A Sweet Year Ahead Could Cost You a Fortune!

Good news. The world keeps right on spinning. That may be it when it comes to the good news! I see some very cloudy skies ahead in some of the most important categories of our everyday lives. We might have to brace for what I’m going to call the “reign storm” that may start to darken some of the financial skies beginning right now, about 3 weeks ahead of Inauguration Day 2017.

While some food costs actually decreased in 2016, we're looking at rising prices in 2017 driven by increasing vanilla extract cost.

For one, we just saw the interest rate hike that has brought mortgage rates to a level higher than it has been in the past several years, and there is more of that coming in 2017. I’m used to the ever changing things that are just part of life and that I have to adjust to every year. I said used to, but I’m not always happy about them. I guess that’s because I can actually remember the days, for example, when oh, I wasn’t put on hold for 45 minutes when I called someplace on the phone and then was told that “my call is very important and that they are experiencing a high volume of calls today”, just coincidently anytime I call!

That’s why when something good happens, revel in a brief moment of abandon and smile, it may not be that long lasting!

Food Prices in 2016

Believe it or not, something good has occurred this year, in 2016, that hasn’t happened since 1967, almost 50 years ago! The price of food actually declined this year about 1% for the year. 1% doesn’t sounds like a heck of a lot, but when you compare that with the infinitesimal COLA increase in Social Security for 2017 (payments are increasing by 0.3% for 2017 compared to 2016) it sounds like you may have hit the lottery as it represents a 333% difference in those two figures in your favor.

But as I stated above, don’t get too used to that good news. Things will be changing again and just like the cost of food has done now 49 out of the last 50 years, it will be going up again in 2017. You are probably wondering why? Why me? Why now? Why again?

Vanilla Extract Cost

Here’s the lowdown on what you can expect to see happen.

First, one major news event is the vanilla bean. Vanilla, vanilla? Yes, the price of vanilla beans is skyrocketing right now. Did you know that currently 85% of the world’s vanilla bean crop comes from the little island nation of Madagascar? There’s a huge shortage of the beans occurring worldwide and that is a thought that doesn’t hit my “sweet spot”!

There are a few reasons why this is occurring so let me explain. As recently as 2005, there was a bounty of vanilla beans around the world. At that time, Mexico was the biggest supplier to the US of vanilla beans and prices were declining because of that abundance. As a result, many farmers stopped growing the beans because the price had fallen so low that they weren’t making enough to make it worth their while. In some instances, they actually burned down their vanilla bean vines.

To complicate matters, drought conditions and political crises over the past couple of years have further reduced production of the treasured beans. With the supplies limited, you guessed it, the price has been skyrocketing. Even with the supply from Madagascar at their very high production, world demand is at a fever pitch and the “middlemen” who broker the trade of such commodities are reaping a fortune from the buyers, who are the producers of products that depend on the beans. Even though there are plans now to increase production, it won’t be in time to affect 2017 needs and by the time it does, it will probably drive the cost down again so that the cycle may in fact repeat itself.

Fresh Fruit Cost

Just to add a few more pieces of wood to the fire here. Can you say coconut? The rise in demand for coconut, components like coconut water for example, are driving those prices higher than ever. Compound the entire fresh fruit category with it (due to demand and shortages due to weather issues) and you will see another jump. In fact, orange juice prices in the US are expected to go up by about 25% this coming year!

What's Coming in 2017

So what does it all mean? If you like fresh fruit or like vanilla (and really who doesn’t?) and thus anything sweet, you may be doomed! Quality products that you are eating are made from real fruit and vanilla beans. Things like ice cream, cookies and baked goods are the prime items which we love that are most affected. But even something as simple as vanilla extract, that you may use at home yourself, has seen 2 spikes in price in 2016 and faces even more in 2017!

Some manufacturers may switch to cheaper qualities or even imitation flavorings and that may cause a difference in the taste of some of the more familiar items we eat. If that happens, you will not see as much of a difference in retail prices but that’s not likely to occur among the more well-known brands.

I’m not going to ask you if you are willing to give up your ice cream, cookies and baked goods when the prices spike as predicted in 2017. The question I will ask is this one.

“Can you live in a world where vanilla ice cream is a reward that you work so hard to afford each week?… and where is Madagascar anyway?”