Tag Archives: inflation

Business/Economics, International, U.S.

Cooking Oil, the new Gold: Prices going up (again), cooking oil becoming target for thieves, and Warren Buffett!

05 March 2013/22 Raby’ ath-Thani 1434/15 Esfand 1391

Cooking oil prices just keep going up at the grocery store.  I remember when I could get a gallon of vegetable oil at Walmart for around $1.00 USD,  now it’s close to six bucks per gallon (last time I checked, I still have a little bit-o-that last gallon I bought for a buck, I been using butter cause it tastes better and it’s cheaper where I get it).

Reasons for cooking oil prices going up range from individual countries imposing and increasing import taxes on vegetable oil, to wars, to crime, to supply/distribution issues, to it being used to make fuel for vehicles and problems (like drought) growing the crops used to make it.

Of course, any war torn country sees skyrocketing prices in the basic necessities, like cooking oil.

Interestingly I’ve seen recent conflicting reports concerning India.  Some reports say the price will come down as demand has dropped (due to it being expensive), yet other reports say the price will go up because India is increasing their import tax on foreign made cooking oil (in the name of protectionism).

In the Indian state of Himachal Pradesh, cooking oil is now part of the state government’s welfare program for low income people.

In Malaysia, palm oil prices are up. In the last week prices fell on rumors that soy oil (currently the cheapest form of cooking oil) yields from China and the Americas would be so large that palm oil couldn’t compete.  Now prices of palm oil are up on predictions that supply will fall. However, there’s also the chance that demand will fall as the Malaysian government has imposed an export tax on their own cooking oil product. Oh the joys of western capitalist commodity markets!

China is buying up soybeans from South America. Apparently China now has enough bean crushing facilities that it can crush the entire soybean crop from Argentina! Last year China crushed 61 million metric tons of soy, which is less than half what it could have handled.

Right now, China takes in about 76% of Latin America’s soybeans.  China also buys up 60% of soybeans made in U.S.A. That’s because soy grown in the Americas was (was is the key word) actually cheaper than soy grown in China. But demand keeps going up, and now reports of supply going down despite increased production.

The latest reports out of Brazil, the largest South American producer of soy, say that transportation issues are resulting in delays getting soy products shipped out. Brazil was expected to beat out the United States as top exporter in 2013, but not now. Analysts say the transportation problems in Brazil are causing demand for U.S. soy to go up, thus causing U.S. soy prices to go up.

The bad economy in Spain has hit the olive oil industry hard. The latest reports say olive oil production has dropped 60%!  Part of that reason is due to cheaper olive oil flooding into the Iberian country: “Boatloads of olive oil keep arriving from Tunisia, and the rain of the last two months has been very good for the land, auguring well for a recovery in terms of better olive flowering in May.”-Olimerica magazine

Another reason olive oil production is down in Spain is that the olives are being shipped out to India. The South Asian country consumed $2 million USD worth of Spanish olives in 2012. This is part of the reason that global demand for the oil producing olive is way up, up so high it might be outpacing the increased global production, which results in higher prices.

According to Olive Oil Times exports of olive oil to China and Japan are up 38% so far this year. Australia has increased olive oil imports by 32%.  Russia by 19%.  Also, for the months of October and November 2012 “…the US imported 53,625 tons, Brazil 14,996 tons, Japan 8,468 tons, Canada 7,447 tons, Australia 7,379 tons, China 7,270 tons, and Russia 7,035 tons.”

Now enter the con-artists. Olive oil has become such a profit maker that sellers are ripping consumers off with fake olive oils and even repackaging to sell cheaper olive oils as more expensive brands: “The olive oil sector is being subjected to a dangerous scheme, whereby traders make huge profits re-exporting imported olive oil after labeling it as Lebanese.”-George al-Aynati, Koura Olive Farmers Association

In Namibia, on the African continent, farmers say the drought is so bad they can not grow anything.  Emergency supplies of corn (maize) are running out.  Corn is used to make cooking oil.

U.S. corn prices are up. This is because of limited domestic supplies due to a combination of drought and increasing exports to other countries.

