Food-Price Spiral Developing: Steps to Take NOW to Protect Yourself
By Seth Van Brocklin
Food prices are on the rise this year…and they are expected to continue rising.
It’s an emerging trend that is just now starting to catch the attention of the mainstream media. However, most reports underestimate the extent of the threat to consumers’ budgets.
What is acknowledged officially (by the Bureau of Labor Statistics) is that food prices increased 0.4% last month – the biggest monthly rise since September 2011.
The most dramatic increases are being seen in costs for meat. Average retail costs for beef have risen at their sharpest pace since 1987 – and with U.S. cattle inventories at their lowest levels in decades, costs are expected to continue rising.
The Department of Agriculture forecast anticipates prices at the grocery store could rise by as much as 3.5% in 2014 (compared to a rise of just 0.9% last year).
Don’t Be Fooled by
“Shrinkflation” on the Food Aisles
These official numbers don’t fully account for the phenomenon that some have dubbed “shrinkflation” – the downsizing of product portions without a commensurate downsizing in price.
Regardless of whether you’re paying the same price for less product or paying more for the same product, you’re getting less and less for your dollar at the grocery store.
The Department of Agriculture and major grocery suppliers blame recent drought conditions, but that’s only a very recent part of the story.
Grocery price inflation has been ramping up due to rising input costs throughout the supply chain, which are now being exacerbated by Obamacare.
Spot prices for most major agricultural commodities have actually been on the decline since 2012. Only over the past couple months have raw agriculture prices begun to climb, partially in response to weather conditions.
Coffee futures are up a staggering 58% year to date. The Dow Jones-UBS Agricultural Commodity Index, which tracks a basket of farm products including coffee, soybeans, cotton, sugar, corn, and wheat, is up more than 14% year to date.
The recent breakout in the “Ags” could be the start of a major trend of rising costs for farmed commodities. That will only accelerate the trend of rising grocery costs that is already in place.
A Two-Pronged Approach: Stock Up on Food and Own Food Stocks
How can you protect yourself from the coming surge in food inflation?
The simplest (and most effective) way is to stock up on the non-perishable products you know you’re going to use. By buying additional quantities now for future consumption, you’ll stay a step ahead of rising costs. You’ll also be boosting your emergency preparedness.
Once you’ve implemented a personal food security and food inflation protection program that includes bulk quantities of household products and long-lasting foods, plus emergency-survival food kits such as the Maximum Shelf Life 30-Day Comfort Food Reserve, you might explore ways to hedge against and profit from rising food prices as an investor.
Here a couple of easily accessible ways to tilt your portfolio toward food:
- The Market Vectors Agribusiness ETF (MOO) gives you exposure to 52 stocks from around the world related to agriculture, including producers of seeds, fertilizer, and farming equipment.
- A less direct play on food is to invest in Brazil, which has the world’s largest freshwater supplies and is becoming a global leader in agricultural development. Although volatile, the iShares MSCI Brazil (EWZ) trades at an attractive valuation and is recovering after Brazilian stocks got sold off last year and early this year
Before you invest in any stocks, which cannot be guaranteed to deliver inflation-beating returns over any given period and cannot protect you from potential food supply disruptions, be sure to invest heartily in your own food pantry