Leading Edge of Field to Fork Inflation Starts to Arrive in September Producer Price Index


Posted originally on the conservative tree house on October 12, 2022 | Sundance 

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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