Before we get into food inflation, we have to take one second to talk about what happened yesterday with Newmont Mining(NEM), the second largest gold producer in the world. Newmont Minings share price was down over 7% yesterday even as the headline report was profits increasing by 46%. Newmont Mining lowered their production forecast for 2011, last November they projected 5.3 to 5.4 million ounces of gold for 2011, but yesterday lowered that forecast to 5.1-5.3 million ounces. Their copper forecast though is set to decline by 33-42%. We should note that during our own research into the gold market, we have reported that mine supply has been in decline since the year 2000 with fewer deposits and lower grade deposits being discovered. FutureMoneyTrends.com believes this could be extremely bullish for the junior mining companies since companies like Newmont Mining will probably need to grow their production by buying up the smaller companies. FutureMoneyTrends.com has presented two junior gold mining companies for 2011, one in late January whose share price is up 80% since we profiled it just 5 weeks ago. Our second company profile on February 6, 2011, was Andover Ventures (TSX-V: AOX & OTC: AOVTF) a high grade precious metal mining company that is about to take their Trixie Mine into production this year. AOX is up almost 17% since we first profiled it just two and a half weeks ago. Anyone who has not had the time to review and research Andover Ventures, please visit their website or our company profile.
Food inflation is here. Main stream economists and government officials have done everything they can in order to pretend that it wasn’t happening. They tried to cheerfully report a fatally flawed monthly CPI number or focus on core inflation which excludes food and energy. However, with the world entering a state of turmoil due to rising unemployment, food costs, and a complete breakdown in the Keynesian model, no one can deny the truth any longer.
Food price inflation has run a muck and has sparked civil unrest in several nations. The math for predicting food prices is easy, wholesale commodity prices are soaring, there’s no other way to describe it. The digital printing press is being ramped up with QE2 policies and QE3 rumors already beginning to start from none other than a federal reserve official. Earlier this month the Federal Reserve Kansas City Bank President mentioned that QE3 may be needed. Now in our opinion, most of this food price inflation is a result of QE1 started back in early 2009. In fact, a lot of the major price increases came before QE2, so it is our analysis that we will see a second wave of price inflation in the coming months. However, this could come a lot sooner with oil recently breaching 100 dollars per barrel. In fact, any further disruptions in the middle east could even cause global transportation disruptions in the middle part of 2011. If we see the citizens of Saudi Arabia beginning to protest and demand regime change, then 150-200 oil could happen very quickly. The uncertainty alone would cause oil traders to panic and push the price up just as we have seen over the past few days. Oil of course is in everything, so as oil prices rise, so will most of everything else because even if your product doesn’t have oil in it, it still takes a machine that uses oil to transport it.
When looking at the type of price increases we have seen recently (pre-Egypt) it is simply shocking. Cotton is up 150%, wheat 100%, corn 100%, soybeans 50%, and most red meats are up 30% since late 2010. Corn, which has doubled, is in over 4,000 products at the grocery store. You may not eat corn, but it sure is in a lot of the ingredients of foods you do eat. Of course, it doesn’t help that nearly 40% of corn is going towards ethanol. Not getting into the politics of corn, but using a core ingredient for livestock and human food has to be one of the stupidest things our government has encouraged. Cotton is currently at a record and the last time we saw a spike in cotton, oil was at 15 dollars a barrel, oil in just the past week has seen a 15 dollar price move, so you know it’s not a far stretch to expect cotton and other commodities continue to rise.
2011 was already setting up to be a year of high food prices. Last month the USDA lowered their harvest forecast, raised their demand forecast, and stated that corn reserves will fall to the lowest they’ve been in 15 years. The first wave of price inflation was at first absorbed by the food companies, but after a prolonged surge in commodities, General Mills, Kraft, Kelloggs, and many others have recently announced they will be hiking prices on their food products. Whether you believe the economy will experience deflation, stagflation, or inflation over the next decade, we believe the evidence for more short term food price inflation is undeniable.
The reason for this report is to make our concerns known to our FutureMoneyTrends.com members and their families. We know this type of article isn’t as exciting as a video, undiscovered company profile, or a story about silver backwardation, yet this type of prediction and mindset is important to being able to prepare for the future. FutureMoneyTrends.com believes that because of oil, currency wars, and global imbalances between national buying power, we could see a spike in certain foods and even disruptions this decade. Now even if we are wrong and believe us, we hope we are, it is still wise to have a solid food storage plan. Many people will run out to purchase large bags of rice only to realize bugs have hatched 6 months after sitting in a closet. Or people during Y2K ran out and loaded up on some type of canned vegetable that they don’t eat, so the can goods expired.
If you do decide to purchase more food in order to off set price inflation or protect yourself in an emergency, make sure you purchase food that you are going to eat anyway. Expand the size of your pantry, this way you can rotate your food, eating food on a first in, first out basis. If you are really looking for some long term food storage, check out Costco online. While doing our research for this report, we looked at the prices for several online dehydrated food companies and in the end most fell short when it comes to their value vs. Costco. Now you won’t typically find dehydrated food at your local Costco store, but you will find it online. If you go to Costco.com and search “dehydrated food” you will get several options of dehydrated food that are healthy, taste great, and have up to a 25 year shelf life.
This is NOT an advertisement for Costco. Our opinion on food storage is completely unbiased, however we are Costco members and have purchased from other dehydrated food companies in the past. We know by buying this you may feel like a doom and gloomer, but in our opinion it is the responsible thing to do especially knowing what you know. If you haven’t taken the time to view our food inflation video released last Friday, please use this video link.
In closing, food price inflation will get worse as the year goes on and more than likely become a major story, if not the story for 2011. Recently the World Bank President stated that food prices were reaching dangerous levels. Well, if current food prices are at or near dangerous levels, what will food prices be with $100 plus oil? With the full effect of QE2?
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