Companies Stock Up As Commodities Prices Rise

The Wall Street Journal ^ | 2-3-2011 | AM PLEVEN And MATT WIRZ

[blam]

Companies Stock Up As Commodities Prices Rise

By LIAM PLEVEN And MATT WIRZ
Feburary 3, 2011

Companies contending with rising commodity prices are stockpiling rubber tires, cotton clothing and other goods, a maneuver that is aimed at insulating them from inflation but also could contribute to it.

John Anton, founder of Anton Sports, with his surplus supply of cotton T-shirts in Tempe, Ariz., last month. Spice-maker McCormick & Co. stocked up on some ingredients and Monro Muffler Brake Inc. bought extra tires and motor oil, assuming prices of those goods will keep rising. Anton Sport, a small athletic-wear wholesaler in Tempe, Ariz., amped up its fabric purchases to avoid higher prices.

These pre-emptive purchases are a fraction of overall business activity, but the trend is being watched by economists and business executives. The stockpiling comes at a pivotal moment for the global economy, as central bankers scramble to judge the impact of raw-materials price increases and figure out whether or when to raise interest rates.

Purchases made more because of perceived inflationary pressures than a response to demand are important because they signal that inflation expectations are climbing. Economists often focus on inflation expectations, because they can spur people to speed up their purchases, in turn driving prices higher.

"The price increase then becomes a self-fulfilling prophecy," said Zach Pandl, an economist at Nomura Securities. Once the cycle ends, prices can collapse, he said.

The hardest part is pinpointing when this cycle begins and figuring out when to step in to quell it.

[snip]

[blam]

Inflation's First Phase

[BobL]

Any company with half a brain at the top (which, I admit, is rare) and some cash kicking around sure as heck better be stocking up, because the ONLY WAY prices are going to go are UP^^^, thanks to our printing of money. And when they go up enough, the demand to DO SOMETHING, ANYTHING, will be too loud for the politicians to ignore...and what do you get...yep, PRICE CONTROLS...and what always happens when prices are artificially constrained...yep, SHORTAGES. That is why it is smart to stock up when times are still good (which, believe it or not, times are still great here - compared to what’s in store).

Obviously the same holds for people. I have 4 years plus worth of every non-perishable item that I can think of. In most cases, I stocked up 2 years ago. Prices are up on those items (thousands of dollars worth of stuff), and I have easily beaten the returns that I could get if I had stuck that money in the bank.

[Kartographer]

People need to do the same thing.

[blam]

"Obviously the same holds for people. I have 4 years plus worth of every non-perishable item that I can think of. In most cases, I stocked up 2 years ago. Prices are up on those items (thousands of dollars worth of stuff), and I have easily beaten the returns that I could get if I had stuck that money in the bank."

Ditto. You're a wise man.

[BobL]

“Ditto. You’re a wise man.”

Thanks, I do a lot of dumb things, but when a no-brainer like our situation is staring you in the face, it’s really stupid to ignore it.

Heck, my wife is normal (no tin foil hat, like me), and she even loves the idea of having just about everything (including 6 months worth of food) available, for whenever we need it.

[goodnesswins]

I told friends of ours in November 2008 that the depression was coming....well....I might have said recession....and that I was stocking up.....I’m sure they thought I was weird....in fact, I know they think I’m weird....they haven’t spoken to me since....THEY voted for OBAMA!

And, yes, I’ve often thought as I was stocking up as prices go up.....I’m MAKING money....but admittedly...so did our stocks. We’ll see about the future.

[Tagurit]

I have hit a new dilemma!
I’ve got a solid 6 month supply of food (Canned & dried) stocked up and have had this for over 2 years. Even with rotating stock, I am having trouble racing to beat the expiration dates. Other than rice, honey, dried pastas and high dollar MRE’s … what else can one stock up on that will last 4+ years?
It seems that now, by rotating stock, we are always eating old food.
I can’t imagine stocking up with a 4 year supply.

Getting sick from old food and filling the garbage can with outdated food is no way to save money.

[Jet Jaguar]

Ping

[blam]

Food is good for much longer than most people know. See here:

Five Different Shelf Life Studies: Two on Canned Food and Three on Dry Food

"NFPA chemists also analyzed a 40-year-old can of corn found in the basement of a home in California. Again, the canning process had kept the corn safe from contaminants and from much nutrient loss. In addition, Dudek says, the kernels looked and smelled like recently canned corn."

[BobL]

I couldn’t see a way to make stocking up on food work - and if we really got into a situation where we didn’t have food, I’m not sure that I’d want to stick around in that society.

But I still have some. My approach is to have mainly rice and noodles for about 6 months - I have other canned stuff, but not a whole lot. I figure that there will always be food, to some extent, and given my supply, I can supplement it with rice/noodles, and do much better than my neighbor trying to scrape by on subsistence levels of government-restricted food.

That’s about it. My 4-years of stuff includes things like toilet paper, bags, soap, etc...but not food - way too much to hold on to. The 4-year supply is more for comfort, so I don’t have to be waiting in line for an hour to get my 2 rolls of toilet paper after the dollar crashes, for example.

[A_Former_Democrat]

What are some of the things you would suggest to stock up on? Presuming available household storage space, of course.

[Nachum]

Thanks for the heads up Jet Jaguar

The list, ping

Let me know if you would like to be on or off the ping list

http://www.nachumlist.com/

[BobL]

Just look around and look at what you buy on a regular basis. Lots of soap/shower stuff. Laundry detergent. Clothes, especially underwear. If you work on your cars, lots of motor oil and other chemicals. Light bulbs, of course. Toilet paper, paper towels. Things that you would really want to have, should the supply lines get cut. I went even further and bought cars and replacement water heaters. The list is endless...

[hinckley buzzard]

Well, I don't know why you think you need a six month supply of food, to begin with. The world is not coming to an end any time soon, and modern conveniences won't disappear short of a nuclear war. If that happens, expiration dates won't matter because your food will be safely irradiated and last a lifetime, like my can of 1967 C-rat ham and eggs sitting on my desk.

[blam]

I read an article around here the other day warning that prices from China would be increasing by 30-35% by summer.

Here:

China To Raise Prices On US Consumers By 30%

[Tagurit]

You never know what man made or natural disasters may occur.
Some call stocking up “a fool’s errand”. Others say, not stocking up is foolish.
It’s the ant and the grasshopper thing….

[Tagurit]

Thank you for the link Blam.
I have (and still somewhat) relied on:
http://stilltasty.com/

BobL, I agree. I also have thousands of coffee filters and Calcium Hypochlorite for water purification, tons of aluminum foil, trash bags, TP, propane, soap, etc…
I feed the wildlife in my back yard regularly. I also have a high powered BB gun (for soft report) and 10,000 BB’s in case the doves, squirrels and rabbits have to feed me!
(I do have real guns too… they’re just louder and much more destructive.)

[kingpins10]

“Once the cycle ends, prices can collapse, he said.”

LMFAO! We have ourselves here an optimist!

Or as I like to say, “Yeah right!”

[Lancey Howard]

Here we go...