U.S. Food Prices 2013: Jeremy Grantham Warns of Coming "Dystopia"

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The U.S. Department of Agriculture (USDA) on July 25 issued a report warning every American that U.S. food prices in 2013 will rise 3%-4% — but that jump is just the start of a frightening long-term trend.

The warm weather in the winter months gave farmers hope for a great crop production this year, but a crippling U.S. drought now covers around 60% of the continental United States. The water shortage has killed crops, pushed corn prices higher, and will eventually make its way to your local store shelves.

But according to famed analyst Jeremy Grantham, the looming U.S. food price increase in 2013 is just the beginning, and the reasons go far beyond the current drought.

Grantham, the founder of Boston-based institutional money manager GMO LLC, in his July 2012 quarterly letter to investors wrote a report entitled, "Welcome to Dystopia! Entering a long-term and politically dangerous food crisis."

Grantham explained that rising U.S. food prices have more to do with soaring population growth than this summer's water shortage.

"We are five years into a severe global food crisis," Grantham wrote, "that is very unlikely to go away."

Editor's Note: Food isn't alone — shortages of energy and natural resources are inevitable, and the latest data we uncovered is startling.

U.S. Food Prices Rise with Population

Grantham explained that as the world's population rises, global demand for resources will rise exponentially; it's a mathematical certainty.

"The general assumption is that we need to increase food production by 60% to 100% by 2050 to feed at least a modest sufficiency of calories to all 9 billion+ people, plus to deliver much more meat to the rapidly increasing middle classes of the developing world," wrote Grantham.

Even today, the average American is responsible for 32 metric tons worth of food, water, minerals, and energy from the environment every single year – and that's just one person.

Given the interconnectedness between food, oil, and water there is no question prices in all three will rise as the population continues to grow. Grantham points out that you can't grow food or develop water sources without energy which is why higher food prices and rapidly rising oil are tightly linked.

"Even if we could produce enough food globally to feed everyone satisfactorily the continued steady rise in the cost of inputs will mean increasing numbers will not be able to afford the food we produce. This is a key point that is often missed," Grantham said.

Over time, Grantham said food shortages "will threaten poor countries with increased malnutrition and starvation and even collapse."

So the long summer drought which currently consumes almost 65% of the contiguous U.S. states is just a preview of what can happen as wheat and corn crop shortages escalate in severity.

Grantham warned, "Any price increase from here may cause social collapse and a wave of immigration on a scale never before experienced in peacetime. Another doubling in grain prices would be catastrophic."

Grantham's predictions have been discussed for years. That's why some of our Money Map Press experts joined a team of researchers to look into the effects of global population growth on our resources.

Turns out, Grantham is dead on.

"We've uncovered a catastrophic pattern in our nation's food system," said Chris Martenson, an economic expert and one of the team's members. "One we believe could soon hasten a world food crisis -a chain of events that could lead to massive food inflation, even riots."

The pattern Martenson identified affects the entire global economic system. It's eerily similar, he explains, to the kind of pattern you see in a pyramid scheme, one that escalates exponentially before it collapses – with little notice.

For a look at this pattern that could crush Americans, click here.

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  1. J.Patrick Hickey | August 8, 2012

    I agree with Ben Gertson, that the handwriting is on the wall when it comes to the near future of world food shortage. Visionaries have been warning about this for decades, basing their predictions on population growth — years before global warming hit the front page.

    As far as I'm concerned, stands above the rest of the burgeoning crises such as banking, energy, water, etc. Some of us suspect that the U.S. empire is passing it's prime which may explain a lot of the dysfunctionality undermining our confidence that the future lead to a restoration of the prosperity we had become accustomed to expect.

    The economists and government has been using inflation for years as an almost invisible way of stealing from the people. I believe that will continue and may increase, with food inflation added on the top like icing on the cake. Of course, Money Morning readers understand the significance of inflation better than most citizens, so there is still time to batten-down-the-hatches, but time is running out fast!

    Unlike most readers, I am a disabled, 70 year-old disabled veteran with a pension that theoretically teeters on the poverty lime. Actually inflation has already pushed me over the edge, but it is disguised by governmental statisticians (aka denied). That is part of the transfer of wealth from the poor to the rich, in my opinion, and I have yet to meet anyone who gives a damn how this impacts my life.

    An important reason why I'm still doing okay is that I took responsibility for my own health a few years, and now I have no chronic health conditions thus I have no need to visit a doctor or take pharmaceuticals (a great saving). I'm pointing this out because I consider the failure of soy and corn crops to be a blessing in disguise, considering that 90% of those are now GMO. I consider GMO crops to be bad for my health. And I avoid wheat and sugar, as well.

    Even the New York Times points out that the U.S. could save a trillion a year if people took responsibility for their own health with half the dedication that I do. Works for me! I suppose eating toxic Monsanto GMO might be preferable to starving, but the whole scenario is gone too far off the deep end. (just a thought).

  2. jon | August 29, 2012

    The higher prices are already here and the higher they get the more people will continue to eat more and more unhealthy foods to try and cut costs. Instead of sacrificing your health start planning now for the increased prices. Here’s a link to a blog I read about budgeting for increased food prices:

    http://blog.clearpointcreditcounselingsolutions.org/blog/bid/207210/Prepare-a-Budget-for-Higher-Grocery-Prices

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