasoline with the intent of holding rising gas prices at bay. At first take, addressing rising gas prices appears a noble endeavor, but by understanding the cause and effect relationship inherent in the overall process, one can easily see how quickly this program accelerates the food price problem.
Put quite simply, the government subsidizes farmers to grow corn for ethanol. These government subsides make it so it isn’t cost effective for farmers to grow corn for cattle feed. The reduction in supply of cattle feed pushes up the demand for feed not only raising the price of feed, but the cost of beef. With the price of feed rising, the government must then provide more subsidies to farmers to keep them from making the switch away from growing corn for ethanol production. This raises the cost of ethanol and by so doing the cost of gas. And as we’ve already stated, as the cost of fuel rises so does food. As you can see the government’s plan to solve one problem—fuel costs—has not only exacerbated it, but contributed to another ongoing problem—rising food costs. (Something that is on par for most government programs.)
So with rising fuel costs caused both at home and abroad and the world community pulling on our food production resources, it may feel as if our hands are tied. Fortunately, there is something you can do.
By buying food today at current prices, you are able to “freeze the market” in time. Price increases that will come won’t affect you because of your stock on hand. You are hedging against tomorrow’s food prices. You are also buying insurance for the “perfect storm” when all three factors explode at once. When this happens—once again, not a matter of “if” but, “when”—you will see a scenario where your grocery store will be limited to what is on hand. And once that supply is gone, it is gone. The food you have stored will enable you to be free of the effects of lack of supply and rising prices.
So be informed. Continue to educate yourself with people like Alex Jones so you not only know, but understand what is happening in the world. As you can see, it really is a matter of life and death.
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