It wasn’t so long ago when we could buy two gallons of milk for $4.69.  Now two gallons set us back nearly $7.  That’s a 50% jump in the space of a few years.  It wouldn’t be so bad if my salary would also jump 50% every few years!

I’ve noticed it mostly with milk, but it turns out that many food products have seen big price increases lately.  According to this article from the Dallas Morning News, prices are up for:

  • Chicken - up 10% in the last year
  • Whole milk - up 20%
  • Tomatoes - up 25%
  • Bread - up 5.4%
  • Eggs - up 30% retail and 60% wholesale
  • Pasta - up 30%
  • Fruits and vegetables - up 20%

We Spend Three Times More on Food Than Gas

According to the same article, food accounts for 13% of average household spending while gas accounts for only 4%.  Despite spending three times more on food, it seems that people notice the price of gas more than the price of food.  Perhaps we should pay more attention to food. 

I don’t know if my own household follows those averages.  I don’t keep track of our spending at that fine level of detail.  Spending three times more for food than gas strikes me as in the ballpark.  We may spend a little less on gas because my commute is only three miles.  And I bike it when the weather’s nice. 

Why Does Food Cost So Much?

So what’s causing the jump in food prices?  In no particular order, the article blames it on:

  • Increasing demand for ethanol has driven up the price of corn.  As farmers plant more corn to meet the demand, they plant less soybeans and everything else, resulting in general price increases.  Cows eat corn, so the higher price of corn means higher meat and dairy prices.
  • Increasing meat demand from China and India.
  • Drought in Australia.
  • Falling dollar.

What To Do?

What’s the wise money decision to deal with rising food prices?  Eat out less?  Shop at Safeway instead of the upscale corner market?  Be a more discriminating shopper?  Skip lunch?

I don’t know about you, but I haven’t made any lifestyle changes because of the rising price of food.  In my opinion, the best way to address rising food prices with the least amount of nuisance is (drum roll please)……  continue to wisely invest your money.  Continue moving yourself toward financial freedom.  The price of food won’t be an issue when you have financial freedom.

You can build exposure to food prices into your portfolio.  When food prices rise, your portfolio rises.  It’s the same thing that happened to the stock price of energy companies when the price of oil started its upward climb a few years ago. 

A diversified portfolio probably already includes some modest amount of exposure to food prices.  If you want to further hedge yourself against rising food prices, you could increase your exposure to certain commodities or companies whose earnings depend on the price of food.  For most people I wouldn’t recommend it though.  It would probably require a lot of work for only a little payoff.  Just stick with the diversified portfolio.

Postscripts

P.S.   Did you know cows eat corn?  Am I the only person that had to look it up?  Apparently, “they love corn” and “will eat any part of it, including the whole plant.”  Yum. 

P.P.S.   If anyone should know what cows eat, it’s me.  There must be 250,000 cows within 15 miles of the house where I grew up.  Maybe more.  250,000 is mostly a wild guess.  My only data point is there were 16,000 cows in 1910.  And that E.A. Miller, one of the largest beef packers in the U.S., is located a few miles from my parent’s house.  They “process” 2,000 cows per day!  In case you were wondering, the diet of E.A. Miller cows is mostly …… corn!