Guest Post: Preparing Accordingly II

Tyler Durden's picture

Submitted by TF Metals Report

Preparing Accordingly II

A frequent topic here has been the ongoing and still-building food
inflation crisis. The MSM is just now awakening and beginning to discuss
the implications. By the time the great unwashed become fully aware of
the magnitude of this problem, it will be too late. You, my dear reader,
still have time to prepare.

As you know by now, the endless money printing by our inept and foolish
"leaders" is causing prices to rise in all things dollar-denominated.
Economics 101 teaches us that more dollars chasing a static supply of
goods leads to an increase in price. Eventually, these rising input
costs are passed along to the consumer in the form of cost-push
inflation. This insidious monster is the most painful of economic
afflictions as rising costs are not met with commensurate rises in
wages. The pain to the consumer is great and often brings about social
unrest and upheaval. We will surely discuss this phenomenon in greater
detail in the days ahead. For now, I wanted to give you charts on some
items that we don't normally follow here, just so you can grasp the
dimension and scale of that which lies ahead.

First up is the primary commodity index, the C.R.B. Here is the current makeup of the index:

Energy Crude Oil, Heating Oil,
Natural Gas
17.6%
Grains Wheat, Corn, Soybeans 17.6%
Industrials Copper, Cotton 11.8%
Meats Live Cattle, Lean Hogs 11.8%
Softs Coffee, Cocoa, Sugar
Orange Juice
23.5%
Precious
Metals
Gold, Silver, Platinum 17.6%

And here is a weekly chart:

When
did the index really take off? Last July. Why then? That's when the
realization was made that QE2 was coming. Will it continue rising? As
long as QE continues? Will QE ever end? No. It can't.

First up, coffee. Coffee is a great cost-push example. For now,
companies like Starbucks are trying to absorb some of this rise in price
by slashing margins and other internal "controls". They can't can't
keep this up forever, though, so soon your latte is going up in price. A
lot. Interestingly, SBUX has risen about 30% since July. Does that add
up for you? Me, neither.

OK, now, here's where the real problem is: Corn and the other grains.
 The dispshit shills, LIESman, Krugman et al , can wax prophetic all
they want about the minimal impact these higher prices will have on the
consumer. You can draw three conclusions from this:
1) They are all profoundly stupid, almost to the point of partial retardation.
2) They are criminally negligent in their lack of basic economic education.
3) They are deliberately misleading people in the hopes of maintaining the ponzi as long as possible.

I'll let you decide which is true. I know which one I believe.

Back to corn. Look at this chart:

This near 100% move has occurred in the offseason. What happens if we get a little drought in the American midwest this summer?

What the shills fail to recognize is the interaction between
agricultural commodities. In this case, its the relationship between
corn, cattle and hogs. You see, if you're a rancher or a pig farmer,
your primary input cost is feed. (Ever heard of the term "midwest
corn-fed beef"?) When feed costs double, your first move as you attempt
to control costs is to sell some of your stock. As those cows and pigs
come to market, their presence has the same impact as any other increase
in supply...a temporary suppression of price. Yet, even in this
environment, look at a cattle chart:

And look at hogs:

The
only thing that has kept cow and pig prices from rising at the same
rate as the grains is this temporary increase in supply. Replacement
rate of a herd or barn is usually not much more than 1:1 so it follows
that all of the excess supply currently in the market will lead to a
commensurate drop in supply later this year. Add less
supply to increased demand (due to QE) and you get explosive price
increases. So, not only are the grains significantly more expensive,
protein is, too. Not good. Not good at all.

Thus the phrase: Prepare Accordingly. The time is now. We're already
seeing, in other parts of the globe, what hungry, desperate people are
willing to do. This will continue and get worse.
Prepare yourselves.
Prepare your families.
Prepare your friends.
Consider things through to their logical conclusions.
Be ready for any and all eventualities.

