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How Rising Food Prices Will Affect You & 6 Ways to Prepare

By Kalen Smith

food prices increasing corn kernelsThe rising price of gas isn’t the only necessity that’s been gouging our wallets recently. The price of food is now the highest it has been since 1974, and the world is starting to face what could turn into one of the worst food crises in decades.

While America has typically been the land of plenty, we’ll start to feel the burden along with other citizens all over the world. Though the situation looks bleak, there are things we can do to help.

But first, let’s look at what’s caused the increase in food prices to begin with.

Causes of Food Price Increases

1. La Niña and Weather-related Issues
A variety of weather problems have taken place around the world and have caused significant damage to crops:

  • Australia and Brazil have experienced some of their worst floods on record.
  • Russia and China experienced their worst drought in over 100 years. In the U.S., Texas and the Midwest are also experiencing the worst drought in almost 50 years. As a result, many countries that have typically been major exporters of food products have had to import food this year.
  • This is also the first time in years that Florida, Texas, and Mexico were all hit by a frost at the same time. These events have decimated the supply of wheat, corn, and many types of produce.
  • As the supplies of wheat have decreased, ranchers have had to respond by reducing their supply of cattle, which has caused an increase in the price of beef.

2. Use of Biofuels
A lot of corn is now being used to produce ethanol. This has further reduced the supply of corn, which is a key input in a variety of food products and is also an important food source for farm animals.

3. Increases in the Price of Oil
Oil is used in the processing of many food products. In additional, oil is used in the transportation of food. As a result, with oil price increases, the price of food increases as well.

4. Increase in Human Population
The world population continues to grow, and with that comes increased demand of various food products. As a result, this rising demand directly leads to higher prices.

5. Devaluation of the Dollar or Other World Securities
As the Federal Reserve continues to print money to improve the economy and finance its debt, inflation has taken a stranglehold and led to increased prices across the board. The devaluation of the U.S. dollar is especially harmful since many commodities are priced in U.S. dollars.

How Rising Food Prices Affect People Around the World

The increases in food prices have already taken effect and are not likely to improve in the near future. As of February 2011, the price of wheat has increased 83% and the price of corn has doubled since one year earlier. As feed becomes more expensive, the cost of beef products is expected to increase by almost 40%, leading to much higher prices for any meat eaters out there. With unemployment remaining at very high levels, these prices will serve to further put a dent in our wallets.

The situation is even more dire in poorer countries as many of their citizens spend about 80% of their income on basic food products. As a result, food price increases can be devastating to people in these countries, with an additional 44 million people already having been pushed into poverty. The food crisis has inspired riots in countries such as Egypt, Haiti, Tunisia, and Algeria.

fruits vegetables food prices

What We Can Do in Response to the Food Crisis

The food crisis may seem very depressing, but it is not the end of the world. There are a variety of things that we can do to respond to these events:

  1. Stock up on dry foods. It may be a good idea to purchase a lot of dry, nonperishable foods now, before prices increase significantly. Reducing food waste will also be essential to getting the most bang for your buck.
  2. Grow your own food. If you live in an area where you can grow your own food or raise small game, you may want to consider doing so. But even if you live in the city or the suburbs, you can still benefit from smaller efforts like growing a home garden. This will not only save you money, but will also contribute to a much healthier diet.
  3. Purchase futures. This may be a good time to invest in agricultural futures such as wheat and beef. As these crops increase in price, the value of these securities will inevitably follow.
  4. Hedge against inflation. Consider investing in TIPS or precious metals like gold and silver. Since these investments are protected against inflation, you will at least be able to partially offset the increase in food prices.
  5. Build your emergency fund. One of the most surefire ways to plan ahead is to build up your emergency fund. Start saving more now so that if you ever need to dig deeper into your savings, you won’t have to take on any debt. The last thing you want is to have to make major sacrifices that will hurt the quality of life for you and your family.
  6. Sales and coupons. Be aware of what foods are on sale when you shop so that you are not spending unnecessary money. Moreover, take advantage of those discount grocery coupons in your newspaper or coupon magazine to save a ton of money while shopping. Better yet, by utilizing extreme couponing, you can combine the two worlds of sales and couponing and save huge percentages off retail prices.

Final Word

Increases in food prices will continue to have a tremendous impact on our economy and our lives as consumers. While it is impossible to project just how long these increases will last and how deep of an effect they will have on the economy, we need to be prepared to protect ourselves against these heightened price levels.

Do you have any additional tips or strategies for fighting off higher food prices?

(photo credit: Shutterstock)

Kalen Smith
Kalen Smith has written for a variety of financial and business sites. He is a weekly contributor for Young Entrepreneur and has worked as a guest blogger on behalf of Consumer Media Network. He holds an MBA in finance from Clark University in Worcester, MA.

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  • http://budgetsrock.blogspot.com Melyssa

    Biofuels. So far I am not seeing the popularity of it. There are very few stations, it is just as if not more expensive, and such a small percentage of ethanol is in the mixture. I think we still have a better chance promoting eletrical cars.

