By Alexander Ochoa, SmallCap Sentinel Member

A news report showed throngs of people overseas fighting for a bag of rice and the news agency used that as their lead-in to a story about Costco (NASDAQ:COST) considering limiting the amount of rice consumers could buy much like competitor Wal-Mart (NYSE:WMT) announced last week. Cut to a rice farmer in the central valley of California who told the field reporter that his silos were full and he has plenty of rice to sell. The farmer blamed the media for the scare. He thinks it’s all hype.

The U.S. is experiencing the worst food price inflation in 17 years according to government reports and according to Wal-Mart on Tuesday, buyers are changing their eating habits by purchasing more white meat and less red meat, stocking up on larger package sizes and buying more boxed frozen meals as eating at home replaces going out. 

While fertilizer costs have doubled from last year and farm labor shortages feeds into food price hikes (much like gas to get the goods to market), Americans still spend only about 10% of their disposable income on food and beverage purchases per year, according to the Department of Agriculture. That's below the 15% share of disposable income that Europeans spend on food and drinks, and the whopping 70% that people in Pakistan and Bangladesh budget for consumables. Maslow would be proud, indeed.

Products with the steepest retail price jumps in the first quarter of 2008 in the U.S. were: a 5-pound bag of flour, up 69 cents to $2.39; cheddar cheese, up 61 cents to $4.71 a pound; corn oil, up 58 cents to $3.01 a 32-ounce bottle; and dozen large eggs, up 55 cents to $2.16 according to the American Farm Bureau Federation. 

So even with a 4.5% expected rise in overall food prices, Americans, per person, will only spend an extra $87 this year on groceries, according to the Economic Research Service of the Department of Agriculture. 

I think there are some bargains here, not small cap bargains, but lower priced large caps. While General Mills (NYSE:GIS) trading at $61 and Kellogg (NYSE:K) trading at $52 in the processed and packaged goods sector might be too pricey, how about Campbell Soup (NYSE:CPB) trading around $35, Dean Foods (NYSE:DF), which is primarily in the dairy business (but also owns Morningstar Farms) trading in the $25 range and ConAgra (NYSE:CAG) which trades in the $24 range (near its two-year trading low) which owns: Chef Boyardee, Healthy Choice, Marie Callender's, Orville Redenbacher's, Slim Jim, Hebrew National, Kid Cuisine, Reddi-Wip, VanCamp, Libby's, LaChoy, Manwich, Hunt's, Wesson, Act II Popcorn, Snack Pack, Swiss Miss, PAM, Egg Beaters, Blue Bonnet, Parkay, and the Rosarita brand.(what a line-up!). 

People have to eat. And once the November election is over and oil drops and the stock market is filled with promise and the doom and gloom media reports are ended, wouldn’t it be great to say, “I bought ConAgra at $24,” when its trading for $34.