The “Producer Price Index” (PPI) is essentially the tracking of wholesale prices at three stages: Origination (commodity), Intermediate (processing), and then Final (to wholesale). Today, the Bureau of Labor and Statistics (BLS) released September price data [Available Here] showing another 8.5% increase year-over-year in Final Demand products at the wholesale level. However, that’s not the bad news in this data.
While the overall September PPI was higher than expected at 0.4%, the Final Demand Producer Price for food products in September was a whopping 1.2% (14.4% annualized).
The BLS notes the driver by saying, “a major factor in the September increase in prices for final demand goods was a 15.7-percent advance in the index for fresh and dry vegetables. Prices for diesel fuel, residential natural gas, chicken eggs, home heating oil, and pork also moved higher.”
That’s a 15.7% increase in price, in one month, for fresh and dry vegetables. Annualized that’s a rate of price increase of 188.4% for vegetables. Remember the warning about farm costs (energy, fertilizer, fuel) driving field to fork inflation at harvest? This is the leading edge of that third wave of food price increases.
I have modified BLS Table-2 to focus specifically on food costs. The data is on left.
You will note that ‘row crops’ are the big drivers along with grain and seed products. This is exactly as we predicted it would be because those specific farming costs are the ones with greatest increase from energy, fuel, fertilizer, weed and insect control, and diesel costs.
All of those higher costs have been growing in the fields and will now surface at harvest. The higher farm costs transfer from the field to the fork via the food supply chain. This is only the leading edge of the price increase.
In October 2021 we first warned of the food price increases coming in distinct waves. The first was Jan, Feb and March 2022. The second wave was May through July 2022. This third wave will be bigger than the first two and starts arriving this month, October 2022.
People laughed at me when I said in late 2022 eggs were going to reach .50¢ EACH ($6/doz).
Well, in September the price of fresh eggs jumped 16.7% in a single month. That’s an annualized rate of price increase for eggs over 200%.
With hindsight you can clearly see the three waves of food price increases (BLS Table A):
Get ready and shop smart.
The October, November and December price increases in the grocery store are going to make the prior fresh food increases look small, as the full increased costs of farming operations starts to arrive at the supermarket. Unfortunately, this will coincide with a wave of gasoline price increases, and the prices of natural gas are already skyrocketing.
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TCTH was one of several voices writing and talking about this. I’ve been stocking as I could with sales for the past year.
Choosing to cut eating out to a minimum and put that money to cans and boxes of food.
I’m still seeing sales, but not as many and the sale prices are higher than a year ago.
We have changed the way we eat. Less beef and more beans and rice.
Shutting down the roaring Trump economy on the sinister pretext of a bat virus was bound to have long-term consequences.
Unfortunately for everyone who fell for the scam, the bad consequences were all part of the plan.
Thanks so much for the information. Took more notes will share the information with Mom and others as well as the site. I am still having trouble finding products past the date of 12-2023.
I saw this comment posted elsewhere and it seemed to make sense to me!
So if this recession is a Supply-side problem, how do you stimulate Supply growth without exacerbating the Demand-side of the economy? hmm…. Tax cuts on the top tax tiers? Sounds like a plausible approach. Might be some other levers to pull in fiscal policy too.
I would think this should be an alternate—and perhaps more discriminating—approach to raising Interest rates which would snuff both Demand-side and Supply-side at the same time, wouldn’t it?