Home About Archives RSS Feed

The Retired Investor: Food Faces Escalating Prices

By Bill SchmickiBerkshires columnist

It has been a long time coming. Commodities have been in the doghouse for years, but a combination of events are conspiring to lift the prices of soft commodities much higher.

A definition of soft commodities refers to future contracts of substances that are grown, rather than extracted or mined. We know them best as food and fiber commodities, such as wheat or lumber. 
 
Shortages are occurring in everything from soybeans to wheat and it is not just in the United States. Readers might immediately think to blame the pandemic for this trend. You would be only partially correct. At the outset of the COVID-19 crisis, the hoarding of food in certain areas of the world did occur, but by April and May, despite the spread of the pandemic, food commodity prices stabilized and even toilet paper in this country was back on the shelves. 
 
However, the recent resurgence of the coronavirus in Europe and the United States might threaten the supply chains for certain foods once again. If lock-downs in the U.S. are re-instituted (as they are beginning to be in Europe right now), or the cases of COVID-19 begin to decimate the work force again, food prices could spike considerably. Readers might recall earlier in the year when some Midwest food processors were shut down. As a result, supplies of beef, chicken, and pork began to disappear from grocery shelves. Prices jumped and are still nowhere near their pre-pandemic levels. 
 
However, beyond the coronavirus threat, the real culprit sending prices skyrocketing is the weather. It is not my intention to debate global warning. Economics has a way of doing that for me. Consider this: the wheat farms of both the United States and Russia are dealing with serious drought, which is decimating harvests. The same is happening to the soybean fields in Brazil.
 
But while our hemisphere contends with drought, over in Southeast Asia, farmer's crops are drowning in too much rain. Flooding is occurring throughout the rice paddies and pam oil plantations in countries like Indonesia, Malaysia, and Vietnam. The result of all this devastating weather has been higher and higher prices of everything from sugar to lumber to cooking oil. This is occurring at the least opportune time for billions of workers struggling to make ends meet because of the impact of this worldwide pandemic.
 
Compounding the crop shortages, are the decisions by multiple governments to safeguard their food supplies. In the event of another supply-chain disruption this winter, no country wants to be presented with a food shortage at home. Soft commodity buyers representing China, the Middle East and other governments are competing (while bidding up prices) for existing harvests.
 
And as grains of all kinds increase in price, so does the cost of livestock feed. When the cost of soybeans rises by 81 percent and corn by 56 percent, as it has in Brazil, you can just imagine what that does to the cost of pork, beef, and chicken production. It is a never-ending, upward spiral. The situation has already convinced many governments to remove import tariffs that simply add further costs to the equation. 
 
To be sure, the world still does have an ample inventory of crops, such as wheat, for this year with bumper crops expected in Australia, for example. But if the world's wild weather persists, in combination with another global surge in the pandemic, we could be facing even higher prices ahead for soft commodities. 
 
Bill's forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
 
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by OPI. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
 
0 Comments
     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Williams Women's Hockey Wins in OT
Mount Holyoke Women Pull Away Late at MCLA
State Police Investigating Death of Individual Found in Pittsfield State Forest
Aluminum Sulfate Spill Closed Route 7 at Vermont Border for 4 Hours
Open House Set Dec. 10 at New Wahconah High
Greenagers Youth Crew to Assess County Bridges and Culverts
Williams Women's Hockey, Basketball Earn Wins
Williamstown's DIRE Committee Looks to Address Elders' Concerns
Pittsfield School Committee Aims to Shorten Meeting Times
Adams Conservation Commission Approves Greylock Glen Outdoor Center Plans
 
 


Categories:
@theMarket (391)
Independent Investor (451)
Retired Investor (69)
Archives:
December 2021 (2)
December 2020 (4)
November 2021 (7)
October 2021 (8)
September 2021 (9)
August 2021 (6)
July 2021 (8)
June 2021 (6)
May 2021 (6)
April 2021 (9)
March 2021 (8)
February 2021 (8)
January 2021 (5)
Tags:
Energy Election Recession Bailout Crisis Metals Congress Economy Banks Stimulus Debt Commodities Stocks Euro Japan Housing Currency Markets Jobs Deficit Federal Reserve Pullback Wall Street Rally Greece Debt Ceiling Selloff Europe Retirement Fiscal Cliff Europe Taxes Oil Stock Market Interest Rates
Popular Entries:
The Retired Investor: The Hawks Return
The Retired Investor: Thanksgiving Post-Pandemic
@theMarket: Markets Get Smacked
The Independent Investor: And Now For That Deficit
The Independent Investor: Don't Fight the Fed
@theMarket: Let the Good Times Roll
@theMarket: The Bottom Is In
@theMarket: Ben Does It Again
@theMarket: Greece — How To Default Without Defaulting
@theMarket: 707 Days
Recent Entries:
@theMarket: Markets Get Smacked
The Retired Investor: The Hawks Return
The Retired Investor: Thanksgiving Post-Pandemic
@theMarket: Market's Week of Indecision
The Retired Investor: The Teacher Shortage
@theMarket: Annual Inflation Hits 30-year Highs
The Retired Investor: SALT Away?
The Retired Investor: Vicious Cycle Between Energy & Food Prices
@theMarket: Markets Get a Green Light
@theMarket: Good Earnings Support Markets