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flacon's picture

That's not what I'm saying. What I am trying to say is that we have reached the point of no return - ie, no Paul Volcker will be able to save this system - it is dead. If interest rates were to rise to that of the early 80's the system would collapse. If rates are kept low like it is today with monetary injections, the system will collapse. There is no way out now. 

 

 

Zero Govt's picture

Flacon

When you say "there's no way out" you're talking hypothetically, for 'The System' right?

So dis-engage yourself from this fuked system and build your own system based on a good local bank and good local everything else. Fuk the system, have nothing to do with it, don't get painted into a corner with it ok

margaris's picture

Wise words...

There is always a third solution... if you havent found it yet, you just havent thought about it long enough.

Zero Govt's picture

Ok 2 Options so far;

1). Get painted into a corner with the parasites and go down with them

2). Fuk the system and regain your independence from it

Now there's a 3rd option, here's my guesses;

3 a). Change the System (you are fuking joking right?)

3 b). Elope to Thailand and avoid the system all-together 

How did i do?

Lord Koos's picture

It's going to be very difficult to escape at least some of the consquences of this no matter how well prepared.

Thailand isn't exactly off the grid, either, although they do grow their own food mostly.  And it's illegal for non-Thais to own land - you have to lease it or have a Thai partner.

margaris's picture

3 a). Wait for the system to show its weakness and use it. Bring the system down or question it and spread the message, this is how it always works. All systems have a rather short half-life period. Different systems are already waiting for their time... There will be alot of "experiments" coming in the future.

3 b). Its the same everywhere. If you cant make it here, why go somewhere else...??

3 c). Quit religion, quit consumerism. Save money to buy land and a house, become a gardener and scientist.

Cindy_Dies_In_The_End's picture

No, he means exactly what he said. Moreover, your solution won't work either. The Event Horizon passed a few years ago.

Either we need a new  currency OR we do an entire re-boot.  Or its just one massive Lord of the Flies.

 

History is a bitch.

In the meantime you legally disengage as much as possible. Lets be realistic here, you're a peasant on the Titanic.

Zero Govt's picture

Can you put Option 3 in clear simple words please?

My suggestion is the 'Eric Cantona Solution' where you remove your assets (deposits, pensions, sell your property etc) from anything big and national and 'Go Loco' (go local). Get into cash or gold/silver whatever. Turn yourself into a flexible zero-debt untouchable Govt non-asset which is precisely what i did here in Europe last year

margaris's picture

Zero-Debt is the way to go. If I can reach that goal here in europe in the next years, I will be very happy and feel great for the rest of my life!

There is way too much government in the world,... it has to shrink and it will!

DosZap's picture

Volker only got by with that because we were the worlds largest Creditors.

Now the opposite is true.

ebworthen's picture

The price of bacon really chaps my puckered wallet; doubled in less than a year.

Of course it is a luxury item and I am lucky to have cupboards full of food.

Can you imagine L.A. if food riots hit and the trucks and trains stop bringing things in?  It will make Cairo look like a playground fight at the elementary school.

Ned Zeppelin's picture

I wonder what BLS's hedonic subsitute is for bacon, to keep the numbers down. Spam? Pork roll? Lard? 

kaiserhoff's picture

Purina Beggin Stripes - Dogs don't know it's not bacon.  Who let the dogs out?

Orly's picture

You can make it that turkey bacon crap.  Yuck.  Like chewing on a rubberised beef jerky.

Just awful.  Sorry, Jenny-O!

Fish Gone Bad's picture

I tried some of that turkey bacon.  When the F was this ever a good idea?  Even my cats won't eat it.

BigJim's picture

I believe the price of salted shoe leather hasn't budged much.

Shameful's picture

Bacon is one of the few things that still brings me joy in this God forsaken hell hole. No bacon, no peace.

mtomato2's picture

This:

http://www.youtube.com/watch?v=3oWsdW3Rebw

is a great link.  Trust me.  18 seconds of cool.

EscapeKey's picture

At least, that's one thing increased luxury demand from the muslims won't affect the price of. At least not directly, anyway.

oygevalt's picture

EscapeKey, I want to say how much I enjoy reading your commentary.  Not just because I knew one of the spies either (not Anna), which was what initially led me to eyeball your posts several months ago.  Please keep up with the insightful comments.

