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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The Japan Outlook


Armstrong Economics Blog/Japan Re-Posted Oct 7, 2022 by Martin Armstrong

QUESTION: Marty, I greatly appreciate all you do to try to prevent this war cycle. You have said many times Socrates beats you. With missiles flying over Japan here, what do you see ahead?

AS

ANSWER: Nice to hear from you. It does not look very good. A year-end closing below 6805 will warn of a major crash in the Japanese yen next year.  I cannot stop the cycle. The best I can possibly do is perhaps reduce the amplitude. Even that is speculative. It just seems that we have insane leaders who care more about defeating Russia for this climate change nonsense. What they are doing to farmers in the Netherlands is insane. They know that the current monetary system is collapsing. They are using the war in hopes of creating an excuse and a diversion from their own sovereign debt defaults – hence you will own nothing and be happy.

All the market look to be cascading into 2023. This is not my opinion. I wish I did not even have to talk about this nonsense. The ray of hope is we get to restart the world economy post-2032. That is when we will hit the control-alt-delete. All I can do is try desperately to get society just for once to look at history and see what systems worked and what failed.

US National Debt Reaches Historic High


Armstrong Economics Blog/Gov’t Incompetence Re-Posted Oct 7, 2022 by Martin Armstrong

The US national debt has reached a historic high under Biden after surpassing $31 trillion. The national debt has always been chaotic as politicians push spending agendas with no plans to pay their debts. The only time the national debt was paid in full was in January 1835 under President Andrew Jackson. The US fell into debt just one year later as a result of the Civil War and Jackson’s war on the banks.

The last time the US experienced a surplus was in 2001, although the debt still increased. COVID spending pushed the nation’s debt to new levels, and the US government spent $3.1 trillion more than it earned. In 2021, the federal government spent $2.8 trillion more than it earned. Now in 2022, the Biden Administration is announcing a new spending plan each week.

Biden spent $1.9 trillion on the American Rescue plan last year, which many blame for fueling inflation as $400 billion was earmarked for Americans to stay home and not work. Biden attempted to pass the $5 trillion Build Back Better bill, the largest proposed bill in US history. When that bill failed, Biden signed the Inflation Reduction Act for $740 billion. Numerous independent studies have stated that the act will only worsen inflation.

Biden plans to spend around $400 billion to cancel student loan debt for families earning as much as $250,000 annually. To add insult to injury, Washington has sent Ukraine nearly $17 billion this year alone. This administration is not worried about taxpaying citizens, and eventually, the citizens will be the ones footing the bill for Biden’s excessive spending.