We could argue that one of the main reasons for rising food prices is out-of-control monetary easing by central banks around the world, namely our own Federal Reserve. While there are short term ups and downs in prices, for example the crash in commodity prices in 2008 and their subsequent meteoric rise to the present, the long-term trend since the establishment of The Fed has led to ever increasing prices.

The other critical reason for why food prices are rising boils down to supply and demand – and the consequences of not dealing with these issues could be much worse then the adverse effects of monetary intervention. With billions of people on the planet, and many in China and India now becoming part of a growing global ‘middle class,’ demand for commodities will no doubt continue to increase. We’ve already begun to see oil price rises as a result of the industrial demand from China, and food will experience a similar effect. We simply cannot and should not underestimate the strain that over six billion people put on food production, as evidenced by recent supply issues with corn:

The global agriculture supply situation has worsened and a failure to boost food production fast enough to meet demand may lead to shortages, said investor Jim Rogers, chairman of Rogers Holdings.“We’ve got to do something or we’re going to have no food at any price at times in the next few years,” Rogers said in a Bloomberg Television interview with Rishaad Salamat in Singapore. “I still own agriculture. If I found something to buy, I would buy it.”

Rogers joins former United Nations Secretary General Kofi Annan, the UN Food & Agriculture Organization and the World Bank, in highlighting the need to boost global food production and address issues pushing prices higher. Group of 20 farm ministers agreed last week to increase agriculture output, set up a crop database and limit export bans to tackle what French President Nicolas Sarkozy calls the “plague” of rising food prices.

Monthly food prices tracked by the FAO have surged nine times in the past 11 months…

…
Global stockpiles of corn, the most-consumed grain, are forecast to drop to 47 days of use, the fewest since 1974, data from the U.S. Department of Agriculture show. Inventories are declining as demand continues to outstrip production that’s forecast to rise to a fifth consecutive year of record.

…

Inventories of wheat, used in making pasta, noodles, bread and feed for hogs and poultry, will drop to a three-year low of 184.26 million metric tons before next year’s Northern Hemisphere harvest, as output misses demand for a second year, the USDA said.

…

Unless governments come together to successfully address the issue of food security, “hopes for wider international cooperation looked doomed,” Annan, who served as UN Secretary General from 1996 to 2007, said last week.

“We have serious problems in inventories” of farm products, Rogers said.

Source: Money News

It wouldn’t take much to make it difficult to acquire food at any price. A long enough drought, flooding, or crop failures resulting from disease could seriously hamper the globe’s food distribution networks. The entire planet has 47 days of corn on hand. There are, of course, other commodities available as well, but any sort of far-from-equilibrium event could make it difficult to not only produce, but also deliver those goods to consumers.

For years we’ve enjoyed the ability to head down to our local grocery stores at any hour of the day and stock up on whatever foods meet our fancy. But what if, from one day to the next, that came to an abrupt stop? A perfect storm of hyperinflationary price rises, production problems and international payment settlement issues (in the event of a currency meltdown, for example) could mean that you and your family won’t have access to staple foods.

It’s a scary proposition for those who have not taken the time to put some reserve food aside.

In January of 2010 we advised our readers to Buy Commodities at Today’s Lower Prices, Consume at Tomorrow’s Higher Prices. Financially, this has been an effective strategy and has paid off well for those who began acquiring and properly storing long term food supplies 18 months ago.

More important than the financial benefits of such a strategy, however, are the emotional and physical health aspects. Emotionally, it feels good to know that you have more than the 47 days of reserves available to you then the rest of the world. The stress of even considering the possibility that you may not be able to put food in your kids’ mouths is one that leads to significant anxiety, frustration, anger or worse. Thus, for those who have realized the dangers of depending on just-in-time food delivery systems to feed their families and have taken steps to ensure food will be available even if production and delivery systems collapse, the emotional benefits far outweigh any financial savings you may have gained by buying food before prices went parabolic.

Stocking up on long-term dry goods, such as these 11 emergency foods that can last a lifetime, is as good a strategy today as it was in early 2010. Prices will, in the long-term, continue to rise for a number of reasons, one of which is the real possibility that demand for food globally will not satisfy the production capabilities of our farming and ranching infrastructures.

The most alarming aspect of all this is that 99% of our population has no idea how fragile our food production systems are, nor do they care to know. While the 47 days of corn reserves mentioned above should be of concern, what’s even more troubling is that the average American family has enough food in the pantry for about three to four days of consumption. It’s a recipe for disaster if you ask us.

Hat tip Survival Blog