The Logistics of Supply and Demand:
I’m going to continue with the warning series I began yesterday. I was going to address the economic scene today, but I’ve found some additional information today and think that this topic is more prudent. Keep in mind that this is just ONE component of the Perfect Storm Combination that I’m addressing this week.
Bottom line is that due to the horrific global weather conditions that have hit this past growing season, you need to get your house in order asap so that you can actually afford the food and in some cases, get it while it’s even available.
Case in point: While we were all watching the unusual weather transpire during the Super Bowl 2011 (except for my Honey—thank you, Honey) it might have gone unnoticed how such weather would impact the crops that we rely on. I’ve said several times previously in my articles that at present we receive nearly 80% of our essential produce from Mexico. Well, picture this folks, entire crops of Roma tomatoes, asparagus, green beans, cucumbers, zucchini, peppers, and so much more have been destroyed. The numbers that we’re getting back, in terms of the amount of crops that were completely destroyed, are literally 80-100%! Thus when you go to your grocery store, expect to be hit by double and triple price increases; and in fact, many grocers are reporting increases by the HOUR! In fact, some stores which purchase their mailers and newspaper ads in advanced, are claiming that they won't even be able to honor their advertised prices! Many of the stores I’ve spoken to all over the U.S. have shared with me that it’s not even a matter of how much an item is. They expect to have NONE of these items until the next crop, specifically your vegetables. Several local chains said that prices have increased 50-300% just in the last 72 hours. (I strongly suggest you stock up on frozen vegetables and make sure that you've got sprouting seeds to replace some of your vegetable nutrients that will be glaringly missing from your plates as soon as this weekend.)
For those of you who think that a vegetable isn’t food, rather it’s what your food eats (yes, that’s my Honey once again—the hardcore committed carnivore) may I remind you that just because you might not eat these things doesn’t mean you are spared from the impact; because when these things are not available, people's purchases will start to cause an imbalance in what the store IS carrying.
Moving on to wheat and corn: To put this simply, may I suggest that you revisit the articles I’ve written in the past about wheat shortages, because I’m sorry to say that everything that I’ve written previously is becoming painfully obvious, except more so.
Here’s a brief summary. Australia, Canada, Brazil, Russia, China, and U.S. have had historically low productions of wheat and corn this past season. Is that a problem? Uh, that would be a YES, because Australia WAS one of the largest exporters of wheat. They are now needing to IMPORT wheat in order to feed their nation. The same goes for Brazil, Canada, and Russia. By the way, this isn’t limited to just these nations. There are another 17 such as Egypt, Tunisia, North Africa, Haiti, Cameroon, Bangladesh, and India, which are in dire straits due to flooding, drought, and tornadoes. The 900 pound gorilla problem, though, is China. You see, China has really been neither an importer nor an exporter of wheat and corn in the past because they have been producing their own all of these years and storing up a hefty reserve, too. Unfortunately though, even their closely guarded state run media has reported that the drought they are suffering is the worst seen in 200 years! And its impact on their crops is literally catastrophic—you know I don’t use that word lightly. Great. This is a big problem because this isn’t the skinny kid who hardly has much of an appetite. This is the FAT KID folks which devours and buys up everything in sight to sustain him. Even IF we were only dealing with the other countries disasters we’d have a big problem. But the problem is compounded to dangerous circumstances when China throws its consumption rate and their ability to BUY all that they want or need into the scene. China has never been considered in the supplies that the world has to produce because they’ve always taken care of themselves. But now…whew.
Let me give you a little bit of perspective here. China is the world’s largest wheat producer. They produce one-sixth of the total amount of the world’s wheat. They produce twice as much grain as the U.S. and five times as much as Australia—who, if you will remember used to be the largest exporter of wheat in the world. China presently has the lowest reserves of wheat that they’ve ever had. This isn’t about China just buying enough to feed their countrymen, folks. This is also about building up their reserves again. In the past they’ve usually stored about half of what they’ve produced for military purposes. Ruh roh!
So, now we have the big fat rich kid buying up as much of the sparse amount of wheat that the world has at present. When you have a limited supply of an essential commodity, you have skyrocketing prices. Yes, this is the age old formula “supply and demand” dictating prices. Right now, Costco has their 25 pound bags of wheat for $13.49. They have made it perfectly clear that that price will increase substantially as soon as the present shipment is gone. What’s substantial? Well, let’s look at wheat right now. (I’ll deal more specifically with China in an upcoming article this week. Wait til we address the economic manipulation that they’ve got going on.)
Wheat commodity prices have increased 80% over the last year. Corn has increased 92%. The UN Agricultural division has warned that this is a serious scenario. Your local grocery stores and restaurants have been pushing back on the price increases in an attempt to buffer the impact, but they simply cannot afford to do so any longer. You WILL start seeing this impact immediately.
Keep in mind that wheat and corn have an impact in nearly every food you purchase. The meat you eat is fed with these grains. Thus meat will become significantly more expensive in about 6 months (as thus far it’s “only” gone up about 6.1 percent from a year ago). Pork, on the other hand has already increased an average of 11.2 percent from a year ago. Dairy is produced by grain-eating animals. Thus you will start to see dairy prices going up in about 6 months. But your actual grain products will go up significantly. Yes, this is in addition to the produce headache we’re dealing with.
In terms of “just how much of an increase can we expect?” Well, even if I could give you hard numbers, I suspect that no one's budget can readily handle an 80-90+ increase in their food budget, not to mention the doubling and tripling of prices. Right? But here’s what I can share with you.
China and India have been battling a surge of food-driven inflation for several months. China has been holding off on this making their news for months! (Remember, they control everything that goes over their broadcast lines.) They’ve been trying to get ahead of the price impact. As a result, world banks have risen lending rates well over government-set benchmarks, resulting in an increase to all agricultural and commodity loans (according to local press reports cited by Bloomberg News). Across the board, basic foods started surging in price at the start of the year, showing the biggest monthly rise in more than five years. Bread and pasta have increased more in the last month than they have ever done in the last two years—even temporarily. Nations all over are concerned that increasing commodity prices will make headline inflation very painful.
Oh, and by the way, China’s drought is also threatening the world’s drinking water supply. But that’s a whole ‘nother article.
Let me state this clearly so that there’s no mistaking the importance of this news. This has NEVER happened before in our history. So, in closing, I firmly believe that it’s time that we start giving ourselves a “pass” on not being more frugal, more focused, in taking measures to stabilize our food budget. I also suggest that you make friends with your window sills, backyards, and patio space and learn to grow your own overpriced tomatoes, asparagus, etc. I also suggest that you learn why wheat is such an important commodity and why it needs to be in your home. There are certainly plenty of articles that I’ve shared in the past on this matter.
Remember, none of this information is intended to incite panic. Please do NOT share it with anyone else in such a vein. It will not help them. Rather, share it as some logical, well founded information that is intended to couple some action with your best of intentions. I can honestly tell you that with the use of the strategies I share via the Self-Reliance Revolution broadcasts on Wednesday nights, I am not afraid for me and my family. But I am not looking forward to the inevitable tears that I know I will shed on behalf of those I care about, as I will have to watch them struggle and suffer unnecessarily. Please, please take this to heart, folks. And sorry to remind you of this, but there are three more articles in store for the rest of this week that will address the other components of this perfectly aligned storm.
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