Supply Excellence — Inflation at the Thanksgiving Table

Inflation at the Thanksgiving Table

November 21st, 2007 · by Tim Minahan · No Comments · supply market dynamics, supply risk

Could your Thanksgiving feast be a bellwether for inflation and possibly (gasp) recession? Some economists think so. And the economic tea leaves seem to support this conclusion.

The American Farm Bureau Federation this week reported that the cost of a traditional Thanksgiving dinner for a family of 10 has jumped nearly 11% this year — a nearly 4X increase over last year’s increase. On average, it will cost the typical family $4.16 more to stock the Thanksgiving table this year.

Turkey saw one of the biggest jumps, with prices increasing about $1.93 per pound. Most of this increase is attributed to rising corn and gasoline and diesel prices, which are up $0.87 over last year. The Farm Bureau also cited price boosts for whole milk, cans of pumpkin pie mix, sweet potatoes, pie shells, rolls, whipping cream and fresh cranberries.

An article in yesterday’s Philadelphia Inquirer reported that inflation has spilled over to impact supply costs in key business sectors. Reporter Harold Brubaker touches on the rising supply costs that have caused companies like Campbell, Kellogg, P&G, U.S. Steel and Rohm & Haas to see lower profits and, in turn, caused them to raise prices.

Robert Schiffner, Campbell’s CFO said he expected costs to rise 6 percent to 7 percent, instead of the previously anticipated 5 percent during the company’s financial conference call to report first quarter earnings on Monday. Concern was primarily around the increasing cost of wheat, dairy, cooking oils and diesel fuel for delivery trucks.

John Mothersole, senior economist at Global Insight Inc. agrees. His company’s index of raw material prices is up 25 percent this year, led by crude oil, chemicals and rubber. However, he doesn’t believe these increases will affect consumers - mostly due to the softness in the U.S. economy and the pressure to hold back on price increases. Sky rocking commodity prices “don’t square with fears of recession” in the word’s largest economy, said Roberr Garnder, economist with Royal Bank of Scotland Group.

Yet, the overall prognosis is that a recession is unlikely even with the downturn in the housing market, record oil prices and the credit crunch that has paralyzed certain segments of the capital market. Good news now – let’s hope it sticks.

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