Food Costs

USDA ERS has released projections on the rise of food costs: http://www.bloomberg.com/news/2011-03-25/usda-retail-food-inflation-forecasts-for-2011-text-.html

The article begins:

Following is the text detailing forecasts for percentage changes in annual food prices, according to the U.S. Department of Agriculture:

Food Price Outlook, 2011

In 2011, the Consumer Price Index (CPI) for all food is projected to increase 3 to 4 percent. Food-at-home (grocery store) prices are forecast to rise 3.5 to 4.5 percent, while food-away-from-home (restaurant) prices are forecast to increase 3 to 4 percent. Although food price inflation was relatively weak for most of 2009 and 2010, cost pressures on wholesale and retail food prices due to higher energy and food commodity prices, along with strengthening global food demand, have pushed inflation projections for 2011 upward.

(full text at link above)

There really is another important aspect to food costs which is rarely discussed. Writers tend to point out how food costs to Americans is less than 10% of income. Averages hide a lot of essential details.

If you divide incomes into 5 groups (quintiles)and then look at the data, the richest 20% spend about 4% of their income on energy and another 4% on food. For the bottom 20%, the picture is quite different. The poor spend 20.6% of their income on energy and a total of 23.5% on food.

To make matters worse, the poor buy from the middle of the store where all the carbs and filler foods are on display. Then there is the problem of further obesity.

There was a time when the poor, particularly the rural poor, could cook good meals from a few cheap ingredients, such as dry beans. But, cooking takes time and the working poor are working too many hours to spend a lot of time in food preparation.

We are becoming more of a two class nation and failing to examine underlying causes.

Food prices

http://www.examiner.com/finance-examiner-in-national/food-prices-to-rise-as-sysco-invokes-act-of-god-clause-for-food-supply

Food prices to rise as Sysco invokes 'Act of God' clause for food supply

Americans can expect food prices to rise massively over the next few weeks to months as the harsh weather effectively destroyed the Mexican winter crops.

In a report from the USDA late last week, crated tomatoes alone have risen 3.5 times their normal cost, going from $6.95 per crate to $22.95.

On Feb. 8, the U.S. Department of Agriculture reported prices of $22.95-24.95 for two-layer cartons of 4×4, 5×5 and 5×6 vine-ripe field-grown tomatoes from Mexico, up from $6.95-9.95 the week before and $5.95-7.95 the year before.

Also in a report from February 4th, the publication The Packer.com reported that from 80 to 100% of produce in the Mexican fields was destroyed.

“The early reports are still coming in but most are showing losses of crops in the range of 80 to 100%. Even shade house product was hit by the extremely cold temps. It will take 7-10 days to have a clearer picture from growers and field supervisors, but these growing regions haven’t had cold like this in over half a century.”

Sysco, which is one of the largest companies that purchases and supplies Mexican winter produce to restaurants and grocery chains through the country, wrote a letter this last week specifying that suppliers are invoking the 'act of God' clause in their contracts, and will be raising the prices on whatever can be harvested from their fields.

The bottom line to all of this is, food supplies, as well as this year's harvests, will be down to critical levels, if not dire ones. Last week we discussed the destruction of sugar and banana crops in Australia due to the cyclone that tore through that continent, and previously we spoke on corn and cotton shortages. Less than a week later we got another act of God, or act of nature, which did the same to produce on the North American continent.

Corn futures skyrocket as supply dwindles and the UN reports shortages

Banana prices set to skyrocket as cyclone destroys Australian crops

Sugar shortage leads to renewal of GMO Beet planting in the US

The revolts we just saw in Tunisia and Egypt by starving people could occur quickly all around the world, including in the United States, as food becomes scarce, and harvests become meager. Prepare now in any way you can, otherwise the recent price hikes in the futures market and on your grocery shelves will simply be a prelude to the prices yet to come very soon.

Missing from most of the rising food prices is a discussion of the devastation occurring to farmers throughout the world.

Most dairy farmers in the U.S. as facing massive rises in input costs with little or no access to credit.