Tuesday, January 11, 2011

Prepare: 5 Reasons Food Prices Will Increase

Food prices are already higher. Just anecdotal evidence from a recent trip to a big box grocer (WallyWorld) showed prices increasing .10, .20 even .50 per item. This is big news in a recession economy like we have now.

5 reasons why food prices will only go higher

1. Oil and gasoline prices - Gasoline is over $3.00 a gallon and every expert and analyst says the price will only go higher. Like to $4.00 a gallon by summer and even as high as $5.00 per gallon by the end of 2011. Because analysts like doom and gloom, I am going to guess the price will be somewhere in between, but regardless, higher fuel prices spell higher food prices.

High gas prices effect the farmer who grows the food, the trucker who delivers it and all the people in the supply chain.

2. The illustrious power of the dollar - the dollar has been weakened in buying power for the past few years due to inflationary spending. The more debt our government creates, the more money it borrows and thus the more money it "prints" based upon that debt makes the dollar worth less.

Much of our food comes from other countries now. Even if we did not want to buy oranges from Chile, the demand for them still exists and if our domestic production does not meet demand, oranges must come from somewhere. When the dollar is worth fewer pesos, rubles, yen, etc, then the buyer must spend more dollars to get enough oranges. He then passes that increased cost on to the grocery store shopper.

3. Weather - Since a lot of food comes from other places, we are effected by their weather as well as ours. A hard freeze, flooding, monsoons, and other weather disasters all effect the price of the oranges mentioned above as well as wheat, rice, meat, etc. When a crop is destroyed, the remaining crop becomes that much more valuable.

4. Government - One government creates new regulations on the food production industry which creates costs for the producer who promptly passes those along to the grocery shopper. Another government puts limits on food exports because of prices and shortages, thus creating making the supply globally smaller and the price increases for all. Another government increases taxes on farmers or producers or grocery stores and the prices go up in another way.

5. Soil erosion, depletion and contraction - Poor soil management, overuse of fertilizers, overplanting, all lower the amount of available healthy soil for food production. Add to that government regulating the amount of land available for food or reducing irrigation to lands and you have the recipe for higher food prices.

All 5 of the above are happening right now, both domestically and overseas. Food prices will increase over the next year so....

If possible, buy extra at the store when possible and as long as you stay out of debt.

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