A report out of Canada says canola was the top money making crop for Canuck farmers in 2012.  However, the latest reports say canola prices are dropping, due to an expected decrease in demand from China, caused by a slow down in the East Asian country’s economy.

A report out of Colorado U.S.A., says more farmers are turning some of their canola oil crops into fuel for use in their farm equipment. This is after a bad year in which crop yields were down.

Rapeseed prices are going up and Canada’s Farm Ministry blames increased demand from China (despite their economic slow down?), with the result being short supply for Canadians: “Consequently, with availabilities likely to remain thin in Canada, and limited capacity in other suppliers to lift exports to meet any potential expansion of global demand, fundamental tightness could provide sustained market support in 2013-14.”

In Australia, export analysts are blaming the increasing value of the Aussie dollar for making Australian agriculture products more expensive for foreign buyers.

In Japan, the country’s number two cooking oil maker, Nisshin Oillio, said they will have to raise prices as much as 15%.  They blame rising prices of basic  commodities and the falling value of the yen (which makes it more expensive to buy foreign supplies).  Other food suppliers said the same, and consumers are expected to see the higher prices in their local grocery stores by April.

The increasing price of fresh grown oil crops has alternative fuel makers going after used cooking oil. But that’s creating a new problem.

In Atlanta (Sandy Springs area), Georgia U.S.A., people have been caught trying to steal used cooking oil from local restaurants! Police say the used oil is sold by restaurant owners to alternative fuel (bio-diesel) makers, and desperate people are trying to cash in by stealing it.  The most recent case involved a woman who got away with $100 worth of used coking oil.

The Philippine Department of Energy, and Department of Environment and Natural Resources, just announced a new program to use waste oil (to include used cooking oil) to make fuel. It involves a major fast food company called Jollibee.

Apparently Warren Buffett wants to jump on the money making cooking oil band wagon. According to the latest reports, Buffett’s current five faves for stock investments involve Archer-Daniels Midland Company, which is involved with cooking oil and food commodities trading. He also likes Kraft Foods, a major user of cooking oil (like in their mayo, Miracle Whip and salad dressings).

In the long run we consumers could see lower prices, as more farmers in the Americas are jumping on the cooking oil crop craze, to try and make some profits.  And, many eastern hemisphere countries are focusing on increasing their own cooking oil crops (like China and India), to try and counter the rising prices.  Analysts say this will result in a future glut of crops for cooking oil, which should, hopefully for consumers, bring prices down.

 

Business/Economics, International, U.S.

What Economic Recovery? As I warned, Cosmetic prices up, as are prices for personal care products. No more cow dung for toothpaste!

“Cosmetics were very expensive back then, and a single product could cost the equivalent of a month’s salary for many office ladies.”-Chen Linlin, L’Oréal China

Linlin is talking about the not so good economic decade of the 1930s, but it looks like history is repeating for people (in North America and Europe) who just have to have makeup.

Back on 4 July 2011, I posted how Estee Lauder Group was the first cosmetic company to jack up their prices, and that it would be a trend for the whole industry.

Recently a Forbes article showed that Estee Lauder and L’Oréal are making bank in the Chinese market.  China’s internet cosmetics market is now nine times bigger than that of the United States, a 200% increase since 2006!

Last year cosmetics makers claimed that labor costs, and the costs of resources were the reasons for price increases.  Now, with China draining the supply of cosmetics, demand will ensure that prices will continue to go up.

Don’t blame China only, blame South America!  According to a NASDAQ report, the biggest market place for Avon (AVP) products is not the home base of the United States, but South America!

But, the NASDAQ report inadvertently reveals a couple of hidden reasons for the increase in your makeup prices: “AVP has turned its toehold in Latin America into a $1 billion-a-quarter business by spending a fortune on marketing and retailer incentives — if not the outright ‘bribes’ it is accused of distributing in Asia.”

However, when it comes to cosmetics that’re supposed to stop aging, it’s vain women in the United States that still take first place when it comes to anti-aging skin care products.

