Food Prices Skyrocket: ‘We’re Going To Have A Major Problem Coming Into The Fall’

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Report: Food Prices Skyrocket: “We’re Going to Have a Major Problem Coming Into the Fall” (SHFTplan, May 15, 2014):

While government statisticians claim robust growth, recent data points suggest otherwise. Consumers are quickly running out of money, home sales have collapsed and hit their biggest drop in three years, there are more Americans out of the labor force than ever before, and one third of adults under the age of 35 are living with their parents because they can no longer afford to pay their own mortgage.

By all accounts, the reality is that we are now factually in a recession, a point further emphasized by the recent revelation that American companies are experiencing near zero percent earnings growth.

But that’s just the beginning. As we warned earlier this year, food prices would see a steady rise through 2014 because of increased global demand, drought and continued degradation of the U.S. dollar.

The Producer Price Index made available by the Bureau of Labor and Statistics this morning has now confirmed those fears. Consumers are seeing an immediate impact to their wallets in the form of food price inflation and in all likelihood the trend will continue going forward.

These latest numbers are serious. So much so that according to Zero Hedge, “the last time food prices spiked by this much in one month, the resulting Arab Spring wave of revolutions tumbled governments across north Africa and the middle east.”

 

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The trend over the last several months shows a clear and sustained rise in prices for food, something that nearly 50 millions are already struggling to acquire, even with assistance from the government. Now their food stamps buy even less. And if people are spending more on food, it means they’ll be spending less in other sectors of the economy.

Karl Denninger at The Market Ticker warns that this is bad news because consumers are now paying 7.4% more for food on an annual basis than they were last year, a scenario which could lead to macro-economic repercussions by Fall.

Food was up huge, and people will dismiss the headline 0.6% (monthly, which would be a 7.4% annual inflation rate!) on food, which of course doesn’t “hit” core.

There’s a problem with that however – services were up the same 0.6% monthly behind an 0.7% increase last month, and “core” is up 0.3% on goods, which is a 3.7% rate of increase.  This pushed the 12 month rate beyond the Fed’s 2% target.

The next claim that will be made is that this is “transitory.”  Unfortunately the intermediate (~1-3 months forward) and crude (~3-6 month forward) numbers tell a very different story.

The intermdiate trend in foods is bad news; that is a monthly change.  Energy has been the counterbalance the last two months on an intermediate term, and has kept things in check, and “less foods and energy” has been reasonably-behaved — right up until this year.  Now it’s looking less-so.  But the alarm bells are not there, they’re in the forward trend on the crude side.

Here’s the problem — we’re several percent ahead of last year’s rate at this time of the year.  Spring into early summer tends to have a PPI increase in crude goods.  But if that spread continues we’re going to have a major problem coming into the fall as this works through the system, and given unit labor costs and productivity numbers (both going the wrong way too) there is no ability to absorb it.

Now let me point out that we’re not quite where you have to ring the “oh crap” bell yet.  There’s another month or two before that happens — but by June, if the trend we’re seeing here hasn’t broken this will get into the forward economic analysis mindspace of most of the people who look at this stuff.

I don’t like the trend at all.

Charts and full analysis

Within the next couple of months we’re going to have a very good idea of where this is all headed. If prices don’t turn down, then by Fall we’re going to have a big problem:

There is no ability in the economy to absorb such price increases as productivity and unit labor cost figures have shown.  Instead, what this will produce is recession – deep recession.

Look out below.

4 thoughts on “Food Prices Skyrocket: ‘We’re Going To Have A Major Problem Coming Into The Fall’

  1. I have been saying all of this for many months. I found an ad from 2010 advertising food, and compared it with a 2014 ad…..beef is up 400%, Chicken 300%, Milk 200%, Fruit 300%………the numbers are there, but difficult to find online. I find it ironic that in this information age, that real data is getting harder to find.
    Yes, prices are going up as the value of the dollar goes down. Less than 50% of the world now uses the dollar, and not a word about this is acknowledged in US media. They talk tabloid, political correctness, weather, drought is now being blamed for the skyrocketing prices of fish and grain…….regardless fish are not affected by drought, but by radiation poisons…….but they cannot discuss that, either.
    There are too many lies, and no truth being told. Prices continue to go up and so do the number of lies on the subject.
    Re: Radiation. A good friend of mine told me she heard someone speak on it…..wants me to go, I refused to listen to US cleanup lies. Her reply was that the message was not to give oneself a heart attack over the radiation……I told her being cooked from the inside is far worse than a heart attack, and accepting their lies is beneath any intelligent person.
    I changed the subject……I understand the denial, but I don’t have to be a member. Swallowing corporate lies is something I cannot do.
    Japan has destroyed the food chain. All prices will go up as a result. The US is all over this drought, but the real reason is the fact that radiation poisons are getting into our food chain, our chickens, beef, lamb……..and killing our fish. Add in what they do to the crops, and you will see what awaits millions…….hunger and death.
    The political landscape that will face those still alive in 2016 will be very different that what is seen right now. After a while, when food is so expensive that people cannot eat……..you will see chaos on a level never seen in our lives………
    God help up. Nobody else can.
    Instead of joining the best minds of the world to find solutions, they do nothing. This is what happens when idiots get into power. The mindless have inherited the earth……and they deserve it.

  2. At the moment it is difficult to forecast anything.
    Before the marketing revolution and era of planned obsolescence, priorities were much different.
    Food, not processed, but raw, fresh un-modified food, represented between 15-25% of the household budget.
    In USA eating out has become the ‘norm’, as witnessed by the filling up of restaurant car parks by 6pm most days.
    The gradual realisation there is now a depression, just might re- awaken the primeval instincts to prioritise again.
    Of course I’m only dreaming, but it would be nice.
    As the late cynical observer of US lifestyles Bill Hicks said
    “Any sales or marketing people…..go kill yourself’.

  3. To Squodgy: People are not eating out like they were, even the crappy places like McDonalds are suffering……..they are beginning to see they are in a cycle that won’t end.
    As long as things keep going down, jobs vanish at over a million a month……..the fear will grow. I am old enough to remember many folks who lived through the Great Depression……and the fear mentality is far worse than anything exterior. Once that sets in, it can take decades for it to stop………and this depression (it really started in 2001, was kept afloat until 2007 with a real estate bubble) has been going on for 14+ years, and there is no hope it will end soon.
    This one, unlike the last one, is global, and what is happening to China, Japan, the EU and the US isn’t going to recover. They no longer build a thing here, they did in China, but they are losing work to Vietnam and other cheaper places, the EU has found several bankrupt states in it’s membership (they used Enron accounting to get accepted in the first place), Japan is being destroyed with radiation, and they are affecting and ruining the food chain.
    We will have mass starvation because there will be no safe food to eat. Overpopulation will become a problem of the past, not the present.
    I think we are facing our demise as a species.

  4. Thanks for the update Marilyn, as always. Looks like My escape from USA was timely, but sadly I saw the writing on the wall and decided to cut & run.

    There is but one country which supported its manufacturing base and will become the powerhouse of the world once again after the rest have collapsed. Germany.

    Travelling down last week, I noticed how the powerful and productive British Dairy Industry has had a massive shake up, with German giant Muller becoming dominant.

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