Food prices heading higher

Dry weather in the Midwest, and frost in Brazil, is pushing up agricultural commodities in a way not seen since 2012.

By Anthony Mirhaydari Aug 26, 2013 3:23PM

Corn field copyright Sean Way, Design Pics, CorbisIn recent weeks, I've been talking a lot about the specter of inflation. Most of this has to with the Federal Reserve, the banking system, and other high-finance issues. But there's another source of inflation bubbling up that'll hit every man, woman, and child in this country: Higher food prices.

 

On Monday, prices for several key agricultural commodities surged higher in a way not seen since last summer. And in the case of soybeans, you have to go back to 2010 for a similar one-day price gain. And the evidence suggests the price rise is just getting started.

 

The reason is that supply is under pressure. The market had been pricing in a bumper crop this year. But a recent  tour of the upper Midwest by analysts at Societe Generale revealed that while on the surface things appear healthy, once they walked into the fields a "decidedly different story began to unfold."

 

Wet weather earlier in the spring, and cooler temperatures since then, have slowed development of both corn and soybean crops by about two to three weeks.

 

That's opened two potential risks. One, conditions have been dry in Indiana, Illinois, and Iowa, stressing developing plants and raising the risk of what's known as kernel abortion and lowering crop yields. Two, there is a risk that an early frost could damage still growing crops in the coming weeks.

 

Adding to the supply concerns has been a bad frost in Brazil, which has damaged the wheat crop there.

 

In my recent inflation slideshow, food prices were one of the main sources of price pain for average families. This suggests more pain is coming.

 

 

For investors, I recommend taking a look at agricultural commodity funds such as the

PowerShares Multi-Sector Agriculture Commodity Trust (DBA), which I'm adding to my Edge Letter Sample Portfolio today.


Disclosure: Anthony has recommended DBA to his clients.

 

Check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​om​​​​​​​​​​​​​​​​​​​​ and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.


MSN Money on Twitter and Facebook

Like us on Facebook: MSN Money and Top Stocks

Follow us on Twitter: @msn_money and @topstocksmsn


213Comments
Aug 26, 2013 4:33PM
avatar
Hey Obama how about killing "ethanol" so it will help our food prices drop.  It was always just a scam anyway, good idea burn corn in our cars, maybe the dumbest move in history.  Hemp could do the job cheaper and can be grown quicker also. 
Aug 26, 2013 4:46PM
avatar
But Obama just boasted last week that inflation is under control if you don't eat, drive, rent, choose to wear clothes and pay for your education. What would we do without Barry....
Aug 26, 2013 4:34PM
avatar
Why not?  Everything is just peachy.  No inflation, jobs are great and everybody's happy so why not raise food prices too?
Aug 26, 2013 4:42PM
avatar

Dude on c span the other day talking about  Big Bens replacement said inflation was "mild".Do these guys living in the insulated DC beltway ever buy:

 

Food-gasoline-health insurance-car insurance-home causality/hazard insurance-pay property taxes, sales taxes and more......they have all gone up, and some have have gone up big time.

 

Sure I can now buy a 60" TV, a computer + other neat junk at what seems bargain basement prices. But how much of that crap does anyone need to survive?

Aug 26, 2013 4:48PM
avatar
Food prices are heading higher.... Thanks captain obvious, the average person has been saying that for years.  Fuel, energy, insurance, food, health care, housing have all gone up.  So as long as the necessities of life aren't an issue your in good shape.  Just remember the price of coffee tables and desk chairs is stable so there's no inflation.
Aug 26, 2013 5:06PM
avatar
But Obama says prices are going down...somebody's a liar!
Aug 26, 2013 5:07PM
avatar
Also, high oil prices are contributing to high food prices because it is costing more to transport the goods to the markets. As long as oil and food costs are high it is not going to get any better for the consumers.
Aug 26, 2013 4:53PM
Aug 26, 2013 4:30PM
avatar
Well gee there must be some way you market shills can make a profit off the starvation of the world, isn't there?
Aug 26, 2013 4:53PM
avatar
And one more thing...........don't assume there is a direct "cause and effect" between grain prices, and the products made from them.  The cost of food (whether it be crackers, cookies, cereal or whatever) doesn't have much to do with the prices of the raw ingredient.  Packaging, processing, labor, advertising, profit margin are far more important.  (I would think we've learned that in the gasoline industry)
Aug 26, 2013 4:59PM
avatar

                                                           Power and responsibility.

