The European Central Bank is Worried about Food Prices. Are You?
- My foolish prediction
- The Ocean Won’t Protect Us
- Obama Can’t Help
Last week in a fit of foolishness perhaps, I predicted we would experience food riots here in the United States sometime within the next 18 months.
I stand by my prediction, not because I especially like making predictions, but because I believe it’s a distinct possibility.
And no sooner had the ink on last week’s prediction dried, than the European Central Bank (ECB) released some very strongly worded warnings about food shortages in Europe.
According to a story in The Wall Street Journal this morning, the ECB believes there is “significant uncertainty” about Europe’s food supply.
Specifically, the ECB said, “there remains significant uncertainty about the extent and pace of the ability of supply to meet the expected rise in demand and thereby help to limit the rise in food prices."
I’ve long believed that what happens in the Euro-zone today is but a presage to what will happen here in the United States.
We should not expect that the Atlantic Ocean will insulate us from higher prices for food, or even food scarcity.
I’ve had some folks question my prediction about a food crisis in the United States.
After all, we’re still the bread basket to the world, they note. We produce more food than any other single country, and export more food than any other country.
How could we possibly starve in a land of plenty?
Here’s how it happens: food prices rise as a simple function of higher oil prices, inflation, and scarcity brought on by Russian drought, Australian floods and a variety of other factors.
So far, so good. We can all afford to pay more for food, and we’ll do it gladly. Higher priced food means that there’s a greater reward for producers to produce more food, investors to invest, and eventually new supply will lower prices.
But government can’t abide higher prices on food. So President Obama will institute price controls. If you think that we couldn’t possibly have food riots here in the United States, then you probably also believe that we couldn’t possibly have price controls in the United States.
But you’d be wrong on the second count, at least.
In 1971, President Nixon enacted wage and price controls - and the biggest reason he gave for these price controls was rising food prices. He also capped oil prices.
You might remember oil shortages during this time - that was a direct result of Nixon’s price controls.
Even though the United States had access to as much oil as it could handle, and indeed, still produced the lion’s share of its own oil, Americans suffered through shortages.
I don’t know about you, but I can easily avoid filling up my gas tank every other day, but if you tell me I can only shop for bread on Wednesdays, and only buy fruit on Sundays, we’re going to have a problem.
I’m not trying to be alarmist, but you should be at least mildly alarmed when the European Central Bank tells you that it’s concerned about food prices. That’s a big, stinkin’ red flag. If it doesn’t alarm you, then what will?
If it doesn’t spur you to load up on non-perishable food stocks, and simultaneously buy relevant agriculture, energy and precious metal stocks, then I don’t know what will encourage you to do so. I’m guessing that nothing will spur you to action until it’s too late.
Most people aren’t prepared for food shortages. Plain and simple.
If you prepare now, it won’t cost you much. If we don’t experience food shortages, you can still eat your stored food. There’s very little downside risk to preparing yourself now.
Tomorrow, I’m going to tell you about my three favorite ETFs to buy today that will protect you from the trifecta-threat of higher food and energy costs, as well as dollar devaluation.
Last week I received many, many great ideas about goods to buy and ways to prepare for food shortages. This week, I’d love to hear any questions you might have about commodity stocks in the agriculture, precious metal and energy sectors. Send those questions to editorial@resourceprospector.com.
Good investing,
Kevin McElroy
Editor
Resource Prospector