    And as for corn being an important food source for farm animals, maybe that will change since corn actually isn’t good for farm animals.

  • Melanie Hughen

    Southernsavers.com is a great website with all the weekly specials at groceries, chain stores, clothing etc. I save lots of money using this website in addition to purchasing several newspapers on Sundays when the coupon inserts are available. Went out to dinner last night using buy one, get one free and was able to take home the remains of my dinner (lots of pasta) in addition to another whole dinner. Great leftovers for Monday night. Coupon clubs that meet monthly are also the going thing; it’s like a little happy hour with coupons, have a glass of wine and trade with friends and family. Everyone uses different products and there is always someone to use your coupons.

  • http://www.savings.com/blog/blog.html Amy Saves

    coupons are a great way to save, especially on frozen foods which last longer than fresh produce.

  • Kalen

    Thank you for the advice. I was not aware of Southernsavings.com. That sounds like a great site and I think people should take advantage of it.

  • Dean

    #2 does help to offset #3. Without biofuels gasoline would be $0.50 or more higher.

  • http://www.medical-marijuana-mentor.com Political Atheist

    Dean that is patently incorrect. Corn biofuels takes more energy to extract and the resulting product is gets less mileage than petroleum products. Even the industry admits the technology isn’t there yet.

    http://www.biofuelsdigest.com/blog2/2009/04/02/scope-biofuels-project-concludes-the-efficiency-of-making-the-ethanol-is-simply-too-low-requiring-too-much-land-and-too-much-input-of-material-plus-biofuels-digest-commentary-on-message-marketin/

    And to the comment “And as for corn being an important food source for farm animals, maybe that will change since corn actually isn’t good for farm animals.”

    Read the “Ominovore’s Dilemma” or nutritional labels on food. Corn is in EVERYTHING. From fillers to high fructose corn syrup (HFCS has gotten such bad press the corn grower lobby is remarketing as “corn sugar”) you’d be amazed. So yeah, its bad for farm animals but its also bad for humans. And don’t even get me started on the genetically modified agriculture that’s being pushed. Ever wonder why kids are so sick these days? Violent reactions to food? 19 studies show GMO causes kidney and liver failure? Increased levels of cancers in children?

  • Colt

    SILVER!!!!! Its the place to be,, it will not only keep up with inflation but grow generational wealth.. Food prices will go higher then anyone can imagine at this point along with the price of fuel,, does $8-$12 per gal. sound plausible? Well im telling you that its more probable then anything.. Get out of the USD for its days are numbered.. “The current international monetary system is a product of the past”.. Hu Jintao said that. But people don’t seem to be paying any attention..

  • JD

    Silver is OFF 25% in 5 days and DROPPING as you read this today….
    Nothing can save you from hyper inflation. All will find out soon…

  • http://www.maxkeiser.com/ ‘All-in’ in PHYSICAL SILVER

    I have just over $11,400.00 invested in silver – all but $1,000.00 of my savings. I’ve seen my investment go from -$37.00 to a high of $3,312.00, when silver hit $49.12 – then, a sudden drop to -$963.00 (Currently, my investment is +$96.00 – which is far better than -$963.00 – the POINT IS: ALL the fundamentals (reasons) why owning PHYSICAL SILVER IS THE INVESTMENT OF THE NEXT DECADE (that’s right – until 2020) ARE STILL IN PLACE. Silver will NOT JUST go to $50.00 in the next couple/few weeks – IT”S GOING TO GO ‘VERTICAL’ on the (silver daily ‘spot’) chart. Silver will hit $60 to $75 an ounce – THIS YEAR – IF it doesn’t go higher. Ben Bernanke will continue with QE3 – he’ll continue to print up more FRN’s (‘Federal’ ‘Reserve’ Notes – fiat, paper (funny) money) – to infinity… Ok, my point is: AM I LOSING ANY SLEEP OVER A TEMPORARY CORRECTION IN SILVER, FROM THE $49.00 AREA, TO THE $34.00 AREA???? Not a chance. Silver’s getting ready for LIFT-OFF !!! Silver is a BARGAIN – right now – at around $38/$39 an ounce. Don’t miss the LAUNCH !!!

  • Rogue

    No one seems to get it. Apparently no one paid attention in the beginning of the recesison. Your government officials have let us all down. Most of them are just in it for themselves. When you vote next time, try and vote for one that is not already bought and paid for. Congress has done this. If they never worked for a living. How can they even relate to the common man. They are to busy trying to fill there own pockets, and keep a certain bunch in the circle. They now want the whole pie, and they will do anything to get it. Take a look at MA. The last three Speakers of the House are felons, but yet there they are, still playing with the good old boys.

  • http://pulse.yahoo.com/_MLV36TYJMIN4P6KNRDH3FHVQ4U Tim W

    This article has some great tips. At the same time, I found myself wondering when it was written. Perhaps a date would be helpful at the top so we could know how recent it is as things change.

    This economy will probably encourage more people to get back to the land for a food source which is where many of our ancestors started. Maybe things go full circle in this way. I’d also like to point out that making home made baby food for the littlest ones can save a ton of money while giving them a superior product.

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