According to the research company, Mintel, the anti-aging skin care market in the U.S. leads the world with $2.3 billion USD in 2011 sales!

But it doesn’t stop with makeup.  One of my daughters told me that the shampoo she uses is now $2.00 USD more than it was a couple of years ago.

According to reports, the booming economy in India is creating a huge demand for personal care products that most rural people in India didn’t have access to: “In the past we used to use sticks or cow dung ash to clean our teeth. But now, just like urban people, we use a toothbrush and toothpaste. We use shampoo and expensive oils and creams. We have everything in our village that people have in towns and cities.”-Arun Mondal, a rural villager

In Canada the demand for body soap that does not contain harsh fragrances, therefore more environmentally friendly, has a Canadian soap manufacture scrambling and expanding into the retail market.

Paul Gillepsie, owner of Island Essentials wholesale, has so much business that he’s opened a retail store in Victoria, and will expand into Alberta. In 2004 his soap products were carried in 150 Canadian stores, now they’re sold in more than 250 stores.

But can we blame rising prices on rising demand in countries like Canada, China, India, and the countries of South America, and our own United States?

According to the U.S. Bureau of Labor Statistics, the cost to U.S. consumers of personal care products has been skyrocketing ever since the 1960s! In the 1960s, the Consumer Price Index (CPI) for personal care products was just under 40.  Now, in 2012, it’s at 161 and climbing.

However, looking at the Producer Price Index (PPI), aka U.S. wholesale prices,  shows that costs of intermediate goods (which are necessary for production of finished goods) have gone down from January 2011 to January 2012!

Intermediate goods were at 6.2% in January 2011, and were at 4.2% by January 2012, a 2% drop.  The cost of finished goods were at 3.6% in January 2011, but 12 months later were at 4.1% in January 2012, a half percent increase.

What’s important in the January to January comparison is what happened in the middle of 2011.  The costs of intermediate goods pegged at 11.5% in July 2011!  For finished goods the costs hit 7.1% twice, once in May and once in July 2011.

The spikes in intermediate and finished goods mirrors the cost of raw materials (aka crude materials). Overall, raw materials began January 2011 at 10.9%, and ended the year down more than 6%, at 4.5% in January 2012.  Again, the real killer was the spike in costs in the middle of 2011, topping out at 26.1% in June!

We in the United States are still paying for those spikes in the production costs of making the personal care products we can’t be without (cow dung for toothpaste anyone?).  However, the overriding decider of retail costs is still demand for such products, which seems to increase year after year, exponentially.

 

 

Fukushima

Global Food Crisis and Government & Corporate Incompetence: Fish catch down 70% off the coast of Fukushima, U.S. FDA misleads!

Fish catches, off the coast lines of Fukushima, Miyagi and Iwate Prefectures, is down 70%.  That’s from the beginning of April 2011 to the beginning of October 2011, compared to the same time last year.

Those three prefectures are the main fishing grounds for the local Japanese fishing industry.

The reasons are a combination of tsunami damage to ports (especially Miyagi, which was literally wiped out), and radiation contamination caused by Fukushima Daiichi nuclear power plant.  Most fishermen had voluntarily stopped fishing over radiation concerns, but some continued to fish, only to find out a lot of their catch was contaminated after it arrived at fish markets.

Contrary to the reassuring statements on the U.S. FDA website, there is no standardized Japanese government testing of fish (or any food product) for radiation contamination. Most contamination was (and still is being) found by private citizens groups, or local governments who acted on their own volition.

Business/Economics, International, U.S.

What Economic Recovery? Chinese families told to prepare to tighten their belts, blame hyper inflation & Global Food Crisis

“Inflation may be a long term problem in the country because food prices may surge again and the price of manufacturing resources is likely to grow fast in the coming year.”-Zhang Shuguang, Unirule Institute of Economics

In one of the few countries where the economy is good, people are being told to prepare for the worst.

What should a family do? Those making enough money to save should start investing in physical assets, including precious metals, real estate and antiques.  (That advise is probably too late for those of us 99%ers in the United States.)

