"Agflation"- finally saw the effects of it all coming...

I had a WTF moment a while ago at the grocery store. I bought some grapes and then found out that they cost $9+. I'm not sure if grapes are just expensive in general, but I don't recall them being $9 expensive.

 

Before we get a wave of ethanol haters in here, corn prices do not drive grocery inflation.

Fear & higher transportation costs do.

That said, I haven't noticed any increases... and I shop weekly for groceries.

 

Part of the reason flour is triple what it was a month ago is due to the shortage of wheat - and much of the shortage is due to the fact that farmers are growing corn instead of wheat because the price of corn has skyrocketed.

The ungodly flour prices certainly will show their face on the grocery store shelves.

 

This hyperinflation will really grind down the economy. There are a lot of things you can do ie. buy in bulk when something is on sale, shop elsewhere for items, instead of buying new at the store just buy the same thing on ebay,(non-grocery) grow your own vegetables, pass on the Starbuck's and just brew your own etc., cut out the prepared/packaged foods. Without a lot of work you can actually spend less than you were before and eat healthier.

 

The stuff I read indicates a stonger global demand for wheat, combined with droughts.

I realize the press isn't the most factual or trustworthy, but usually they side with hairbrained liberal beliefs (like what you mentioned).

 

Yes, like I said above there is stronger demand and a shortage - but from what I've read the switch over to corn has contributed to the shortage. I could be wrong.

Here is an interesting article on the whole situation:

http://nymag.com/news/businessfinance/bottomline/44607/

 

But wait, don't we ignore food and energy prices when calculating the CPI or inflation rates?

Seriously, if anyone hasn't noticed the price increases on many things, it is possible that you haven't been paying attention, or generally buy different items than I do. It seems many items related to wheat or corn with low margins have increased quite a bit, perhaps 10-20% in the last year.

The animals that eat corn also has been impacted. Beef prices have went nuts, eggs are certainly more, that $3.99 block of cheese is now $4.74, etc. Corn syrup will be more expensive, so expect that can of soda or bottle of ketchup to eventually follow.

Fuel prices also hurt us, obviously. It also seems anything that has a short shelf life has increased greatly. Things like lettuce, tomatoes, and grapes have seen big increases this winter.

Amazingly some cheap but heavy items haven't raised at all. I paid the same $3.88 for a case of water last week that I have been paying for three years.

My guess would be that higher margin products like Red Bull or Pepperidge Farm cookies probably won't see many price increases, they likely will be able to absorb the additional costs of production and may choose not to pass it on to the consumer.

 

My monthly grocery basket for wifey and I has doubled in the last 2 years.

When you go shopping you will notice that the foods you should be eating, namely, fresh veggies, fruits, meats, fish, etc, are pricey.....whereas the crap should never put in your body, what I call "sugar delivery systems" or those boxed foods, are much, much, cheaper.

 

Most of this has to do with Bush's failed economic policy. Read the book The Squandering of America by Robert Kuttner. Book came out last fall and realy hit the nail on the head with his predictions. Best to get a 50 lb bag of beans beans make your own beer and stock up on ammo.

The bank solvency problem is now hitting mid sized businesses wo can not get short term loans. A lot of these businesses are in food processing so now they need to build cash reserves if they do not have them. One quick way to raise cash is to raise prices. These businesses run on very low margin and with out loan liquidity they can go under fast.

Wall St your margin is calling.

 

+1 the Economist, which is by no means "liberal," had an article a few weeks ago about this very situation. Farmers switching over to corn due to higher prices have created a shortage in other areas. As those prices rise and they're able to make more money farming wheat they'll switch back and cash in on that.

 

The number one reason for this, and all prices going up--the price of diesel is outrageous. Truckers are going broke left and right, and no one is noticing.

 

Hey the dollar declined 30-50% against other currencies, including the euro, and the europeans have no real production anyway. These other currencies did not get stronger ours got weaker, that means inflation is real and it is here, all prices of goods will go up, real estate is going down, its the law of nature.

 

Ethanol production from corn is not the reason for any of the price changes. Corn almost can't be sold here in Ohio because the graineries are all full.... of corn. Wheat isn't much better.

 

Economist article:

"Rising incomes in Asia and ethanol subsidies in America have put an end to a long era of falling food prices"
http://www.economist.com/displaystory.cfm?story_id=10250420

P.S. Notice the date on the article.

