All-time high oil prices (US$120/barrel and US$4/gallon) increase the cost of transportation – and up the tab for many petroleum-based agricultural inputs, including fertilizers and farm equipment fuel. Increased planting of corn to sell for biofuels has constrained other crops like wheat and soybeans. It has also caused a dramatic increase in the price of corn that’s used to feed livestock – impacting everything from milk to beef. Overall, supply is squeezed and prices rise.

In the U.S., rapid price increases on rice have caused a run on the commodity at big-box stores. Although USA Rice Federation spokesman David Coia has said there is no rice shortage in the United States, consumers were purchasing so much (most likely in anticipation of future price increases) that Costco and Sam’s Club have set limits on the number of bags consumers can buy.

The increase in organic feed prices has even caused some organic dairy farmers to switch back to conventional milk production. What’s more, prices for non-organic corn, soybeans and wheat are now so high that there’s little incentive for farmers to go organic. (Read more about the situation here.)

Globally, price increases are causing “food riots” as lower-income citizens rebel against an increasing share of wallet for eating, while higher-income consumers shy away from organic premium-priced foodstuffs. Food Nutrition Science reports the countries are trying to improve the situation – “Egypt, India, Kenya, Morocco, the Philippines and Vietnam have reduced tariffs on imports. China has introduced price controls on grains, dairy products, milk and eggs to combat inflation. To replenish grain stocks, the European Union recently suspended their land set-aside requirements.” And, as reported by the UN Secretary General, “world food production must rise by 50 percent by 2030 to meet increasing demand.”

What can you do as an investor?

  • Explore public companies that are increasing their share of organic, sustainable or fair-trade products – including Unilever, Group Danone, and PepsiCo. (Sorry, Trader Joe’s is still private.)
  • Join the HIP Roundtable “Put Your Money Where Your Mouth Is” on Tuesday, May 13 – Food: Organic, Fair Trade and Beyond – SIGN UP HERE
  • Seek out private companies for angel, venture or growth investments. As an accredited investor ($2 million net worth; $200k income), you may be able to buy shares in a company that is using sustainable methods, integrating organic ingredients, or paying a fair-wage for farmers and staff.
  • Read the Goldman Sachs (GS Sustain) report which includes a section on the Food Industry.

What can you do as a consumer?

  • Grow your own. Plant herbs, salad, vegetables in your backyard – or even be a beekeeper for honey. (We at HIP hope to have a “green roof” that has its very own goat to graze and make chevre.)
  • Buy organic foods, which don’t rely on petroleum-based fertilizers. Yes, prices are going to go up, but stick with organic whenever you can for health reasons. (In our HIP household, we use a gallon of milk weekly. Though the per-gallon premium is 100%, that’s only $3 per week more – are you willing to invest $156/year for your daily health and milk consumption? We are.)
  • Buy meats and eggs from animals that have been “pastured” or 100% grass-fed. Yes, these products are expensive, but they don’t rely on corn – and research shows they’re actually more nutritious. (The main carbon footprint for organic yogurt is in the type of feed for the cows that give the milk, says Stonyfield CEO Gary Hirschberg. Using grass-fed cows instead of grain-fed cows eliminates more than half of the greenhouse gas emissions related to that yogurt cup!)
  • Buy at farmers markets, where foods have traveled less (meaning less oil has been consumed). They’re most likely to be fresher, too. The “loca-vore” movement (150 miles or less) saves transport fuel and costs, supports the wealth of local farmers, and tastes better – because it tends to be healthier.
  • Eat more leaves but fewer grains and meats (read all about it in Michael Pollan’s latest book, In Defense of Food). We are in the midst of changing our DNA yet again as a species with all of our new food innovations. This happens over generations not decades, so as Pollan says, “cook and eat like your great-grandparents.”

A special New York Times portal profiles the tradeoffs of being HIP – from watching your “food miles” and “carbon footprints” to farmers foregoing long-time federal tax credits and incentives. How are organic entrepreneurs competing and still gaining revenue? What’s coming next?