EscapeKey's picture

Cheers, I think ZH has quite a lot of sharp people, and it's a great place for both discussion and a bit of banter.

You knew one of the spies? Who, and did you ever suspect anything?

oygevalt's picture

Rather not say, as admitting I knew one already narrows me down considerably, but I will say that I thought the accent strange, but since the person clammed up when asked questions, didn't pursue.  What a lesson that was.  Dealt with this person for years.

Hook Line and Sphincter's picture

Shameful,

I don't take bacon lightly. I was at Emeril's flagship restaurant in New Orleans not too long ago after a little jaunt out to what BP euphemistically calls 'the source'. In one of the dishes I discovered several tiny, and I mean miniscule nuggets of bacon. When I bit into it, it blew my mind with flavor and catapulted me to ecstasy. Straight down, I AM a bacon connoisseur. I asked the waiter who was the manufacturer. The name is Benton's. I ordered mass quantities on-line because I couldn't get it anywhere else. 

Warning; this bacon is not for the wuss at heart. Intensely salted, and NOT the type you eat more than one or two pieces.

http://bentonscountryhams2.com/

Shameful's picture

Hmmm, might have to give that a try, thanks for the heads up. The cheap bastard in me recoils at the price but I do love bacon. Bacon chocolate bars, excellent. Bacon vodka, not as good as it sounds. Would think that two great tastes would go together...

Mostly I cook with a few slices in stews or tossed in with veggies (love it with my kraut). More as flavor then just as it's own dish. Bachelors got to know how to feed himself, and figured the Domino's and Chinese take out was slowly killing me. Now I'm that guy, shopping at ethnic stores buying only base food ingredients not processed foods.

Fish Gone Bad's picture

I have been dying to try some of the pata negra ham (https://jamondepatanegra.com/tienda/lang-en/index.php?language=en) but the price is freaking outrageous.  I am thinking this bacon might be worth a try.

Hook Line and Sphincter's picture

Since I'm at it, and I need a reprieve from envisioning a day without bacon due to bernanke's anti-bacon bias (hickory smoked porcine products only for the bourgeoisie), let me tell you what I witnessed today at 2:30PM PST; I was in the audience at a cooking competition where one of the competitors (who strangely enough commented during his exhibition that he also teaches composting in his spare time) took thick cut bacon, dipped it in a seasoned egg batter, deep fried it, and drizzled chocolate syrup on it.

Zero hedge bacon forum!

ebworthen's picture

suhhweet!  bacon, bacon, bacon

I like the Oscar Mayer myself, and sometimes the fresh cut with pepper that the meat/deli puts out at the grocery store.

mmm...bacon...mmm

tellsometruth's picture
Pork Bellies Now 'Nontrading Places'

this popped in my mind... Wife's Aunty pays for our subscription for the hard copy as aChristmas gift .... nice repub from az...

http://online.wsj.com/article/SB1000142405297020468500457604603036822505...

 

please comment

blunderdog's picture

I've been hit pretty hard by the food prices myself, and something occurred to me. 

As margins collapse on real staples, retailers are probably marking up "luxury" items to make up for the losses of selling things like rice and potatoes at acceptable levels to the affluent and working-class.

SNAP recipients who are able to prepare proper foods may well be keeping grocery stores afloat in low-income neighborhoods because they're the only customers buying bacon, prepared foods, brand-name products, etc.

That's what it looks like when I'm on line to pay cash for my flour and lard, anyway.  I only ever see Kraft cheese and frozen pizzas when someone's got their EBT card handy.

DosZap's picture

LA,

Hell it would be choppered in,or air dropped.

But it would be controlled by gangs, and we would have the Somalia West Group.

goldfish1's picture

If you saw how they raised the pigs

from which the bacon comes, you might

choose otherwise.

virgilcaine's picture

It's Springtime 2008 all over, Inflation was springing up then too only to Cliff Dive 75% in 5 months.  Bernank has everyone running on the wheel.. this is progress. Run til you drop.

