Meat, Gold, Corn and Peak Oil

Where’s the Beef?? It Better be in Your Freezer – Several different things I want to address first before getting to analysis of the HUI. The first one has to do with meat. The governments do not include the price of food or energy in the core rate of inflation (soon they will be including those that lie in graveyards into their index to further “average” the price down I am sure of it) so everything that you or I have to buy in the grocery store no matter how much costs rise is not “their definition of inflation”. This is the government’s way of hiding the volumes of money being created out of thin air.

The coming of Peak Oil is causing a movement in the US to produce ethanol in order to provide an alternate fuel source. The big corporations are pushing for corn because it is big money. Use of straw grass, sugar beets etc. is far more efficient in the energy balance of the production equation.

More energy is put into growing corn, fermenting it, distilling the ethanol and transporting it that what will be generated in energy in the car. Also, ethanol damages rubber gaskets, is corrosive and has a whole host of problems. The biggest problem is that corn is a staple for many poor families and also animal feed.

Higher prices for animal feed translates into higher meat prices, cereal etc. The price of corn has doubled the past year, so people should be expecting to see meat in the supermarket rise by as much as 30-40% by year’s end. Sound crazy? There is a fixed cost for animal feed and a doubling in corn price will amount to a doubling of the percentage that goes to grow cattle, pigs etc. for harvest.

More and more farmers are going to be planting corn this year; there is only so much land available for producing crops, so other crops such as soy, wheat, barley, flax etc. etc. are going to also rise in price due to a reduction in output with an ever increasing global demand. We are on the cusp of seeing food inflation rise by 10-15% YOY for at least the next 4-5 years out.

At some point, high natural gas prices looming in the background will make the cost of fertilizer too expensive which will cause lower applications which will result in lower crop yields. This will in turn drive the price of grains and meat even higher, which is one reason many should consider buying some arable land with access to an available water source. Note that the price increases from peak natural gas have not even been factored into the higher prices of meat or grains. Food will become so expensive that the ethanol boom will absolutely collapse due to public demand for “Food instead of Fuel”.

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