The government’s forecast, based on a consumer price index for food, estimated that prices would rise 4 to 5 percent for beef next year with slightly lower increases for pork, eggs and dairy products.
The drought comes along with heat. So far, 2012 is the hottest year ever recorded in the United States, according to the National Oceanic and Atmospheric Administration, whose records date to 1895. That has sapped the production of corn, soybeans and other crops, afflicting poultry and livestock in turn.
Analysts said there might be little effect on economic growth or overall inflation, which has been running around 2 percent a year. But economists said consumers — particularly the poor and unemployed — would still feel the effects.
“It is one extra kick in the stomach” for low-income families, said Chris G. Christopher, senior principal economist at IHS, a consulting firm. “There’s a lot of people in this country living paycheck to paycheck. This is not a good thing for them.”
Higher food prices might also damp consumer sentiment. “Consumers are very sensitive to the price of gas and food,” said Jeet Dutta, a senior economist at Moody’s Analytics. “But overall inflation will still look pretty moderate for the rest of the year.”
Lower production at home means less supply and higher prices abroad.
Countries that import substantial amounts of animal feed made from corn and soybeans will feel the impact the most, said Maximo Torero, an economist with the International Food Policy Research Institute, an international research group.
The Agriculture Department’s figures show the largest percentage increase next year in its price indexes is expected for beef, a rise of 4 to 5 percent. The price of dairy products will increase 3.5 to 4.5 percent and eggs by 3 to 4 percent. Pork is expected to rise 2.5 to 3.5 percent.
The department also slashed its estimate for what was supposed to be the largest corn harvest on record. The government cut its corn yield forecast to 146 bushels an acre for the year, the lowest corn yield since 2003. The outlook just last month was for 166 bushels. The soybean yield is projected to be 40 bushels an acre, down from an estimate of 43.9 last month.
Cattle farmers in several states have already started selling off or culling cattle because the drought has ruined grass for grazing and the price for corn for feed has skyrocketed.]
Now is when you have to start having real conversations with yourself & your loved ones about the true dire nature of our current economic environment and what the future will hold if you realistically want to plan your budgets moving forward. If you are in denial as to what your expenses will be moving forward there is no way in the world you will effectively be able to budget for those expenses & therefor you will be underfunded & forced to make drastic cuts in order to trim your expenses just to survive. You certainly won’t be able to manage any surprises that may arise moving forward. This is applicable whether we are talking about a small business or just talking about your personal or family budget at home. For example, if you don’t account for paying your child’s college tuition in the fall & budget everything else out to the penny you will be shocked & backed into a corner when you get a $25,000 bill in the mail.
So what happens when you trim some of the luxury items you can live without & are successful in tightening the budget to a point of comfort & then something unexpected like an over active cycle of solar activity by the good ole sun makes its effects known? The list of consequences range from natural EMPs that complicate the functioning of your cell phone but more importantly what happens if this period of excessive solar flares leads to a nasty drought that ends up being the worst on record? You might say ‘the poor farmers are gonna have a tough time growing crops with a drought, but what does that have to do with me?’ Well it has everything to do with you because the very crops these farmers are struggling to produce in this inhospitable environment are the same vegetables & fruits you will be looking to buy in the grocery store in a couple weeks. Once the limited production of crops is successfully harvested they will be shipped across the nation using much more expensive fuel as gas prices will continue to rise with middle east tensions only getting worse & this cost too will be past on to you the consumer at the grocery store.
Now we have a TRIPLE THREAT to your personal or small business budget, or both! Now you are fighting off FOOD INFLATION, while trying to neutralize the added cost of FUEL/ENERGY INFLATION & all the while having to take MONETARY INFLATION head on as the FED desperately gears up to launch the third round of quantatative easing in the form of QE3. Remember that with each round of QE the period of ‘beneficial effect’ has shortened by as much as 60% so I can only imagine that there may be little to no period of benefit as a result of people finally starting to wake up to the fact that QE does nothing for Main Street but instead is designed to function in the interest of Wall Street. Why else would all the banks be pushing for this action if not for their benefit? Do you really think the banks are going to be cheerleaders for handouts of free tax dollars to go to you & me? If so, I have a bridge I would be willing to make you a great deal on but you will be responsible for the cost of shipping!
As the world begins to fall in line behind China in this global currency war & takes their lead on removing the US dollar as the world reserve currency there could be untold tens of trillions of USD that will be marked ‘RETURN TO SENDER’ & sent home to flood the country with 4 decades funny money & this will exacerbate the monetary inflation at home beyond the point of comprehension. Since 1971 when Nixon took the dollar off the gold standard we have had many monetary crisis at the hand of the federal reserve that have flirted with derailing the Keynesian money machine on multiple occasions. Because the world was willing to play along with the fractional reserve banking system the US has exported to the world we have been able to narrowly pull back from the edge of the abyss, but this has changed as some of the worlds biggest players are now planning their exit from this runaway train. This is coming at a point where the FED is out of options & going back to old faithful, printing more money & hoping somebody kicks starts the economy for them with the free money they are dropping from helicopters. The odds of this happening unfortunately are not in our favor & therefor you need to begin to prepare for the ‘what if’ scenario that is shaping up now. The ‘what ifs’ range from an insane period of monetary inflation that is beyond anything we have known in our lifetimes all the way to the other end of the spectrum where we could see a true global dollar crisis that results in a dollar confidence collapse as the world runs away from the USD. There are a million other variations that are in between these two extremes but the focus of my concern is that at minimum we will have the wild inflation in consumer goods that will drive gold & silver to unheard of levels & this should be your focus as well. Remember that it is a far better strategy to PREPARE your portfolio for the coming crisis than to attempt to REPAIR your portfolio once the crisis has begun. Tick, tock.