Wednesday, April 30, 2008

Load Up The Pantry article

Here is a good article from the Wall Street Journal that Connie sent me. Everyone has thought we were crazy for trying to get together a year supply of items when our Prophets began to tell us to. Obviously, we don't know all of the reasons why, only that we have been asked to do so....but keep in mind that THERE IS ALWAYS A REASON. Read the article and tell us what you think!

April 21, 2008 6:47 p.m. EDT R.O.I. By BRETT ARENDS

Load Up the Pantry April 21, 2008
Brett Arends

I don't want to alarm anybody, but maybe it's time for Americans to start stockpiling food.

No, this is not a drill.

You've seen the TV footage of food riots in parts of the developing world. Yes, they're a long way away from the U.S. But most foodstuffs operate in a global market. When the cost of wheat soars in Asia, it will do the same here.

Reality: Food prices are already rising here much faster than the returns you are likely to get from keeping your money in a bank or money-market fund. And there are very good reasons to believe prices on the shelves are about to start rising a lot faster.

"Load up the pantry," says Manu Daftary, one of Wall Street's top investors and the manager of the Quaker Strategic Growth mutual fund. "I think prices are going higher. People are too complacent. They think it isn't going to happen here. But I don't know how the food companies can absorb higher costs." (Full disclosure: I am an investor in Quaker Strategic)

Stocking up on food may not replace your long-term investments, but it may make a sensible home for some of your shorter-term cash. Do the math. If you keep your standby cash in a money-market fund you'll be lucky to get a 2.5% interest rate. Even the best one-year certificate of deposit you can find is only going to pay you about 4.1%, according to Bankrate.com. And those yields are before tax.

Meanwhile the most recent government data shows food inflation for the average American household is now running at 4.5% a year.

And some prices are rising even more quickly. The latest data show cereal prices rising by more than 8% a year. Both flour and rice are up more than 13%. Milk, cheese, bananas and even peanut butter: They're all up by more than 10%. Eggs have rocketed up 30% in a year. Ground beef prices are up 4.8% and chicken by 5.4%.

These are trends that have been in place for some time.

And if you are hoping they will pass, here's the bad news: They may actually accelerate.

The reason? The prices of many underlying raw materials have risen much more quickly still. Wheat prices, for example, have roughly tripled in the past three years.

Sooner or later, the food companies are going to have to pass those costs on. Kraft saw its raw material costs soar by about $1.25 billion last year, squeezing profit margins. The company recently warned that higher prices are here to stay. Last month the chief executive of General Mills, Kendall Powell, made a similar point.

The main reason for rising prices, of course, is the surge in demand from China and India. Hundreds of millions of people are joining the middle class each year, and that means they want to eat more and better food.

A secondary reason has been the growing demand for ethanol as a fuel additive. That's soaking up some of the corn supply.

You can't easily stock up on perishables like eggs or milk. But other products will keep. Among them: Dried pasta, rice, cereals, and cans of everything from tuna fish to fruit and vegetables. The kicker: You should also save money by buying them in bulk.

If this seems a stretch, ponder this: The emerging bull market in agricultural products is following in the footsteps of oil. A few years ago, many Americans hoped $2 gas was a temporary spike. Now it's the rosy memory of a bygone age.

The good news is that it's easier to store Cap'n Crunch or cans of Starkist in your home than it is to store lots of gasoline. Safer, too.

6 comments:

The Reese Family said...

This article made the threat of a "famine" (if you will) a major reality. Pay attention people!!

Kolina Romney said...

So I'm not really crazy for having over 80 boxes of cereal and a year supply of razors after all? I am thinking bartering??

johnsonteammom said...

That's what I am looking forward to, is bartering. This article only says what we, as members of the church, have known for years and years. You never know the reason why you are to have a year supply until you don't have it and you need it.

The Reese Family said...

If you do have to live off of just cereal, at least it'll be good cereal & you won't be hairy. I'll trade you some Rice-a-Roni for some razors - haha :D

Whetten Family said...

It just makes me realize that I am not feeling bad for walking way from the store with 30 boxes of cereal for free. They make enough money, and they don't mind jacking up the prices to keep their salaries the same!

Bethany M said...

I love the irony of it all. If only people listened to the prophets LONG ago when they started saying it.
Side note: I just got 3 toothpastes, 3 toothbrushes, and 3 deoderants FREE at CVS, plus $8 ECB. Thanks Deanna, it worked!