Your New Reality
Thursday, April 24, 2008
The New York Times recently told its more wealthy readers to consider buying a rural cottage, or even log cabin, to ride out the water and food riots that militarised police forces are preparing and training for, and now Wall Street recommends its readers to begin stockpiling rice and cereals, not only to fend off hunger but as an investment opportunity :
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."
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%.
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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The readers of the Wall Street Journal now know it's time to get busy stockpiling. For good reasons. Shortages of rice and other essentials are now being reported in American cities :
Many parts of America, long considered the breadbasket of the world, are now confronting a once unthinkable phenomenon : Major retailers in New York, in areas of New England, and on the West Coast are limiting purchases of flour, rice, and cooking oil as demand outstrips supply. There are also anecdotal reports that some consumers are hoarding grain stocks.
At a Costco Warehouse in Mountain View, Calif., yesterday, shoppers grew frustrated and occasionally uttered expletives as they searched in vain for the large sacks of rice they usually buy.
"Where's the rice?" an engineer from Palo Alto, Calif., Yajun Liu, said. "You should be able to buy something like rice. This is ridiculous."
"There have been so many stories about worldwide shortages that it encourages people to stock up. What most people don't realize is that supply chains have changed, so inventories are very short," Mr.Rawles , a former Army intelligence officer, said. "Even if people increased their purchasing by 20%, all the store shelves would be wiped out."
An anonymous high-tech professional writing on an investment Web site, Seeking Alpha, said he recently bought 10 50-pound bags of rice..."I am concerned that when the news of rice shortage spreads, there will be panic buying and the shelves will be empty in no time. I do not intend to cause a panic, and I am not speculating on rice to make profit. I am just hoarding some for my own consumption," he wrote.
The presidential Bush family's favourite newspaper, the Washington Times, notes the rapidly growing chaos and panic in American food industries, and the demented greed of Wall Street :
Farmers and food executives appealed fruitlessly to federal officials yesterday for regulatory steps to limit speculative buying that is helping to drive food prices higher. Meanwhile, some Americans are stocking up on staples such as rice, flour and oil in anticipation of high prices and shortages spreading from overseas.
Community Futures Trading Commission (CFTC)....regulators said high prices are mostly the result of soaring world demand for grains combined with high fuel prices and drought-induced shortages in many countries.
Costco and other grocery stores in California reported a run on rice, which has forced them to set limits on how many sacks of rice each customer can buy. Filipinos in Canada are scooping up all the rice they can find and shipping it to relatives in the Philippines, which is suffering a severe shortage that is leaving many people hungry.
While farmers here and abroad generally are benefiting from the high prices, even they have been burned by a tidal wave of investors and speculators pouring into the futures markets for corn, wheat, rice and other commodities and who are driving up prices in a way that makes it difficult for farmers to run their businesses.
U.S. wheat stocks are at the lowest levels in 60 years because worldwide consumption of wheat has exceeded production in six of the past eight years, said U.S. Agriculture Department chief economist GeraldBange . Adding to tight supplies was the back-to-back failure of two years of wheat crops caused by drought in Australia, a major wheat exporter, he said.
In addition, the diversion of one-third of the U.S. corn crop into making ethanol for vehicles has increased prices for corn and other staples such as soybeans and cotton as more acreage is set aside for ethanol production.
The upswing in prices has been exaggerated by the massive influx of investors and speculators seeking to profit from rising prices for corn, wheat, oil, gold and other commodities. Big Wall Street firms and hedge funds have taken huge positions in futures markets that once were dominated by relatively small operators such as farmers and grain-elevator owners.
Oil speculation helped drive the price of a barrel beyond $100, and now 'food speculators' are going to do the same for the food you need to buy to feed your family. And the government doesn't want to stop it happening.
Maybe they're hoping Monsanto with save the day, and bellies, of Americans with GM crops, but the 'miracle' of GM crops is turning out to be little more than clever marketing. Monsanto now admits their genetically modified crops do not actually produce higher yields of rice and grains. More food from less acreage is something they aspire to achieve, not something they can actually do yet.
Food prices will stay high simply because oil prices will never drop below $100 again. It will only ever increase, drop back a few dollars, then increase again. We're already being softened up by oil cartels and governments to expect $200 a barrel prices within the next few years.
When oil hits $150 a barrel, trucking and freight companies will start projecting big losses, and will reconsider whether it pays to service longer, less profitable routes to smaller urban population pockets. The sort of places that need nearly everything trucked in, but produce little to truck back out again. When the delivery trucks slow, or cease altogether, most supermarkets will be emptied of food within a few days.
Soaring food prices, and food shortages, are impacting across the world.
In Japan, people are trying to cope with the savage shock of shortages of staple foods, stunning rises in the price of rice and emptying supermarket shelves :
"I went to another supermarket, and then another, and there was no butter at those either. Everywhere I went there were notices saying Japan has run out of butter. I couldn't believe it.."
Japan's acute butter shortage, which has confounded bakeries, restaurants and now families across the country, is the latest unforeseen result of the global agricultural commodities crisis.
A sharp increase in the cost of imported cattle feed and a decline in milk imports, both of which are typically provided in large part by Australia, have prevented dairy farmers from keeping pace with demand.
While soaring food prices have triggered rioting among the starving millions of the third world, in wealthy Japan they have forced a pampered population to contemplate the shocking possibility of a long-term — perhaps permanent — reduction in the quality and quantity of its food.
The wealthy can only afford to buy the food that the poor cannot while that food is still available. When supplies run out, they too must either go without, grow their own or pay absurd prices for what was, only last year, so cheap.
How bad could global food shortages ultimately get? The lives of many hundreds of millions who have never known hunger before are threatened.
Will we be reduced to the pitiful state of Haitians, who have been driven by food shortages and extreme hunger to start eating the earth beneath their feet?
...the one business booming amid all the gloom is the selling of patties made of mud, oil and sugar...
“It’s salty and it has butter and you don’t know you’re eating dirt,” said Olwich Louis Jeune, 24, who has taken to eating them more often in recent months. “It makes your stomach quiet down.”
The age of cheap and plentiful food, at least from supermarkets, is clearly over.
All governments need to encourage backyard, and balcony, food gardens. Houses that will never sell and are decaying can be bulldozed to make way for community farms. There are at least two or three dozen villages in England returning to thispre-20th century method of feeding the people and bringing the community together.
For city dwellers, however, even those with balcony gardens crowded with carrots, tomatoes, herbs, salad greens and citrus trees, the food staples like milk, cooking oil, butter and wheat, however, will continue to grow only more expensive.
The psychological impact for most Americans of seeing food riots in their towns and cities will be immense, and destructive.