How's your weather been?

Short-term reasons for rising food prices include low stockpiles, a rough growing season, and demand for grain-based ethanol. Maybe it is a good time to start stockpiling, writes Nick Hodge in the Energy & Capital newsletter.

At the end of this year's growing season, the US department of agriculture (USDA) says we'll have 675 million bushels of stockpiled corn (maize) — just 5% of what we use in a year. It's expected to be the lowest surplus since 1995.

The mid-Atlantic and Northeast have been covered in snow for weeks. The Midwest was just hit with a monster storm, closing schools in Chicago for the first time in a decade.

In the last two weeks, snow has fallen in 49 states, even threatening the Super Bowl in Dallas.

Earlier this month, snow almost covered the entire Northern Hemisphere.

Russia's enduring drought ... Australia's enduring flood.

And the UN recently said the weather pattern causing it all (they're going with La Niña) is "one of the strongest ever" and could last for four more months.

In locales where it's growing season, this is having a very real effect on prices; in those where it's not, a psychological one.

The result?

Corn futures have doubled since June, breaking $7.00 per bushel this month. Consensus is it'll break its all-time high of $7.65 in the next few months.

The food price index, run by the Food and Agriculture Organisation of the UN, just passed its previous peak reached in summer 2008.

"In Bangladesh," the Washington Post reports, "rice prices jumped 8% in December. In India, the price of onions soared 80% in just one week."

Sugar, oils, and soy are all surging higher.

High food prices were the main cause of the Tunisian uprising and were partially cited in Egypt.

But droughts and floods are only responsible for bringing food prices to a tipping point. Many other factors have been stoking this fire for years...

Failed policy

From a slap-your-forehead Farm Bill to egregious ethanol subsidies, US food policy leaves much to be desired.

Take, for example, the well-known government food pyramid compared to how that same government issues subsidies:

What the government practises is nearly the exact inverse of what it preaches.

And it gets worse. Take this snippet I lifted from my local Baltimore Sun:

“The corn used to produce ethanol to fill a 25-gallon SUV tank one time would feed a starving African for a year, and it takes 10 acres of land to produce corn to fuel the same 25-gallon SUV tank for a year operating on 100 percent ethanol. In the U.S., from 2000 to today, the demand for corn to produce ethanol has grown sixfold. The U.S., the world's largest corn exporter, now converts more corn to ethanol than we export.”

Our ethanol subsidy policy not only drove up the price of corn by shifting supply to biofuels; but it also caused a shortage of other grains as farmers raced to cash in on government hand-outs for corn.

That was in 2008, the last time the UN's food price index hit a peak. And the EPA just approved higher ethanol blends for more cars a few weeks ago, adding even more subsidised fuel to the food price fire.

A wealthier and growing population

There are long-term trends in play that can pretty much all be rendered down to population growth as a central theme.

China's consumption of soy beans, for example, has jumped fivefold since 1995. But its production has remained the same.

That trend plays out on a world stage, where soybean demand is rising more than 6% per year while crop yield remains flat.

More people with fatter wallets are adding to the problem.

In 1985, the Chinese ate 44 pounds of meat per person. Thanks to rising affluence, they ate 110 pounds per person in 2010. And I can assure the US didn't eat less for balance ...

It takes eight times the amount of energy to produce the same amount of beef calories as it does grain, and 35% of the world's grain is used as livestock feed.

So beef production is not only grossly inefficient; but as the world eats more of it, more acres and grain are diverted to supply it — further hindering global supply of corn and other grain used as livestock feed.

And yet, meat is one of the most subsidised agricultural sectors.

The government is subsidising one of the very practices contributing to rising food prices all over the world.

Food for thought, profit

Whatever your thoughts on climate change or global warming, and whether it's anthropogenic, a natural phenomenon, or nonexistent, rising temperatures must be considered when discussing food supply.

Consider President of the Earth Policy Institute Lester Brown's take on the most serious threat to feeding a growing population:

“Above all, water shortages and climate change will constrain output. Every one-degree Centigrade increase in temperature will reduce grain yields by 10%.”

Called La Niña or anything else, changing weather patterns severely affect agriculture.

A couple more or fewer inches of rain in a year can throw off crop yields; heavier snows in the South, thanks to more moisture in the air from warmer oceans; higher temperatures shifting prime growing seasons by days, weeks, or more...

Just considering the weather events of the past few months, you have to agree the evidence is piling up. And even if you don't, you should concede that even the idea will have an effect on prices as it weighs on the minds of emotional traders.

It's a perfect play on the perfect storm facing food supply. And there are dozens of others...

Be sure to take a closer look at that stock and the myriad ETFs and agricultural companies available to offset the sting coming to a grocery store near you: