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<div class="boldPumpkinSixteen"> R.O.I. </div>
By BRETT ARENDS </td>
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<h1 class="articleTitle" style="margin: 0px;">Load Up the Pantry<br>
<span class="aTime">April 21, 2008 6:47 p.m.</span></h1>
<p class="times">I don't want to alarm anybody, but maybe it's time for
Americans to start stockpiling food.</p>
<p class="times">No, this is not a drill.</p>
<p class="times">You've seen the TV footage of food riots in parts of
the developing world. Yes, they're a long way away from the U.S. But
most foodstuffs operate in a global market. When the cost of wheat
soars in Asia, it will do the same here.</p>
<p class="times">Reality: Food prices are already rising here much
faster than the returns you are likely to get from keeping your money
in a bank or money-market fund. And there are very good reasons to
believe prices on the shelves are about to start rising a lot faster.</p>
<p class="times">"Load up the pantry," says Manu Daftary, one of Wall
Street's top investors and the manager of the <a linkindex="77"
class="times"
href="http://online.wsj.com/fund/page/fund_snapshot.html?mod=art_fund&symbol=quagx">Quaker
Strategic Growth</a>
mutual fund. "I think prices are going higher. People are too
complacent. They think it isn't going to happen here. But I don't know
how the food companies can absorb higher costs." (Full disclosure: I am
an investor in Quaker Strategic)</p>
<p class="times">Stocking up on food may not replace your long-term
investments, but it may make a sensible home for some of your
shorter-term cash. Do the math. If you keep your standby cash in a
money-market fund you'll be lucky to get a 2.5% interest rate. Even the
best one-year certificate of deposit you can find is only going to pay
you about 4.1%, according to Bankrate.com. And those yields are before
tax.</p>
<p class="times">Meanwhile the most recent government data shows food
inflation for the average American household is now running at 4.5% a
year.</p>
<p class="times">And some prices are rising even more quickly. The
latest data show cereal prices rising by more than 8% a year. Both
flour and rice are up more than 13%. Milk, cheese, bananas and even
peanut butter: They're all up by more than 10%. Eggs have rocketed up
30% in a year. Ground beef prices are up 4.8% and chicken by 5.4%.</p>
<p class="times">These are trends that have been in place for some time.</p>
<p class="times">And if you are hoping they will pass, here's the bad
news: They may actually accelerate.</p>
<p class="times">The reason? The prices of many underlying raw
materials have risen much more quickly still. Wheat prices, for
example, have roughly tripled in the past three years.</p>
<p class="times">Sooner or later, the food companies are going to have
to pass those costs on. Kraft saw its raw material costs soar by about
$1.25 billion last year, squeezing profit margins. The company recently
warned that higher prices are here to stay. Last month the chief
executive of General Mills, Kendall Powell, made a similar point.</p>
<p class="times">The main reason for rising prices, of course, is the
surge in demand from China and India. Hundreds of millions of people
are joining the middle class each year, and that means they want to eat
more and better food.</p>
<p class="times">A secondary reason has been the growing demand for
ethanol as a fuel additive. That's soaking up some of the corn supply.</p>
<p class="times">You can't easily stock up on perishables like eggs or
milk. But other products will keep. Among them: Dried pasta, rice,
cereals, and cans of everything from tuna fish to fruit and vegetables.
The kicker: You should also save money by buying them in bulk.</p>
<p class="times">If this seems a stretch, ponder this: The emerging
bull market in agricultural products is following in the footsteps of
oil. A few years ago, many Americans hoped $2 gas was a temporary
spike. Now it's the rosy memory of a bygone age.</p>
<p class="times">The good news is that it's easier to store Cap'n
Crunch or cans of Starkist in your home than it is to store lots of
gasoline. Safer, too.</p>
<p class="times"><b>Write to</b> Brett Arends at <a class="times"
href="mailto:brett.arends@wsj.com">brett.arends@wsj.com</a> </p>
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