Posted on 01/16/2011 3:54:15 PM PST by blam
Positioning For A Food Riots Economy
by: Kevin McElroy
January 16, 2011
On Monday I wrote something that caused my coworkers to look at me even more sideways than usual.
I said, “I think we can expect the words “food riot” to enter the American lexicon sometime in the next 18 months, and I don’t say that flippantly.” Just to be clear, “lexicon” is a fancy word that means vocabulary – and “food riot” is a phrase that refers to a group of angry, hungry, violent people who destroy property because they feel (among other things) that food prices are too high. And yes, to answer any questions from the peanut gallery in my office, I do believe we’ll see food riots in these United States of America sometime in the next year and a half.
I’m belaboring this point because I want to be crystal clear with this prediction, not because I especially like making predictions. Quite the opposite, actually – I detest making predictions because it’s so easy to be wrong on the scope, specifics, time-frame, location, etc. In that vein, if I am wrong about this prediction, it will probably be a matter of my timing rather than anything else.
But where am I getting these crazy ideas? Let’s take a look at an interesting chart from the folks over at shtfplan.com:
This chart shows us that food stamp participation has risen sharply – with no signs of slowing since early 2008. Currently, over 42 million Americans rely on food stamps – or 1/7th of the entire population. Okay, so the very fact that more people are on food stamps isn’t cause for alarm. But what it means is that 14% of people in the United States already can’t afford to feed themselves – and that number is rising. I don’t know what number of people it would take to break the camel’s back. The number already seems ludicrously high.
The other side of the coin is that food prices are rising too – for three simple reasons:
* The first reason is just plain old bad luck. Bad weather around the world, including heat waves in Russia last summer and flooding in Australia right now, continues to put a crimp in global
food stocks.
* The second reason is sustained levels of higher energy prices. Oil is a vital input to most food production in the developed world. Higher oil prices necessitate higher food prices.
* The third is a global currency devaluation race. Trillions of newly minted dollars will increasingly find themselves competing with trillions of yuan, yen, euros, etc. to buy an
already diminished supply of food.
Perhaps the most common response to these facts is to say something like, “wow that’s scary!” But fear is something that children feel when they don’t know how to deal with a situation, or they don’t understand something.
I’m a grown man and for that reason, I don’t fear these trends. I am preparing myself and my family for the likelihood that these trends will continue down the same inevitable path. You won’t see me in a food riot, because I’ve been positioning my portfolio for survival and maybe even profit during the times to come.
Don’t wait for the Government to start talking about this problem. By then, it will be far too late. Start protecting yourself today, if you haven’t already. Here’s what I’m doing:
I regularly buy physical gold and silver. I’ve stopped paying much attention to the price, though I do try to buy on dips if at all possible. (Both are in a dip right now!)
I’ve been buying durable food goods like rice, beans, pasta, flour, salt, etc. It’s impossible to buy “enough” of this stuff, but a 6 month supply isn’t too difficult to amass. I recently bought a bunch of different fruit and vegetable seeds. We don’t have much of a yard, but seeds are cheap and if stored correctly they remain viable for a while.
I also own shares of blue chip companies that will probably continue to be profitable no matter what happens. I'm continuing to buy shares of precious metal miners, oil exploration companies, and other commodity-based securities.
You’ll notice that none of these things is really “crazy” to own, even in boom times. In the event that I’m 100% wrong, and everything’s going to be A-okay-terrific, I can use or sell all of these different assets, and probably not take too much of a bath.
The yellow dent that’s grown in the Midwest, 1/2 goes to animal feed, the rest for starch, ethanol, and soda pop.
Anything like meal or flour is contracted. It may be yellow corn but not what we grow here in Iowa.
Sound like an Okie. LOL
My Mom had two refrigerators, a necessity when raising six kids and a freezer.
We also had two outside that where never turned on and used in the winter for extra food storage when she would cook way too much.
I wonder if the grid can take all that electricity put back on it.
What no DuPont fishing “gear”?
Due to the ever increasing demand for ethanol corn, we are not rotating crops as we’ve done in the past. The issue is much larger than you seem to understand.
While I agree with pretty much every point made in this article, I would like to add one more “commodity” people should be stocking up on... ammo.
We went out of the corn-bean-wheat rotation here in the Midwest because frankly we got too little snow and too much cold for wheat to survive the winter. Farmers just stopped growing wheat, but not necessarily by choice.
I think the same thing applies to the Constitution and our God given rights as free men. Will we awaken *before* they are smashing in our doors?
WAY too funny. Unfortunately, that’s because it’s way too true.
Ah well, thanks for the laugh. I’m going to paste it into an email to a lib who apparently worships the printing press.
Did a little checking on corn usage. Domestic crop in 2009 was 42% animal food, 10% human food (including a bit of beverage alcohol), 32% ethanol, and 16% exported. Not as much exported as I would have thought.
Don’t know how much of the ethanol corn is effectively recovered as animal food, but significant. This says to me that ethanol production is not a great factor in food prices at present.
A greater percentage of field corn is used as animal feed vs. the percentage used for human consumption, true. But your original comments indicated that "we eat sweet corn and white corn".
My comments pointed out that we don't just eat sweet corn and white corn, as most of the corn products we consume, except for fresh, canned and frozen, are derived from field (dent) corn.
"Do you know the actual percent of yellow used for human food vs. animal?"
Yes, I have the USDA statistics for US Corn Production & Use. In 2007, the US produced a little over 13 billion bushels of field corn. About 6.1 billion bushels of that went to feed livestock. 3 billion bushels went to ethanol production and a portion of that is livestock feed after the ethanol is produced. 2.45 billion bushels were exported and I do not have figures for specific use on those bushels. Just under 1 billion bushels were used to produce corn starch, corn sweeteners and corn oil, with the residue being livestock feed. 328 million bushels produced corn flour, meal, grits, masa and corn beverage, with the residue being used for livestock feed.
The economy has hit my business so badly that I've eaten most of my storage food (thank goodness I had it).
I'll be spending a lot more time next year on the garden. I don't see a choice.
And looters beware. I see a looter, I see fertilizer.
/johnny
It hasn't been, that is right. That is a piece of information that is hard to drive home on this forum. Everyone wants to believe that ethanol is bugaboo of food prices and it simply is not.
Looks like we have answered each other and reached consensus.
As easy as that was, I wish people would go to the trouble to look it up before complaining about how we are burning up our food supply.
Wow! That is startling.
I hope we have enough Navy left post-Obama to convoy our food sales and protect them from our creditors.
Yeah, what the heck would I understand about corn production or crop rotation ... we've only been prosperous farmers for forty-something years now. LOL.
Your expertise on this subject is derived from what exactly???
Do your homework on ethanol.
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