Time to Stock Food - Political Forum

Wheeldog · 04-25-2008, 12:49 AM

I strongly recommend that forum members take the time to read the following article that appeared today in the Wall Street Journal. It could save you lots of money - and possibly much more.

R.O.I. - WSJ.com

Quote:

I don't want to alarm anybody, but maybe it's time for Americans to start stockpiling food.

No, this is not a drill.
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Reality: Food prices are already rising here much faster than the returns you are likely to get from keeping your money in a bank or money-market fund. And there are very good reasons to believe prices on the shelves are about to start rising a lot faster.

"Load up the pantry," says Manu Daftary, one of Wall Street's top investors and the manager of the Quaker Strategic Growth mutual fund. "I think prices are going higher. People are too complacent. They think it isn't going to happen here. But I don't know how the food companies can absorb higher costs." (Full disclosure: I am an investor in Quaker Strategic)

Stocking up on food may not replace your long-term investments, but it may make a sensible home for some of your shorter-term cash. Do the math. If you keep your standby cash in a money-market fund you'll be lucky to get a 2.5% interest rate. Even the best one-year certificate of deposit you can find is only going to pay you about 4.1%, according to Bankrate.com. And those yields are before tax.

Meanwhile the most recent government data shows food inflation for the average American household is now running at 4.5% a year.

And some prices are rising even more quickly. The latest data show cereal prices rising by more than 8% a year. Both flour and rice are up more than 13%. Milk, cheese, bananas and even peanut butter: They're all up by more than 10%. Eggs have rocketed up 30% in a year. Ground beef prices are up 4.8% and chicken by 5.4%.

These are trends that have been in place for some time.

And if you are hoping they will pass, here's the bad news: They may actually accelerate.
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The main reason for rising prices, of course, is the surge in demand from China and India. Hundreds of millions of people are joining the middle class each year, and that means they want to eat more and better food.

A secondary reason has been the growing demand for ethanol as a fuel additive. That's soaking up some of the corn supply.

You can't easily stock up on perishables like eggs or milk. But other products will keep. Among them: Dried pasta, rice, cereals, and cans of everything from tuna fish to fruit and vegetables. The kicker: You should also save money by buying them in bulk.

If this seems a stretch, ponder this: The emerging bull market in agricultural products is following in the footsteps of oil. A few years ago, many Americans hoped $2 gas was a temporary spike. Now it's the rosy memory of a bygone age.
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My wife just returned from weekly shopping trip. She said that it was clear that lots of shoppers are stocking up on large bags of rice, canned food and other commodities. She remarked about the quiet intensity of people in the supermarkets and grocery stores. Based on the above article, you can probably get more return from your money by stocking up on non perishable food now than you will get from most investments - and you will feel much more secure.

smallpox · 04-25-2008, 02:33 AM

Stockpiling -----> increased demand -----> price reduction.

Oh well, here in Canada, food prices have always been high thanks to subsidies (unfortunately rather). I hope the Federal Government will cut back subsidies to alleviate food prices....

Wheeldog · 04-25-2008, 06:34 PM

Quote:

Originally Posted by smallpox

Stockpiling -----> increased demand -----> price reduction.

Oh well, here in Canada, food prices have always been high thanks to subsidies (unfortunately rather). I hope the Federal Government will cut back subsidies to alleviate food prices....

As the article states, "People are too complacent. They think it isn't going to happen here."

nemesis · 04-25-2008, 06:45 PM

I hear there are food riots going on in poorer countries already. We need to abandon the ethanol subsidies and kick their lobbyists out of Washington. This is a problem too, not just the oil prices.

smallpox · 04-26-2008, 02:22 AM

Quote:

Originally Posted by Wheeldog

As the article states, "People are too complacent. They think it isn't going to happen here."

And that disproves economic laws how? Or are you suggesting people won't stockpile food at all?

smallpox · 04-26-2008, 02:23 AM

Divert all the funding for ethanol into research for wood-chip made ehtanol.

Wheeldog · 04-26-2008, 08:07 PM

Quote:

Originally Posted by smallpox

Divert all the funding for ethanol into research for wood-chip made ehtanol.

Oil prices to double by 2012: Canadian study

Quote:

"Whether we have already seen the peak in world oil production remains to be seen, but it is increasingly clear that the outlook for oil supply signals a period of unprecedented scarcity," said Rubin.

"Despite the recent record jump in oil prices, oil prices will continue to rise steadily over the next five years, almost doubling from current levels."

The CIBC report also notes that while production increases are at a virtual standstill, global demand continues to grow.

An expected drop in demand in the United States due to higher prices and a weak economy will be more than offset by demand growth in developing nations, it says.

For all practical purposes we have reached peak oil. We will use less oil, simply because there will be less to go around. Price is simply a way of measuring how steep the decline will be. We have frettered away the time we had to prepare for a post peak oil world denying that it would ever impact our lives. We do not have the time or the resources to make a major shift from petroleum to ethanol or any other alternative before we are faced with some very difficult decisions. The only viable strategy for the near-to-long future is to begin a comprehensive reduction in overall energy consumption. It will take decades, if ever, for alternative resources to be scaled up. In the meantime we had better learn to live with less.

smallpox · 04-26-2008, 10:34 PM

Ok, the more reasons to invest in wood chip ethanol research....