To give you an idea of how good the Chinese economy has been doing, read this: “Among urban families with average annual personal income between 50,000 yuan and 100,000 yuan, 63.7% have family wealth management plans this year, compared with 27.5% last year.“-Zhang Jinbao, Tsinghua University and Citi Foundation

Current savings trends for Chinese workers include health care, education for their children and retirement (so much for China being a communist/socialist country).  But now even bank officials are prompting families to put as much as 70% of their earnings into property, to try an avoid the coming hyper inflation!

Business/Economics, International, U.S.

What Economic Recovery: WalMart profits down, again, don’t blame the U.S. consumer, blame inflation

WalMart Stores Inc., the world’s largest retailer, saw its 3rd quarter profits fall below what they expected.  They blame price cutting in an effort to boost overall sales.

WalMart says that compared to the same time last year (3rd quarter, ending October 31), their net income was down 2.9%.  The lower prices did increase overall sales, by 8.2%, but WalMart had cut their prices below what it was actually costing them, which explains the drop in net income.

WalMart officials claim they will continue to keep prices low, despite their suppliers raising their prices (inflation).  They also admit they expect their 4th quarter net revenues to be down as a result, Merry X-mas!

Business/Economics, International, Technology, U.S.

What Economic Recovery? Whirlpool announces big layoffs, will close factories around the world

“…recessionary demand levels in developed countries, a slowdown in emerging markets and high levels of inflation in material costs.”, that’s what Whirlpool Chief Executive Jeff Fettig says about the economy, basically it stinks!

As a result Whirlpool sales are down, and they have to layoff 5,000 employees, and shut down their Arkansas refrigerator factory!

Whirlpool joins the growing number of big businesses that say: “During the quarter, we experienced weaker than expected global industry demand and elevated material costs.”

No sh*t Sherlock, Corporate America keeps laying people off.  Ironically even Whirlpool CEO Fettig blames Corporate America’s job cuts!

Whirlpool will also close a dishwasher factory in Germany, moving production to Poland (Poland is a member of the European Union, but does not use the Euro, they use their own money).

The result is not only lost jobs, but if you need a new home appliance in the near future it’s gonna cost you more; Whirlpool is jacking up their prices (hello inflation).

 

 

 

 

Business/Economics, U.S.

North Dakota: Proof that fast oil money destroys Society, can you say Hyper Inflation?

“At first, we were excited about the prospect of bringing in new people and money … but it slammed us so hard, in such a little time that a lot of locals now are kind of resentful. Now we want our town back.”-Deone Lawlar, a 57 year old native of Watford City

North Dakota is viewed as an economic bright spot in the U.S. economy,  because oil companies have recently opened up their capped oil wells, and are pumping like mad.  At first the natives welcomed the money, but not anymore.  With the oil boom not only does fast money come in, but so do hundreds of thousands of job seekers, and North Dakota just isn’t ready.

The result is hyper inflation.  It’s hitting hard right now in the housing sector, specifically rents.  According to CNN: “One bedroom apartments can run around $1,500 a month, while two to three bedroom apartments are often around $3,000.” (Holy crap, I used to live there, and I thought about moving back?)

“People are getting greedy, and we’re losing people who have lived here their whole lives.  It’s hard to make ends meet, especially with two little kids.  How does a nursing home keep up with the oil fields?”-Kristen Pallacheck, Bethel Lutheran Nursing Home, Williston (I used to live in Williston and I can tell you the town was first destroyed by the super WalMart, now after recovering it’s being done in by hyper inflation no thanks to the oil boom)

The oil industry is also destroying the infrastructure; thousands of big rigs and heavy equipment are tearing up roads that were not designed for such loads: “I drive 15 miles to work everyday with my two children and we have about at least two to three near car accidents a week.  The traffic is horrible and our road infrastructure was not ready for the hundreds of oil field trucks that tear it up.  This week alone, there were four semi truck accidents in four days.”-Michelle Falcon-Nelson, who lives in Williston

According to the Williston Police Department, accidents jumped 30%, and traffic misdemeanors increased 30% from last year.  Also, theft, violence, abduction, sex crimes, domestic abuse, has tripled, with 16,495 reports of criminal activities in Williston last year.  This doesn’t sound like the Williston I lived in, back in the middle of the 1970s!  Even with the boom in jobs, and crime, the Williston Police Department still has only 22 officers!

