SMART BUYING


How to Beat Rising Food Prices

Anyone who witnessed the browned and stunted farm fields in drought-stricken states over the summer could tell you that this year’s harvest won’t be up to par. Smaller yields in the U.S. will likely lead to a bump in prices on supermarket shelves in the coming year.

SEE ALSO: Save Money on Groceries Without Coupons

The U.S. Department of Agriculture recently predicted that higher crop prices would push prices for fats and oils up by as much as 5% this year and prices for cereals and bakery products up by as much as 4% in 2013. Prices for dairy products, poultry, pork and beef are also expected to spike. Cows produce less milk in extreme heat, and higher prices for corn and soybeans make it more costly to feed livestock. But shoppers who make space in their freezers and pantries now will find a silver lining. As cattle become too expensive for farmers to feed, more cows are going to slaughter early. That means beef supplies will increase for the short term, causing prices to dip temporarily before shooting up as supplies eventually decrease. More modest price hikes for processed foods won’t hit fully until well into 2013. But stockpiling now could help you avoid paying more later.

Stephanie Nelson, founder of CouponMom.com, suggests being flexible about what you buy. Prices on frozen foods may run lower than fresh. Purchasing a large cut of meat and having the store’s butcher break it down could save you 50% per pound.

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Want to offset the cash you leak at the grocery store? Consider investing in an exchange-traded fund linked broadly to agriculture production, such as Market Vectors Agribusiness ETF (symbol MOO). The fund’s holdings, such as Monsanto and Potash Corp. of Saskatchewan, could benefit as farmers purchase drought-resistant seeds or more fertilizer to coax yield out of surviving plants, says Dave Nadig, director of research for IndexUniverse.

This article first appeared in Kiplinger's Personal Finance magazine. For more help with your personal finances and investments, please subscribe to the magazine. It might be the best investment you ever make.

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