Monday, October 11, 2010

I know, food cost again...

Yup! Food prices are going up, up, and away... But this time it does not have to do with a shrinking economy or the weak value of the dollar a la 2008. Nor does it have to do with soaring energy prices a la 2007. This time it has to do with hoarding inventory of such items like corn and cereal grain. Recently, we heard about Moscow placing a limit on exports of their grains; recognizing the recession well in advance of the actual moment. Credit to their economists their... They were widely scolded by many countries and the U.N. for this behavior as well.

Looks like they had the right idea... The U.S. and Africa have begun exporting less grains in anticipation of a world-wide shortage. What does this mean to us? Higher costs of course! I know it seems like doom and gloom from 2008 and 2009, but I am going to take a more optimistic approach. Americans have a unique quality to tighten up when the going gets rough. Think about the energy prices in early 2007 when oil was well over $100 per barrel. We tightened up our consumption and drove the prices down to the $50s. I believe this will be yet another example of the conservation that seems to be inherent in the American psyche. Therefore, prices will certainly spike for a short while, but once the inventory becomes too great and expensive to keep hoarded, that inventory will be unleashed and prices will drop again precipitously.

As responsible administrators, it is our duty to turn away as much as possible from "short-supply"items whilst waiting for the prices to drop. We have proven as an industry that we can do this over and over again. Now we have to do it again!


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