A Day's Wages for a Loaf of Bread

Food Costs to Soar as Big Freeze Deepens

January 9, 2010

Guardian - Britons have been warned to brace themselves for an increase in food prices as plunging temperatures leave farmers unable to harvest vegetables and hauliers struggle to distribute fresh produce.

Gordon Brown, who will chair a meeting of the Cobra emergency committee early this week to discuss the freeze, was today forced to reassure the country that it would not run out of gas or grit for its roads during the coldest weather in 30 years.

Police confirmed today that the weather-related death toll had risen to 26. A 90-year-old woman froze to death in her garden near Barnsley after falling in the snow. Widow Mary Priestland was discovered when her neighbour called round to make her tea. A 42-year-old Newcastle woman died after being found lying in the snow this morning. She had told her family she was going for a walk at 7pm on Friday.

Concerns have now switched to food supply. Sub-zero temperatures have made it impossible to extract some vegetables from the ground. Producers of brussels sprouts and cabbages are all reporting problems with harvesting. Cauliflowers are said to have turned to "mush" in the sustained frost, with the result that only imported ones are available – at more than £2 each.

"Food is selling fast and there is a problem with replenishing it," said Stephen Alambritis of the Federation of Small Businesses. "One business I spoke to said it was like Christmas Eve, with people rushing to buy up food. This will inevitably have an impact on food prices."

Food prices had already started to edge up after a sustained period of low inflation. Food inflation increased by 3.7% in December, up from 2.8% in November, said the British Retail Consortium.

In Ireland, 6,000 acres of potatoes remains unharvested and there are claims that up to three-quarters of the crop may be ruined. Potato growers in Northern Ireland say they are facing some of the biggest losses in recent history because of frost damage.

Meanwhile, greengrocers in some of the worst-hit areas are reporting shortages, with the price of carrots and parsnips reportedly rising by 30% in some small shops. A spokesman for the National Farmers' Union said:

"There are isolated examples of farms struggling to get milk supplies out, but so far the majority of farmers, although finding it difficult, are getting on with the job."

Milk suppliers in Somerset said they feared they may have to dump 100,000 litres of organic milk because tankers could not get through.

In a move that underscores the severity of the situation, on Monday the government will permit an emergency relaxation of European laws regulating the driving hours for hauliers involved in the distribution of animal feed. Under the temporary rules, the hauliers will be allowed to drive for 10 hours rather than the EU maximum of nine. There will also be a reduction in their mandatory daily rest requirements, from 11 to nine hours.

Today, the prime minister insisted gas supplies were not running out, despite record levels of demand. In a podcast from Downing Street, Brown said:

"I can assure you: supplies are not running out. We've got plenty of gas in our own backyard – the North Sea – and we also have access to the large reserves in Norway and Netherlands."

Last week, nearly 100 large businesses were forced to stop using gas in an attempt to conserve supplies.

Brown also tried to allay concerns over salt stocks.

"Working with the suppliers and the highway authorities, we are making sure stocks of salt to grit roads and pavements get to where they're most needed," he said.

On Friday, a government emergency planning committee met to discuss the UK's state of preparation if the cold weather continues. The committee heard the country has a stockpile of 320,000 tonnes of gritting salt, but transport sources suggest the UK is getting through 60,000 tonnes a day, more than four times the amount produced.

Further supplies are due to arrive from Spain and the US later this month. However, some have questioned how the UK will cope if these supplies prove insufficient and the cold snap returns.

"The government has failed to build up a strategic Highways Agency reserve and ministers have sat on their hands," said the Conservatives' local government spokeswoman, Caroline Spelman.

Edmund King, president of the AA, said he had raised concerns about salt supplies before Christmas.

"We were not assured that everyone was as prepared as they should have been… and that's why I wrote to the Local Government Association in November, prior to the cold snap," King told the BBC. "There is more we could have done."

U.S. Inflation to Appear Next in Food and Agriculture

October 31, 2009

PRNewswire - The National Inflation Association today released the following statement:

“While most mainstream economists such as Nouriel Roubini are warning of deflationary threats to the U.S. economy, it is our belief that massive price inflation has already begun. The Federal Reserve’s policy of massive monetary inflation in 2009 has caused the Dow Jones to bounce over 50% from its low, oil to rise 100% from its low, and gold to surge to a new all time nominal high. One NIA co-founder just saw his health insurance premium rise 16% over a year ago; and the average tuition for a four-year public college increased this year by 6.5%.

Prices are rising all around us, yet agricultural commodities have for the most part been left behind and remain at historically depressed levels. Fundamentals for agriculture are improving on a daily basis. A worldwide shortage of farmers combined with food inventories falling to record lows is setting up the perfect storm for an explosion in agriculture prices. There is a huge opportunity today to invest at the ground-floor into what will likely be one of the biggest boom industries of the next several decades.

