Monday, January 24, 2011

Price Check, Please !!!

by  Craig Hasten

According to the government the current rate of inflation is sitting right at 1.5%. Most people in the U.S. have no idea how the government comes up with this number, they just assume that since our government was the one who issued the information that it must be accurate.
The sad fact is that when the government calculates inflation it uses what is known as "core" inflation - a measure that strips energy and food from the consumer price index (CPI) because they're theoretically subject to short-term volatility - therefore making inflation seem smaller than it is. To see the true rise in inflation all one has to do is walk into their local grocery store and you immediately know that food costs have went up way more than 1.5%. The price of everything is going up, some sectors more quickly than others, but overall prices are on the rise. To see what is causing these price increases all one has to do is look at the year to date price increases of commodities. 

Here are a few examples:
Cotton  +127.7%
Corn  +77.5%
Coffee  +69.8%
Oats  +65.7%
Wheat  +65.4%
Soybean Oil  +56.8%
Soybeans  +48.5%
Feeder Cattle  +30.1%
Orange Juice  +23.2%
Pork bellies  +19%
Sugar +12.1%

***as of 1/24/11

When you look at these massive increases in the markets it is not hard to see why your prices are raising as fast as they are at your local grocery store. If you look at the list of commodities above you will notice that they represent a major portion of what's on the grocery shelves in one form or another. Also beware to all the sweet tooth's out there, cocoa is on the rise as well, having seen a 10% increase in the last quarter alone.

From what it looks like, food inflation is going to continue to rise. Due to various economic climate conditions as of late the grain output worldwide is projected be much lower that average. Russia announced last August that they were suspending all exports of wheat until Dec.31,2010 which cause the price of wheat to spike as well as corn and oats. Sadly, our country does not produce the amount of commodities that we once did so world markets prices effect us now more than ever. Now factor in the fact that the U.S dollar is in a death spiral which equates into higher import costs and you add even more to your food costs now that we have become more dependant on imported food.

I have been preaching to friends and family for some time now to start stocking up on food while the prices are still somewhat affordable. I promise you that the prices of grocery items are going nowhere but up and you will look back to this time next year and remember the good old days when milk was only $3.29/gal.