Speaking of the super WalMart that destroyed Williston back in the 1990s, job seekers have turned the parking lot into a campground.  In the CNNMoney video many of those working are making as much as $25.00 per hour, but because there just isn’t enough homes, or apartments, they’re still living in their cars and trucks.  One man said it wasn’t worth it and was leaving.

The oil boom isn’t helping old timers keep their homes either: “I was talking to myself this morning, and I thought, ‘How am I gonna’ feel when I have to shut this door? I sold my house and have to be out by the first of November, and how is it gonna’ feel to walk out of that door?'”-Wanda Goetz, lived in Williston for 61 years

Many wish the oil boom never came: “While the majority of us appreciate the additional revenue the energy industry brings to our community, the problem for a lot of us is that it’s not just our community anymore. We liked it better when it was ‘the middle of nowhere’.”-David Rolfson, lifelong Watford City resident

 

 

Business/Economics, International, U.S.

Not everyone in China is doing well economically, restaurants forced to use ‘gutter’ oil for cooking, blame inflation

At least 32 people are on trial in China, for collecting used cooking oil from street gutters, then selling it back to restaurants.

A company that was supposed to be creating biodiesel from used oil, instead found it cheaper to simply strain the used cooking oil and sell it back to restaurants.

Also, according to local police, the company was using a “white substance” to remove the nasty smell from the used cooking oil.  Some local media speculate that it causes cancer.

China’s fast booming economy is causing rapid inflation, many individuals, and mom & pop businesses can’t keep up.  Buying recycled cooking oil is a cheap alternative.  One report said the price of new cooking oil in China is about 10,000 yuan, or $1,560 a ton, while ‘gutter’ oil sells for around 8,000 yuan to 9,000 yuan.

This is not the first scandal relating to food safety in China.  Scandals have included melamine tainted infant formula, and pork tainted with the chemical clenbuterol.   Melamine gives false increased protein levels in dairy products.  Clenbuterol helps make meat leaner.  The Chinese government says both can be harmful to humans.

Here in the United States the FDA has approved the use of clenbuterol in animals, but not in humans.  However, the FDA is out on melamine.  Their latest studies showed that melamine was dangerous only when combined with other chemicals.  One study showed cats had kidney failure after eating 32 parts per million of cyanuric acid and 32 parts per million of melamine.

 

Business/Economics, International

China to modify Tight Money Supply policy

China has tightened money supply (monetary policy) in order to control inflation.  Now they will modify it with a “directional loose” money supply.

What they mean is that certain industries will be allowed easier access to financing.  Those industries include agriculture, certain small and medium sized businesses, and construction of low income housing.

Chinese officials hope this new policy will still hold down inflation, without putting a drag on industries.

 

Business/Economics, International, U.S.

What Economic Recovery? Global Hyperinflation, incouraged by the U.S. and Europe, China is the only one doing the right thing

“While the markets can operate on false scenarios for a significant period of time, reality always wins in the end. When it does, the situation can get quite ugly and all the profits gained from a belief in an unsupportable viewpoint can evaporate over night. At the moment, there is a lot of denial about inflation and investors should be paying attention to this.”-Daryl Montgomery, Independent Trader

People need to start studying up on basic economics.  What the G7 and the U.S. Federal Reserve are doing will lead to catastrophe, for the little guy.

After an emergency meeting on August 7, the Group of 7 most industrialized countries decided to deal with the growing debt crisis, of Europe and the United States, by flooding the markets with cash (liquidity).  One way to do that is to buy massive amounts of bonds, which is what the European Central Bank (ECB) did.

Following the G7 meeting the ECB began buying up Italian and Spanish bonds, even though the week before Germany was advising against such a move, because Italy and Spain were too bad off to be trusted to pay them back.

