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G C Mays is a equity, grains, and economic analyst that for the last 5 years has covered the agricultural chemicals industry as well as the grains markets. He is currently expanding his coverage universe to include the entire food value chain from seed to supermarket. For intraday updates on... More
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  • November Producer Prices Show Rising Food Costs, Falling Durable Goods Prices 0 comments
    Dec 15, 2011 12:22 PM

    The Bureau of Labor Statistics reported that producer prices were 0.3 percent higher in November and are 5.9 percent higher than one year ago.

    There are a couple notable things in this report. Prices for food items rose across the board from crude to finished goods. Prices of intermediate durable and non-durable goods declined during the month. Durable good prices have tumbled in 5 of the last 6 months. Makers of intermediate and finished goods have really had their profit margins compressed by the volatile prices of crude goods. In November prices of crude non-food supplies rose by 5.9 percent, mostly due to rising petroleum costs.

    In my August post on July producer prices I wrote, "I expect inflation to moderate as the lower prices for crude materials move downstream in the value chain in the coming months." . Since that time the price index for crude materials has been volatile, first falling by 2.7 percent in the month immediately following my comment before reversing the very next month and rising by 5.3 percent. Today the index for crude non-food goods is 5.3 percent higher, prices of intermediate goods have declined by about 3% and finished goods manufacturers are receiving marginally higher prices.

    With the EUR/USD exchange rate and economic expectations being so volatile attempting to forecast the prices of crude goods appears futile.

    Producer Price Index
    PPI - Month-to-Month-0.3%0.3%
    PPI - Year-to-Year6.1%5.9%
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