Producer Price Index for August 2022

Time for more painful inflationary discussion. The BLS has now released the August Report. (historical releases)

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A 2nd month of easing on the PPI at -0.1%. That follows a revision of last month from -0.5% to -0.4%. Does that mean August's reading was essentially flat?

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Thus far the gauges are mixed, with 16% trimmed mean, CPI-U core, Median CPI-U and Demand Stage 2 on the rise.

Delving into the data, suggests that some moderation is taking place, except in energy  and food. We all realize or understand that gasoline prices are falling. However, gasoline is not the only story in energy. Electricity and Natural Gas are on the rise.

Food gives an interesting story and possibly some hope of slowing prices, if selective...

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Let's not count our chickens, before they hatch. Granted egg prices and processed young chickens are falling, but another bout of bird flu, could squelch that fall. That might seem like chicken feed in the grand scheme of things, but chicken feed is also necessary for continued fall in prices.

Replenishment of chickens in the industry can be fairly rapid, as in a few months as chickens can lay a lot of eggs. A hatchling is ready for the frying pan in less than 3 months and ready to lay eggs at roughly 18 weeks. Hogs, have multiple offspring in batches of possibly 2 per year and slaughter ready at about 6 months. Cattle is a matter of years, as a heifer can be bred between 16~30 months, generally with one calf, which requires 9 months and then 30 months to slaughter. 

What does all that mean? Cattle, Chickens, Turkeys, Hogs... require feed stock, which can be Hay or Grains. There is not a lot of pullback on grain prices. Weather is, will be, and always has been an issue with agriculture. As commodities were globalized to offset some of this issues, the chickens have come home to roost... weatherwise.

The weather has not been a good crop year in large areas of our planet. In some areas, it has started turning into a multi-year problem.

This has resulted in thinning of livestock, et al, as feedstock becomes too expensive, whether through drought, excessive rains, etc. 

With electricity and natural gas likely to displace gasoline as the big issue this coming winter, food prices will likely continue to rise for several more months. I would hope not, but the outlook is not so positive going forward, in my humble opinion. So what should a person do? If I knew, I would tell you.