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Wall Street Journal, "Better stock pantry"

Discussion in 'Financial Cents' started by melbo, Apr 25, 2008.

  1. melbo

    melbo Hunter Gatherer Administrator Founding Member


    Load Up the Pantry
    April 21, 2008 6:47 p.m.

    I don't want to alarm anybody, but maybe it's time for Americans to start stockpiling food.

    No, this is not a drill.

    You've seen the TV footage of food riots in parts of the developing world. Yes, they're a long way away from the U.S. But most foodstuffs operate in a global market. When the cost of wheat soars in Asia, it will do the same here.

    Reality: 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." (Full disclosure: I am an investor in Quaker Strategic)
    Stocking up on food may not replace your long-term investments, but it may make a sensible home for some of your shorter-term cash. Do the math. If you keep your standby cash in a money-market fund you'll be lucky to get a 2.5% interest rate. Even the best one-year certificate of deposit you can find is only going to pay you about 4.1%, according to Bankrate.com. And those yields are before tax.

    Meanwhile the most recent government data shows food inflation for the average American household is now running at 4.5% a year.

    And some prices are rising even more quickly. 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%.

    These are trends that have been in place for some time.
    And if you are hoping they will pass, here's the bad news: They may actually accelerate.

    The reason? The prices of many underlying raw materials have risen much more quickly still. Wheat prices, for example, have roughly tripled in the past three years.

    Sooner or later, the food companies are going to have to pass those costs on. Kraft saw its raw material costs soar by about $1.25 billion last year, squeezing profit margins. The company recently warned that higher prices are here to stay. Last month the chief executive of General Mills, Kendall Powell, made a similar point.

    The main reason for rising prices, of course, is the surge in demand from China and India. Hundreds of millions of people are joining the middle class each year, and that means they want to eat more and better food.
    A secondary reason has been the growing demand for ethanol as a fuel additive. That's soaking up some of the corn supply.

    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.

    The good news is that it's easier to store Cap'n Crunch or cans of Starkist in your home than it is to store lots of gasoline. Safer, too.
    Write to Brett Arends at brett.arends@wsj.com
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  2. monkeyman

    monkeyman Monkey+++ Moderator Emeritus Founding Member

    I think my window for large scale stocking up is pretty well past and am going to have to work more at renewable food sources at home. Increase the garden and add to the livestock that can munch brush, grass and bugs or scraps.
  3. Jonas Parker

    Jonas Parker Hooligan

    The MSM is trying to spin (or unspin) this article frantically. Unfortunately, similar articles are now appearing in the British press:


    It looks like the cat is out of the bag for good. As anecdotal evidence, I was talking to a good friend yesterday who's business is selling barrels and buckets for food storage. She has many Mormon customers, who told her that the last big rice order that the LDS Church tried to place with their usual supplier in Beaumont Texas was refused on the grounds that "the US government had bought the available supply of the particular vendor involved for overseas shipment". Admittedly, this is "hearsay" and not admissible in a court, but another "survival foods" operation (sorry, I didn't save the link) reported on their website that their entire incoming shipment of canned butter from New Zeeland was similarly "hijacked" by the Feds.

    The answer may simply be that it's now too late for folks of average incomes to stockpile basic foodstuffs such as wheat, rice, beans, etc. in sufficient quantities to feed their families for the suggested 2-3 year period due to both cost and availability. The alternative may be the "Victory Garden" of WWI and WWII fame, with home canning and a root cellar.

    For people in towns where chickens and/or goats are banned by zoning laws (though if things get really bad, I would guess that, down the line, those laws would be tacitly ignored by authorities), raising rabbits are a good option.
  4. monkeyman

    monkeyman Monkey+++ Moderator Emeritus Founding Member

    Yup, just remember that you have to suplement the rabit with some other meat as they dont provide the fats you need. They are neutricious in other stuf but is a meat you cant live on all by its self.
  5. franks71vw

    franks71vw Monkey+++

    The biggest issue here is that if everyone panics at the same time all hell will break lose. Hopefully that doesnt occure, I think whats gonna happen here is the same as Argentina. Maybe the American people will get a wake up call and get their heads out of their arses. Stop eating crap with the middle east and either nukem or leave them alone and try and build sustainable renewables out in death valley etc. If I had to make a decision over a coupl of snakes and scorpions etc over cutting down a forrested area guess what the dessert goes bye bye.. ITs time to be part of nature and not think we are above it and learn from this mistake and start to introduce this to our economics and business majors... hopefully Agriculture could go back to small farmers and not these big transglobal 'F' companies...
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