U.S. food prices up 19 percent in 2014; increasing inflation feared

Monday, April 14, 2014 by: J. D. Heyes
Tags: increasing food prices, California drought, subsidized crops

(NaturalNews) Despite proclamations that the "economy is improving" and that "unemployment is down," one thing is evident and that is - for a number of reasons - food costs are soaring, and as they do, those most vulnerable, like the poor, the elderly and those earning the lowest wages, are being hurt the most.

"We are sure the weather is to blame but what happens when pent-up demand (from a frosty east coast emerging from its hibernation) bumps up against a drought-stricken west coast unable to plant to meet that demand? The spot price (not futures speculation-driven) of US Foodstuffs is the best performing asset in 2014 - up a staggering 19 percent," notes Tyler Durden over at Zero Hedge.

In February, the site gave voice to a sort of prelude to the aforementioned scenario, in publishing a post by Michael Snyder of The Economic Collapse blog:

Did you know that the U.S. state that produces the most vegetables is going through the worst drought it has ever experienced and that the size of the total U.S. cattle herd is now the smallest that it has been since 1951? Just the other day, a CBS News article boldly declared that "food prices soar as incomes stand still," but the truth is that this is only just the beginning. If the drought that has been devastating farmers and ranchers out west continues, we are going to see prices for meat, fruits and vegetables soar into the stratosphere.

A number of factors are leading to price increases

Sure, prices are up because California's drought is limiting supply. Some have even said that commodities prices are being pushed upward by speculators on Wall Street; that may be happening to an extent.

But there are a number of other factors that the government doesn't report as having much of an effect at all on food prices (and remember, the government doesn't include "volatile" food and energy prices in its monthly inflation reports).

Speaking of energy, the price of a gallon of fuel, especially diesel fuel, has a lot to do with the prices you pay at the grocery store. Historically, food supplies were more much more local; transportation costs, therefore, were much reduced (and that was during the era of much cheaper fuel). Not anymore; the impact on prices that California's drought is having demonstrates how vast the U.S. food supply chain has become. With it has come higher transport costs.

Kimberly Amadeo, a U.S. Economy Guide at About.com notes:

Food prices rise in response to high gas prices. That's because transportation is a large cost of food you buy at the store. When you notice prices at the pump rising, expect to see the same thing happen in about six weeks at the grocery store. High gas prices are, themselves, usually caused by high oil prices. Here again, it usually takes about six weeks for increases in oil futures to translate to the pump.

Government policies don't help keep prices down

Regulations and laws are also behind the increase. As NaturalNews has reported, with Americans hungry and hundreds of millions around the world starving, U.S. lawmakers have adopted an insane policy of burning up our food supply in the form of a corn-based ethanol fuel mandate (and by the way, ethanol-laced fuel gets much worse mileage, meaning you have to buy more of it to get where you're going).

It's a policy that has never made much sense, but adopted more as a sop to Big Agriculture creating a market that otherwise would not have existed. Also, growing corn for ethanol reduces the available farm land to grow food crops.

What's more, a recent Congressional Budget Office report concluded that the increased use of ethanol accounts for 10-15 percent of the increase in food prices.

Speaking of inane government policy, ever-changing subsidies for certain crops (which creates shortages) and paying farmers in some regions not to grow crops are two more factors that enhance shortages.

Sources for this article include:

http://www.zerohedge.com

http://theeconomiccollapseblog.com