In our house there is a division of household chores that is, probably like many households, unequal in many ways. One of the chores I get to routinely do is the grocery shopping. It started many years ago, and I like to think I am pretty good at comparison shopping while bringing home the food the family will consume.
Over the last six months or so, I’ve noticed first hand quite a few prices starting to climb. It started with certain fruits and vegetables. However, there are quite a few substitutions that work fine. Last spring before the local growing season, I recall green beans (imported from Mexico) were out of stock because of bad weather. Later a sign went up saying the southern storms severely impacted the peanut crop, so peanut butter may be out of stock at times this season. Not to mention more expensive. Then crackers and cereal started to climb. Most recently, pasta. They say this is at least partially due to the wet weather in North Dakota significantly upsetting the durum wheat crop.
On a larger scale we have seen huge increases in the price of commodities over the last couple years. Oil, corn, soybeans, metals, and other commodities affect many different things. In the construction business, almost all supplies have gone up in the last couple years, including lumber, steel, gypsum board, and accessories. Being in the business of designing, delivering and building post-frame steel structures, I am acutely sensitive to steel and lumber prices, along with diesel fuel. I get twitchy when I see steel prices 30% over 2009, and feel helpless when diesel pushes through $4 a gallon. Of course, $7 corn makes me feel a little bit better because my agricultural
customers will have a good market for their crops, and maybe buy equipment - - and storage buildings! Then I go shopping and I see agricultural commodities differently in a box of breakfast cereal.
Until this past month, though, the government reports have indicated inflation is under control, meaning on average prices are not rising. We now have data to show increases, though only at the wholesale level. Don’t the authors of these government reports have to buy groceries?
I guess what we all really want is stable prices. However, given the turmoil in the world, from sovereign debt crises in Europe to the United States deficit to the geopolitical implications of the Arab Spring on oil supply stability, not to mention the weather, we might be in for a bumpy ride for quite some time. It makes it challenging to balance costs and prices in a competitive marketplace.
Hopefully prices will stabilize on all levels as we go into the fall season. In the meantime, if I see a deal on peanut butter, I am going to stock up.
Written by Pete Marsnik, CEO, Northland Buildings, Inc.
