The Commodity Rebate

In the chart below we calculated the 2008 price change of the major food and energy commodities in the CRB index (Corn, Soy, Wheat, Cattle, Hogs, Oil and Natural Gas) and multiplied the changes by the annual per capita consumption of each item. While this method may oversimplify the actual costs, it provides a good idea of how changes in commodity prices have impacted consumers wallets this year. Less than five months ago, the price of oil and other key commodities impacting the consumer were trading at record highs. Because of these price increases, the average consumer was spending an additional $4.77 per day compared to the start of the year.

Five months later, we find ourselves in a situation where these key commodities have now declined by record amounts. As a result, the cost of higher commodities has turned in to the windfall of lower commodities. While consumers were spending an additional $4.77 per day in July, they are now getting a benefit of 4.02 per person per day. On an annualized basis this works out to $1,460 per person. While there are certainly plenty of headwinds out there, it's nice to see that at least some things are going in our favor.

click to enlarge

Comments

[smc:]

that is only true if retailers and consumer products companies pass lower commodity prices through to consumers which they are slow to do

2008 Dec 05 11:46 AM

[patio:]

Slow? They have no choice, everyone is buying very selectively or not at all.
In normal times, however, I agree with you. I can't believe how fast gas has fallen, very unusual, they usually keep it jacked up lagging oil decreases.


On Dec 05 11:46 AM smc wrote:

> that is only true if retailers and consumer products companies pass
> lower commodity prices through to consumers which they are slow to
> do

2008 Dec 05 12:25 PM

[Pipo:]

Biggest weekly drop in OIL since the Persian Gulf War in 1991.

Read the Full Story on:

www.oiltradersblog.blo...

2008 Dec 05 06:58 PM

[Roowns:]

People ignore the fact companies benefit from falling commodities too, making products cost lower and final products cheaper, so it's benefiting the consumer too. Of course, right now they have included in cost the higher commodities price from summer, but this will change soon.
Companies seen themselves in the situation of very high material and transport costs, not a very good market, so they tried to lower where it could, from salaries.
As a fact unemployment started to rise fast.
I expect better times in the spring-summer of 2009.

2008 Dec 06 07:38 AM

[ain't no fo...:]

However, it appears supermarkets are lagging at passing down the lower prices to consumers I notice, even as more products are being put out with smaller sized packages and the same price. Many co's, especially the national and premium brands, have done not one but two downsizes in the last couple of years while keeping (or even increasing) the sticker price.

They must think we're pretty stupid, but you know what, we are, because we keep buying that stuff even tho we know what they're doing. Stick to the generics and private labeled supermarket brands, they usually come from the same place, they usually aren't shrunk as much, and they are just as good.

2008 Dec 06 02:08 PM