Tuesday, January 25, 2011

WSJ Warns on Higher Prices

They write:
It's getting pricier to throw some ribs and burgers on the grill. And you can blame the surging price of corn.

That's because much of the corn grown in the U.S. is used as animal feed. And "we're using $6 corn to feed hogs right now," up from about $4 last year, says Michael Swanson, an agricultural economist at Wells Fargo in Minneapolis. "Either the hog guy is going to go out of business or you're going to pay more for pork." So if you "want barbecue ribs," he adds, "you're going to have an extra $10 attached to it."

A lot of manufacturers and retailers are expected to bump up prices this year on many basics -- from ribs to coffee to khaki pants -- as they pass along the escalating prices of the commodities, or raw materials, they use.

The prices of many commodities -- including corn, cotton, wheat, coffee, sugar, cocoa and soybeans -- surged last year as severe weather crippled some crops and demand from nations like China and India continued to explode. And the trend is expected to continue this year.

The United Nations' Food and Agriculture Organization's monthly Food Price Index, which monitors the monthly change in a basket of commodities including meat, dairy and sugar, rose for the sixth straight month in December to its highest level since 1990.
One technical note: Manufacturers can't just "pass along" price hikes they experience for their raw materials. What is going on is that there is more competition for commodities (because of increased demand and because of Bernanke money printing). If there wasn't increased bidding for commodities, prices wouldn't be climbing. Thus, manufacturers, to stay in the game, will attempt to raise prices. But this is likely to mean some fall in the quantity demanded, which means a failure to pass the price increases on to some, who just won't buy the product anymore, i.e. the price increases are truly a lowering of the standard of living for some.  Especially those who are last in line to get Bernanke's new money, while those first in line to get the new money, like Goldman Sachs employees, eat caviar.

1 comment:

  1. It has nothing to do with weather or "evil busnessmen"...It is due to Fed printing money and STEALING from us. To the psychopath politicians that refer to themselves as "Leaders", all food is animal feed because that is what we are to them...Tax Cattle.