 

From a year ago, milk is up 26% and eggs are 40%.

NPR did a piece on this very thing this afternoon. Their explanantion of the price increases...all of the above.

 

I sure hope someone wakes up soon and realizes how bad all this f'n inflation is for people. I put a post in another thread about it. Everything is getting so expensive so fast its unreal.

 

Meh...it will all work itself out in the end. If we never outsourced anything and everything to China and India, they wouldn't be accumulating as much wealth this quickly and the gap between the standards of living wouldn't be closing. It was only a matter of time. Too bad all that happened because people wanted cheap stuff and now they got what they want. Cheap stuff and their purchasing power reflects what they can afford nowadays.

I'm waiting for the Fed to do more helicopter runs dropping billions of dollars over all the banks. Keep printing that money and lower rates, Ben. You're the man, right?

 

It will work itself out in the end? At what price? Will the government(s) resist the urge to get their hands dirty and stop screwing around with the free market?

Gotta love it... excessive greed leading to the subprime meltdown/housing slump/credit crunch and then Bernanke making my USD worthless in an effort to save Wall Street's Rear End. F them, I'm all for trying to make money, but when they screw up they should have to deal with the consequences, not rely on the Fed and-or Gov't to bail their ass out.

Surely there has to be an upside to this BS? Someone? Anything good to come from this?

 

The only good I can see happening from this is more regulation. Some here may prefer the capitalism with very little government regulation, but I'm not much a fan of that. i.e. hedge funds tanking because of ****ty lending practices they backed with their money. I honestly don't care what happens to Wall Street.

I also think that the commodities market should only exist between the sellers and users (not all buyers are users) of the good. Not speculative "'let's unload this bundle at a later point for a tad more money" thinking. That's not what the system was designed for back in that day. It was to allow buyers and sellers to make transactions easier when all were at one place.

The key is still for the Fed to stop unloading money all over the place and to stop lowering rates and bailing people out. They are just delaying the inevitable. I would've kept the rates the same before that 1.75% drop crap in a week period. Screw 'em.

 

Corn acreage competes primarily w/ soybean acreage. US Winter Wheat, the largest variety grown in the US (trade at KCBOT and CBOT) is planted in early fall (sept-oct) and harvested in early summer (late may-june-july). Corn planting will start in April and will run into June and harvest in sept, similar to beans.

 

What is the difference between a truck driver and a park bench ?

A park bench can support a wife and two kids...

ANYWAY..

Didn't we also have a drought in the southeast - where 'most' of the wheat is grown ?
And then we had a freeze that killed much of the tomato crop, and then another freeze that killed off a lot of the orange crop.
I know that was a year ago - the wheat was this past Summer - but it all adds up down the road, and here we are, down the road.
Our local water utility said 10 gallons of water costs .02, and why people choose to buy bottled water is beyond me.

And yes, using corn to make ethanol instead of food IS driving food (corn-related) prices up, how can you possibly say it is not ?

 

Last March, oil was at $60 a barrel and corn was at $4 a bushel. Today, oil is at $102, and corn is at $5.25. So in the past 12 months, oil's price has increased 70% and corn's price has increased 31%.

The United States produced the following amount of corn:

2007 - 13,200,000,000 bushels
2006 - 10,500,000,000 bushels
2005 - 11,100,000,000 bushels

The United States produced the following amount of ethanol (in gallons):
2007 - 6,500,000,000 (est.)
2006 - 4,860,000,000
2005 - 3,900,000,000

Since a bushel of corn makes 2.7 gallons of ethanol, we can calculate that the ethanol industry used about the following amounts of corn:

2007 - 2,400,000,000
2006 - 1,800,000,000
2005 - 1,400,000,000

Finally, we subtract what the ethanol industry used from what American farmers produced to find out how much corn was available for food:

2007 - 10,800,000,000
2006 - 8,700,000,000
2005 - 9,700,000,000

So there you have it. Even after the ethanol industry takes its share, the American farmer is putting more corn on the kitchen table now that ever before. The only conclusion that you can reach is this: food prices are NOT going up because of a shortage of food corn (there is more food corn than ever). Rather, the price of food corn is going up because the price of oil has increased 70% in the last year, and farmers use a lot of fuel.

 

Come say that to my father's face...a man who with a high school education, and no money, built an impressive trucking business, supported four kids, and put two of them through college. I can only hope to be so successful.