Wheat is currently down 60% from its all time nominal high set in 2008 and 80% from its inflation adjusted high set in the 1970s. Corn is currently down 50% from its all time nominal high set in 2008 and 75% from its inflation adjusted high set in the 1970s. Wheat and corn have only bounced 13% and 26% from their 52-week lows this year respectively. While sugar has faired much better and is now at a 28-year nominal high, sugar is still down 70% from its inflation adjusted high set in the 1970s.

With crude oil back above $80 per barrel, we will soon see a renewed interest in alternative energy. This will create increased demand for wheat, corn and sugar which are used to make ethanol and other biofuels. A massive rise in agriculture prices is just around the corner.

We receive countless emails on a weekly basis asking about if Real Estate is now a good investment and if rents will likely climb during hyperinflation. While rents will increase nominally during hyperinflation, they will plummet compared to agriculture. No longer will Americans eat more than most other countries, yet spend less of their income on food. When Americans are forced to pay more for food, it will take away from what they can spend on rent.

The average American consumer today spends approximately 30% of their income on housing and only 10% of their income on food. We expect these numbers to reverse in the years ahead as the U.S. dollar loses its purchasing power. In Germany during hyperinflation, rents fell from 30% to less than 1% of the average households’ expenditures while food rose from 30% to a high of over 91%.

The U.S. is currently the world’s largest exporter of wheat and corn and the fifth largest exporter of sugar. When American consumers purchase food at their local supermarket, they are competing against consumers from all around the globe. As the Federal Reserve prints trillions of dollars out of thin air and causes our currency to lose its purchasing power, Americans won’t be able to afford to eat as much and farmers will be forced to increase their exports to countries with stronger currencies.

When it comes to an apartment in the U.S. that a landlord is trying to rent to a tenant, there is no global market to drive rent prices up. The rents landlords receive depend on the strength of the local U.S. economy. With unemployment continuing to surge and a huge glut of homes on the market, it is only a matter of time before real rent prices decline and become a smaller monthly expense than food.

While Americans will eat less in the years ahead, Chinese citizens will be able to afford to eat more. Despite China’s rapidly growing economy, there are major food shortages in China. Chinese agriculture companies have a chance of becoming the market’s biggest gainers of the next decade. Our last China agriculture stock suggestion gained over 83% after our profile in a little more than six months. We will be announcing our new China agriculture stock suggestion on Tuesday.”

Food Prices to Stay High, Volatile: FAO

October 12, 2009

Reuters - Food commodities prices are likely to stay high and volatile in the medium term, while a repeat of the 2007-2008 price spikes is seen as a realistic possibility, the U.N. Food and Agriculture Organization said on Monday.

Between 2006 and 2008, international prices for basic food commodities shot up by 60 percent while grain prices doubled.

By mid-2008, food prices on international markets reached their highest level in nearly 30 years, causing riots and hoarding in some countries and sparking a drive by import-dependent rich nations to secure farmland mainly in poorer countries.

The food price spikes caused a sharp rise in the number of hungry people around the world to more than 1 billion this year.

While prices have fallen back since, they remain high and are not likely to dip below their 2006 level, FAO said in a report discussed at a forum of 300 agriculture and development experts in Rome on Monday and Tuesday.

"Available mid-term to longer-term projections ... indicate that prices may stay above pre-2006 levels, at least in the medium term," the report said.

Graphics published in the report showed prices for commodities such as wheat, rice, oilseeds, raw and refined sugar were expected to hold above pre-2006 levels through to 2018.

FAO, which is hosting a world food summit next month, said the global food commodities market was also likely to remain volatile "in the foreseeable future" and a new surge in prices like the one seen in 2007-08 was a "realistic possibility."

"I would say it's almost inevitable," said Homi Kharas, a senior fellow on global economy and development at Brookings Institution and one of the panelists at the forum.

He said that the factors which led to the food price crisis last year -- droughts, volatile energy prices, U.S. dollar instability and market speculation -- all threatened to push prices up again.

That helped keep the situation of supply and demand tightly balanced and vulnerable to even a single shock -- be it a crop shortfall, commodity speculation or short-term oil price rises.

FAO said that while overall demand growth was forecast to slow further globally, demand for some income-sensitive products will grow faster.

Insufficient investment in productive capacity, and further demand growth for biofuels were also factors that could keep prices firm in the medium term.

FAO says the world needs to produce 70 percent more food by 2050, and invest $83 billion a year, to feed a growing population that is estimated to top 9 billion people by then.