Tyler Durden's picture

Spot on. The only difference, however, is that back then central banks' existence wasn't intimately tied in with the reflation experiment: only banks were on the hook.... This time it's different.

Mr Lennon Hendrix's picture

Not only that, but now the banks are no longer on the hook.  They "paid" TARP back and they were slapped on the wrist for Abacus.  JPM is set to issue currencie to CA via the SDR after the Fed fails.  They beta tested it years ago with the JPM IOUs.

silvertrain's picture

"This time it's different"  

And thank God for that because I am a little bit better prepared this round..

Shameful's picture

I would challenge that. To prolong their existence they need a bust. They will continue to bury the market in fiat, but they need to force a big market move to scary weak hands out of commodities and back into the "security" of Treasuries of all stripe. Even if it's just a surface move for the MSM to pick up on and keep the masses calm on their couches.

If commodities keep on this trajectory then in a few months even the most braid dead might figure out what is going on and they don't want that to happen. On the other hand anther market crash is another chance for a power grab and spread the deflation meme again. CBs won't die till their host countries do so they need to keep the ball in play a while longer for their own pillaging.

centerline's picture

Before the bust can occur, it will be necessary to have moved the blame so as to deflect the energy of what happens next.  The polticians will serve well in this capacity.  The stage is being set right now for this.

Lord Koos's picture

Inflation is often followed by a war, so look for a scapegoat coming to a country far from you.  Iran is my bet.

WaterWings's picture

Blankfein >>> "God's work" >>> "Act of God"

Hmm...Force Manure...anyone? (spellchecker convinced me ;-))

---

Wonderful posts, as usual. Hate saying it (stating the obvious) - glad to see dburn out and about as well.

DosZap's picture

Yes this time it is different, this is happening on a grand scale, yet to really take root.

Ned Zeppelin's picture

Real life: buy 2 different bags of store version of Dunkin Donuts coffee, normally a safe bet, over a 2 week period of time. The coffee we make tastes like acidified bathwater, complete crap.  Then on Marketwatch in am, hear that Smuckers, owners of Folgers and Dunkin Donuts store coffee, are forced to raise prices. Clearly, for a few weeks, shit beans were served up in an effort to hold back eroding margins, but even they recognized shit is shit and no one will buy their product. Off to the races we go. 

To recap for those like me trying to figure It All Out, QE is raising the prices of commodities, but not real estate.  How will wages rise? More productivity? Don't think so.  Stagflation, bitchez. 

 

Tedster's picture

Coffee deserves its' own column. Have known of this for a while. Folgers coffee, while not a gourmet blend or arabica, had one noticeable trait - consistency of flavor over many years. My guess is this is tougher than it sounds. It tastes "different" in any case, starting several years ago.

The "house" brand el-cheapo supermarket brands that I sometimes favor have a distinct burlap flavor, that means they are probably buying years old commodity coffee, that is coffee traded to satisfy futures contracts and not esp. intended, by god, for drinking.

One way to save money for caffeine addicts is to not only grind your own, but roast your own. The story of coffee in America is a story of reinventing the wheel. Canned, ground coffee, along with freeze-dried, were wartime expedients that stayed long after the necessity. Prior to the 1940s, virtually every town had a coffee importer, roaster, and retail outlet. It certainly wasn't an aspect of snobbery, but a vital commodity.

But roasted coffee only keeps for several days, maybe a week at most. Green coffee beans however, keep for at least a year and can be roasted at home easily with something as simple as a hot air corn popper. It actually takes a day or so to reach peak flavor after roasting - it's ready when the room is filled with that wonderful fresh coffee bean aroma! As I understand it, after oil, coffee is the number 2 import. It just cannot be grown in any quantity in the US proper.

Sean7k's picture

I'm planting Kentucky coffee trees this year. They produce a pod with beans inside that when roasted properly make a very close substitute for coffee. Will make an excellent extender as well.