Injecting cash into markets, like buying up bond issues, can have the same result as overprinting money; hyperinflation.  The most recent case of hyperinflation took place in Zimbabwe.  It lasted from 2004-2009, and is considered the second worst case of hyperinflation in the world.  It happened after their economy crashed, and the government responded by overprinting money  (by the way the U.S. has been overprinting money for years now).

In a statement, the G7 (which includes the United States) tried to say their move to flood markets with cash will work as long as government fiscal policy remains “disciplined”.  There was no clarification what they meant by “disciplined”, but surely they mean that as long as governments, mainly European, continue to cut spending and increase taxes to pay their government debts, then hyperinflation should not be a concern.

Why would that be? Possibly because so many people are out of work, which reduces the flow of money in the consumer markets, and, increased taxes reduces the amount of spending money a consumer, who still has a job, has.  Also, cutting government spending is another way to reduce liquidity in the consumer markets.

But flooding markets with cash isn’t the only way to create hyperinflation, keeping interest rates low can do the same thing.  And keeping them artificially low for long periods of time will only make things worse.  That’s exactly what the U.S. Federal Reserve (a privately run central bank) is doing.

On August 9, the Federal Reserve (incorrectly referred to as The Fed, incorrect because it’s not a government agency. The Fed, or Feds, usually refers to a government agency, in fact it used to refer to the FBI), announced it would keep interest rates low, again.  Not only that but they would so so until 2013, with the possibility of lowering it even more.

The interest rate, that the mainstream media is always talking about but surely doesn’t understand, is the Federal Funds Rate.  This rate does NOT affect us little guys.  It is the interest that banks pay each other for borrowing money from each other.  Only in theory does it “trickle down” to us little people in the form of lower credit card and loan rates, and even supposedly on the interest rates the banks give us for putting our money into their so called “savings” accounts.

The past decade has proven that keeping the Federal Funds rate low does NOT “trickle down” to the little guy, working class, consumer level.

And that’s the point.  There is nothing being done to help the average John Q Public.  Everything is being done to help the big guys, the Man, the elites and their global corporations/governments.  Keeping interest rates low for the big guys, and flooding the markets with cash (only for the benefit of the big guys) are short term actions that will result in long term pain for the little guy (as if the little guy isn’t in pain now).

Even investment advisers are warning people of the dangers: “…governments that engage in this behavior frequently go to great lengths to ensure the public doesn’t make the connection and realize that inflation is caused by government actions.”–Daryl Montgomery, Independent Trader

Now, there are some officials with the Federal Reserve that are also sounding a warning.  Narayana Kocherlakota, the president of the Federal Reserve’s Minneapolis bank, has been arguing for an increase in interest rates: “Central bankers alone cannot solve the world’s economic problems.”

Kocherlakota wants to raise the Federal Funds Rate by at least a half a percent.  He says most of the economic problems in the U.S. are a result of mismatches between the labor market, and employers, and that is something the Federal Reserve can not influence.  It’s proof that what Central Banks are doing have nothing to do with solving the bad employment situation.

China seems to be the only country that’s following traditional economic policies regarding the prevention of inflation.  So far this year the inflation rate in China has hit 6.5%.  China is blaming the slow down in their economy partly on domestic inflation.

China is experiencing inflation because more people are making more money, which means more money available on the consumer market.  It’s being exacerbated by foreign banks loaning money to Chinese consumers.

China has instituted policies to restrict the money flow, by making it almost impossible for people to qualify for home loans, and even auto loans.  They’ve recently banned certain loans being issued by foreign banks.  The Bank of China is also raising their interest rates.

It hurts consumers, only in that it’s much harder to get a loan, but it restricts the amount of money in the consumer market, which is supposed to keep inflation down, which benefits consumers in the long run.  Also, if you’re a saver then you benefit by getting higher interest on your traditional savings account.

Bottom line: Low interest rates and flooding markets with cash only benefits the big guys, and only for the short run.  In the long run it will hurt everyone.