Hoarding

April 24, 2008

An article in the Wall Street Journal today calls for Americans to start stocking up on food as a mean of “investment” with the simple analysis that food prices have gone up higher than the interest rate. Here’s an excerpt:

Stocking up on food may not replace your long-term investments, but it may make a sensible home for some of your shorter-term cash. Do the math. If you keep your standby cash in a money-market fund you’ll be lucky to get a 2.5% interest rate. Even the best one-year certificate of deposit you can find is only going to pay you about 4.1%, according to Bankrate.com. And those yields are before tax.

Meanwhile the most recent government data shows food inflation for the average American household is now running at 4.5% a year.

While I’m not sure if you can look at stocking up your pantry with food as an investment. But I can tell you that this “buy now while you can” attitude is so American. I, like everyone, am not a fan of paying $1.01 for something that was worth $1.00 yesterday, but I can’t imagine the idiots who would race each other to see who would be last in a nasty game to drive the prices up.

All of these commodity futures are there to price risk and protect prices of commodities in the future. So when the Asian countries saw that prices are going up, what did they do? Buy three times more rice than they usually do to “stock up” for the future. And the result? Well, a simple supply/demand analysis will easily predict that prices will (and have) soar.

This whole thing is amazing to me because it is not like there was a natural disaster and a large crop of rice was lost and there’s now a shortage. From my understanding, this is just a nasty chain of event that was started by the weak dollar. The weak dollar caused prices (based in dollars) to go up, and as countries saw prices going up, they started to add fuel to the fire by driving the demand up. And now you have the WSJ telling Americans, of all people, to start hoarding up food. In the end, who gets screwed here? The people who didn’t have food in the first place.

I propose that instead of going to the store and buying as if a natural disaster is imminent, why don’t we just stop wasting food?? It never cease to astonish me how much food we waste - start just by sticking your head in your fridge and finishing what’s in there before you run to the store and by more food. Maybe if we all do that there’ll be enough food for all of us and then some.

Posted in News/Events