I was standing in line at the grocery store earlier this evening when I saw a copy of The Economist on the rack in the checkout lane. The cover story titled The End of Cheap Food caught my eye. It made me sad because I hate paying high prices for food. LOL! The article is an interesting read because it lays out the reasons why food is getting more expensive and why it’s likely to stay this way for a while. The main reasons for the rather large increase in food prices mentioned are:
- China and India becoming wealthier nations. As wealthier nations, they are consuming more meat, which requires more grain to raise the animals.
- America’s obsession with Ethanol is causing more farmers to grow corn, which comes at the expense of other crops. Less of the other crops means their prices rise. See how this all works together?
If you have a few minutes, I urge you to read the article. Read it and be prepared to spend more of your hard-earned dollars on food. Either that or consider allocating some of your money to a commodities fund like the iPath Dow Jones-AIG Agriculture Total Return Sub-Index ETN (JJA). Take a look at how it’s allocated:
With an expense ratio of .75%, it’s hardly cheap. I’m not recommending this particular ETN (it’s only been around since October 23, 2007), but it could be an interesting way to take advantage of the rising food prices.