It seems the pressure from all sources (financial, political, consumer, global) points that this must happen. But the Fed wants to hold the line on inflation.
I mentioned in that post some grocery inflation due to Tyson Foods (TSN):
"But Tyson was able to diffuse cost pressures during the quarter by passing them along to consumers. It hiked chicken prices by 18.8% from a year ago, beef by 13.0%, and pork by 6.1%. That depressed the amount of meat the company sold but helped it boost margins."
Sanderson Farms (SAFM), another chicken producer had its earnings yesterday and some striking numbers - much of it due to this misguided attempt to force feed ethanol down people's throats (when studies show it uses more energy to produce, than it creates!) - via Forbes/Reuters:
- Increasing feed costs drove Sanderson's worse-than-expected performance. During the third-quarter prices for corn and soybean meal, Sanderson's primary feed ingredients for its chickens, increased 68.4 percent and 12.7 percent rom a year ago. Booming ethanol production has driven those prices higher by gobbling up corn supply and diverting other users to the corn fungible soybean.
- Sanderson's Chief Executive Joe F. Sanderson Jr. said the high price of grains will continue to pose a threat. "Looking ahead, we expect the market for both corn and soybean meal to remain high and volatile into fiscal 2008,” said Sanderson.
- During the quarter, prices for leg quarters were up 49.5 percent, while breast meat averaged 24 percent higher, and whole chicken prices were up about 17 percent.
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4 comments:
I wanted to comment here that I appreciate these posts on the obvious inflation in daily items, most especially food. The increases in meat products was an easily forseeable event from the tremendous increase in corn demand. I'm just suprised by how much these price increases are - not minor by any means. The problem with looking only at CPI is that large increases in these ex- items like fuel and food will eventually affect prices of non-exluded items, and the larger the increases the sooner that will happen.
My degree is economics so I like to read these big picture things and see where the 'big ship' is turning. Although not quite as interesting as the individual stock names. But the macro is telling us, get the hell away from anything tied to the consumer (finally) - the death of the American consumer has been called for years, and I won't call this the death - just a return to normalcy (pre 2002?) but compared to where we have been thats going to feel like death. Also with wages not keeping up with cost of living, people are just running in place the past 6-7 years. So they went to credit in increasingly large waves to spur spending. Now without as much access to credit, we see what happens.
This (risk, credit and mortgage issues) is definitely a longer term issue that will be played out over time as the effects ripple through the markets, domestic and international.
Regarding your comments on the U.S. consumer, this is an interesting report:
The recent Consumer Shopping Pattern survey indicates more consumers are now becoming "circumspect" because of the housing and credit issues, affecting mid-level department store and larger-ticket home items (See SHLD reporting a 40% drop in profits).
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