I don’t ususually get into economic discussions as there are many people more informed and intelligent than I am. But I do pay attention. I have the fortunate position of dealing with commodities and input materials in my every day business as a plant grower/farmer. I am here to say, inflation is coming to a US city near you. The monetary base in the US has exploded over the last year due to the cheap price of money to those who can still get it. Consumers aren’t seeing all the money due to the fact banks are building up reserves and the government borrowing.
We’ve all seen the commodity prices lately and they are almost all at record highs. Those are inevitably going to be passed down to the consumer. Corn, grain, basic materials, all go into the products we consume. Companies have been eating those costs to avoid raising prices in such a tough economy but that’s about to all change.
As a buyer of comodities for my business and a tracker of the meat markets, I’ve seen a huge increase this winter in prices. A calf that I bought last year at market to raise for meat went for $400. This weekend to buy that same calf? $675. Add to that the higher price of corn and butchering and the price of a quarter steer just went up 50%. Now it may sound over simplified to use my meat rasing to judge an entire economy but I have been right more often than I’ve wrong. I call it the sustainability factor.
The sustainability factor is the ability to sustain activity at their current levels. I could see it on the credit front. I could see it on the cash rent prices of farm land. Now I can see it in the grocery store. Prices are about to take off. Here are the price increases in 2010 going into fall
*Agricultural Raw Materials: 24%
*Industrial Inputs Index: 25%
*Metals Price Index: 26%
*Palm Oil: 26%
*Iron Ore: 103% (source)