 

The name of the game in politics is power. Congress uses our tax dollars and borrowed money to buy their political power. So long as the American people or all people for that matter, don’t have to face the real cost of government, congress keeps and expand its power. When the people face, see or understand the cost of government, government’s power is controlled. The problem is that people don’t except responsibility for government. We want to believe they are entitled to government programs and they don’t want to know the cost of government. This is the true course of socialism. However, it is financially unsustainable, as socialism always is. In any civilization past, present or future, under any form of government, pharaoh, king, dictator, socialism, parliament or congress, there is only one person responsible and we can meet that person when we look in the mirror to comb our hair, shave our face or but on our makeup. When we abrogate our responsibility to any form of government that government will eventually make us their pons and slaves, this is where America is today. We are losing our democracy, liberty and freedom because we refuse to face the real cost of government, in effect accepting our responsibility for government. Responsibility starts with the American people being responsibility for the cost of government and paying the bill.

Aug 26, 2013 4:50PM
avatar
Ben said there is no inflation and we need to give the banks interest free moneyto help wall street.
Aug 26, 2013 4:51PM
avatar

Much of the inflation can be attributed to the rich making money off manipulating commodity futures for easy millions.... and they only pay a maximum of 15% off the profits while the working poor get even less for their limited money and food stamps are being cut and all the while the rich pay the rich (Fox) to convince the middle class that the poor are to blame.

 

Oh, and capital gains (commodity trading) hires almost nobody and produces nothing, just the greedy rich using a form of trading they invented that causes and makes money off inflation.

 

People as stupid and easily manipulated as we are don't deserve a democracy and we lose more of it every day.

Aug 26, 2013 4:45PM
avatar

kraft mac and cheese for all

 

but hey, throw 2 slices of american in there and some ketchup or hot sauce

Aug 26, 2013 5:04PM
avatar

The fed should have only three jobs.

 

1. Maintain an accurate and honest CPI.

 

2. Keep the real inflation rate between a deflationary 1% and 0% inflation (no more inflation). This will increase the purchasing power of the consumer. Also, this will bring real earnings to saving. If, savers can earn real income on savings, interest rates will stay low.  Also, it will increase the value of the dollar. This would move money to America (an estimate 5 trillion dollars).

 

3. Replace the fed with a computer program ASAP.
Aug 26, 2013 5:24PM
avatar
$6.49 this week for 10lbs of Russet potatoes in Nebraska.  Inflation at its finest.
Aug 26, 2013 5:14PM
avatar
WTF!  a surge like we haven't seen since when, last summer season.  Come on guy.  This is media creates a frenzy without any real news.  Isn't this the  annual crop cycle.  it would be one thing if you said since 1995 or the dust bowl but last summer come on. Sounds like the Shipping News. "storms threatens fishing fleet"  and when the sun  comes out  the next  headline read "Fleet spared catastrophe"
Aug 26, 2013 5:11PM
avatar

It's those SOBs in office they don't care about the american ppl. I am so sick of this i work 50hrs a week and still struggle to make ends meet and feed my two kids. It doesn't matter what we think the GOV is going to due what they want and we can't stop them

Aug 26, 2013 5:48PM
avatar

Everyone in Washington DC, and Trading Centers have no clue what working Americans have to do to survive. We all have to live within our means and budgets. The Senate and House of Representatives all need to have term limits with laws against revolving doors into lobbying when they leave office. The whole power structure needs to be rearranged so that "OUR" representatives actually do what the constituents want them to do, rather than just lining their pockets and feeding of the trough of every working person who actually lives in the real world.

 

We should all be marching on Washington with our pitchforks and throw them all out of office, it doesn't matter what party they belong to.

Aug 26, 2013 5:22PM
avatar
B.S. !!! The Midwest is set to have a bumper crop in all categories.....you guys tell a whopper to get people to lose money investing the wrong way, time after time..... shame on you !
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

114
114 rated 1
280
280 rated 2
473
473 rated 3
639
639 rated 4
637
637 rated 5
662
662 rated 6
640
640 rated 7
498
498 rated 8
287
287 rated 9
121
121 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
COPCONOCOPHILLIPS9
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
KOGKODIAK OIL & GAS Corp9
CVXCHEVRON CORPORATION8
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.