Why your wallet is feeling a lot lighter

Here's a graph that explains why your wallet is a lot lighter these days.

Zero Hedge:

We are sure the weather is to blame but what happens when pent-up demand (from a frosty east coast emerging from its hibernation) bumps up against a drought-stricken west coast unable to plant to meet that demand? The spot price (not futures speculation-driven) of US Foodstuffs is the best performing asset in 2014 - up a staggering 19%...

h/t Bloomberg's Chase van der Rhoer

Food prices are extremely volatile, which is why the BLS doesn't include it in the "markletbasket" they use to determine the rate of inflation monthly. The same goes for energy prices which are actually moderating a bit since the first of the year.

Supply and demand - that simple, elegant math problem - is greatly affecting food prices. You have somewhat of a pent up demand following a brutal winter in the east and midwest meeting reduced production from the west due to a severe drought. The Agricultire Department says to get used to it because many of these prices are here to stay:

Various measures, including overall food, food-at-home and food-away-from-home prices, are expected to rise by 2.5 to 3.5 percent in 2014. The consumer price index for all food prices rose by 1.4 percent in 2013.

The ongoing drought in California could have "large and lasting effects on fruit, vegetable, dairy and egg prices" although that impact has not been seen so far, USDA said.

California is the No. 1 U.S. farm state, producing roughly half the nation's fruits and vegetables. The Golden State faces a water crisis after its driest year on record in 2013. Large amounts of farmland are likely to go unplanted this year.

In other categories, USDA said farm egg prices have been exceedingly volatile recently, rising by 20 percent in February after falling by 28 percent in January.

Farm cattle and wholesale beef prices rose in February, by 1.1 percent and 2.4 percent respectively.

"While not unusually large, these changes indicate that the record-high supermarket beef prices across the country are here to stay for the coming months," the agency said.

I know exactly what you're thinking. "Where do these idiots do their shopping?" The idea that food prices increased only 1.4% last year is a joke. We don't need the government to tell us we're spending a lot more on food than we were at this time last year. And fresh meat and produce is only part of the story. Prices vary from store to store, but processed foods are rising far more than 1-2%.

Like most of you, Sue and I buy pretty much the same foods week to week at the grocery store. Sue has taken to going to three different stores - Aldi's, Walmart, and Kroger - to get the best deals possible. We could probably coupon a bit more but coupons sometimes allow you to kid yourself that you're saving money even though you buy something you might ordinarily not.

The result of all this careful planning and shopping? An overall increase in our food bill of more than 10% last year. Food price inflation is the most important issue not being discussed in Washington. It's killing the middle class. This graph only confirms what anyone who goes to a grocery store already knows.


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