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This Is Starting To Get Very Real: Agricultural Commodity Prices Have Exploded And Now The Price Of Food Is Beginning To Rise Substantially In The United States And All Over The World

Tuesday, October 5, 2010 23:28

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The American Dream
By Michael Snyder

Do you believe that you will always be able to run out to Wal-Mart or to the local supermarket and buy massive amounts of inexpensive food? If so, you might want to think again. During 2010, agricultural commodity prices have absolutely exploded. Nearly every single important agricultural commodity has seen a double digit percentage price increase. In fact, the S&P GSCI Agriculture Index recently surged to a fresh two year high. Now food producers and retailers are starting to pass those commodity price increases on to consumers.

Today when I went to the supermarket I was absolutely startled by some of the price increases that I witnessed. On some of the items that I most commonly purchase, prices were up 20 or 30 percent. So just what in the world is going on here? Well, it turns out that there was a lot of bad weather around the world this year, so many harvests were worse than projected. In addition, the growing population of the world has an increasingly voracious appetite for food. When supply gets tighter as demand continues to go up that means that prices are going to increase.

On a recent article on our sister site entitled “Rampant Inflation In 2011? The Monetary Base Is Exploding, Commodity Prices Are Skyrocketing And The Fed Wants To Print Lots More Money” a reader named Erica left a comment describing the food prices that she is seeing in her area….

Food inflation is real, and it is here. Just yesterday I compared my receipt from a grocery run to prices I have from the same exact store from September 15, 2009. Bacon? Up 52% to $13.69 from $8.99 for 4 lbs. Butter? Up 73% to $9.99 from $5.79 for 4 lbs. Pure vanilla extract up 14% to $6.79 from $5.95. Chopped dried onions up a mere 2% but minced garlic (wet) was up 32%.

These price increases are not a coincidence. This is happening all over the United States. Food inflation is here and it is not going away any time soon.

In fact, food inflation is hitting consumers hard all over the globe this fall….

*According to the United Nations, international wheat prices have soared 60 to 80 percent since July.
*Since the beginning of 2010, the price of bread has gone up 17 percent and the price of meat has gone up 15 percent in European Union countries.
*The inflation rate in Russia rose to 7 percent in September primarily because of rising food costs.
*Turkey’s inflation rate accelerated to 9.2 percent in September, and authorities there are primarily blaming rising food prices for the increase.
*Food riots have already erupted in the poverty-stricken country of Mozambique and the government there is desperately trying to maintain order.
*Food prices have doubled in Afghanistan and authorities are warning that there could be an outbreak of famine unless the nation quickly receives more humanitarian aid.

So is there hope that things are going to get better in the years ahead? No, not really. In fact, global demand for food is only going to increase in the years to come.

Global demand for meat and poultry is forecasted to increase 25 percent by 2015. Overall, it is being projected that global demand for food will more than double over the next 50 years. So where in the world will all of that extra food come from?

That is a very good question.

Meanwhile, rising food prices threaten to send a new wave of inflation sweeping across the globe.

Mark O’Byrne, the executive director of GoldCore in Dublin, was recently quoted in Bloomberg as saying that the Federal Reserve ”continues to be worried about low inflation, but the rising prices seen in agricultural commodities such as wheat would suggest that they may be looking in the rear-view mirror and should be more concerned about inflation, especially in the medium and long term.”

As mentioned earlier, wheat prices have soared 60 to 80 percent this year, but wheat is not the only agricultural commodity that is going up big time.

In a recent article entitled “An Inflationary Cocktail In The Making“, Richard Benson listed many of the other agricultural commodities that have spiked in price in 2010….

*Coffee: 45%
*Barley: 32%
*Oranges: 35%
*Beef: 23%
*Pork: 68%
*Salmon: 30%
*Sugar: 24%

So are American families seeing large increases in pay to keep up with all of this food inflation? No, actually incomes are going down.

Median household income in the United States fell from $51,726 in 2008 to $50,221 in 2009.

In fact, of the 52 largest metro areas in the nation, only the city of San Antonio did not see a decline in median household income in 2009.

American families are being squeezed like never before, and the last thing that they need is for the price of food to start moving up substantially. But it isn’t just the price of food that is going up.

Health insurance companies across the United States are announcing that health insurance premiums are going to go up substantially this year because of the new health care law.

American consumers can only be stretched so far. Eventually something has got to give.

In fact, we are already seeing more Americans beginning to fall into poverty than ever before. Today, one out of every six Americans is now enrolled in at least one anti-poverty program run by the federal government.

Unfortunately, there is every indication that the Federal Reserve wants to make inflation every worse. It seems like almost every single day now a different official from the Federal Reserve makes public comments about how another round of quantitative easing is going to be necessary in order to stimulate the U.S. economy.

But if the Federal Reserve pumps even more paper money into the financial system isn’t that going to put inflationary pressure on the economy?

Of course. It is time to wake up. Your dollars are never going to stretch farther than they do today.

The price of food is going to continue to go up. But perhaps you disagree. Please feel free to leave your opinion in the comments section below….