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Wholesale Week In Review

-- 2011-01-21 3:00 am --

Spike In Wholesale Food Prices

Biggest news coming out of the wholesale sector this week is the rise in the wholesale food prices, driven by the cold spell that hit Florida late last year. The freezing temperatures hit just before many truck vegetable crops were due to be harvested. Some tomato growers lost as much 50% of their crop; other farmers reported devastating losses to green beans, cucumbers, sweet corn and squash harvests. Consumers can expect to see this reflected in supermarket price hikes: In December 2010, the wholesale price of vegetables was a whopping 22.8% higher than it was one year earlier, while the price of fruit was up 15.4%.

Fruit and vegetables are not the only comestibles whose costs have spiked. According to a recent Department of Labor Producer Price Index report, the wholesale cost of meat is rising too though as yet these costs have not been passed along to the consumer. The price of beef a rose 2.7% in December 2010 – that’s 15% higher than it was the year before. Pork, fish and turkey are all up around 20% over last year at this time.

Coupled with the escalating cost of gasoline (pump prices rose 5% in December 2010) the rise in wholesale food prices have some economists whispering the dreaded I word – inflation. Not to worry, say other economists, pointing out that apart from food and gasoline, most consumer goods prices have held steady. [From The Christian Science Monitor]

Egg In Your Face

It’s not just the prices of fruits and vegetables that are soaring, it’s also the cost of eggs. But not legitimately, claim a Kansas City organization called Associated Wholesale Grocers who say the price hikes are part of price fixing scheme on the part of a “cartel” of egg producers.

The suit filed in Kansas City’s US District Court, charging that egg producers violated antitrust laws, is the latest in a series of similar litigations filed nationwide by wholesalers and grocers. The price fixing scheme began in 1999, Associated Wholesale Grocers claims; by 2008, the price of a dozen eggs in Kansas City at $2.20 had more than doubled in price from what it was six years before at $1.00.

Egg industry trade groups counter that the increase in egg prices is due to an Animal Care Certified Program that has reduced the number of laying hens per cage.

Two settlements have already been made in comparable lawsuits. Land O’ Lakes has agreed to pay $25 million though it is admitting no culpability, and smaller, Minnesota-based Sparboe Farms Inc. has agreed to provide information about the alleged price fixing to federal authorities. [Kansas City Star]

Wholesale Inventories Decline Unexpectedly

In other wholesale-related news, November 2010 wholesale inventories declined on average .2% throughout the US while wholesale sales climbed 1.9%. The inventory drop was the biggest in almost a year.

Many economists, who’d had been expecting a modest increase in wholesale inventories, see this as a sign that the modest economic recovery that buoyed 2010 has stalled since unchanging inventory levels are often indicators of a stagnant economy. Other economists, however, point to the decline as a positive sign that means supply is outpacing demand. [Marketwatch]

The iPhone’s Role In the Trade Deficit

Finally out of China comes the news that iPhone may be playing a part in the Sino-American trade deficit – at least on paper. While iPhones are assembled in China, only one of the iPhone’s parts is actually manufactured there. Nevertheless, because the iPhone ships from within China, the entire $178.96 wholesale value of the gets added into the trade figures on the Chinese side, leading to a $2 billion trade surplus on paper. A more accurate figure, analysts say, would be $73 million. [TUAW: the Unofficial Apple Weblog.]

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References:

 Rising food prices:  <a href="http://www.csmonitor.com/Business/2011/0113/Inflation-rate-headed-up-The-impact-of-higher-food-energy-prices">http://www.csmonitor.com/Business/2011/0113/Inflation-rate-headed-up-The-impact-of-higher-food-energy-prices</a>
 Egg Price fixing:  <a href="http://www.kansascity.com/2011/01/11/2577908/grocers-push-back-over-higher.html">http://www.kansascity.com/2011/01/11/2577908/grocers-push-back-over-higher.html</a>
 Decrease in wholesale inventories:  <a href="http://www.marketwatch.com/story/wholesale-us-inventories-decline-02-in-novmber-2011-01-11?reflink=MW_news_stmp">http://www.marketwatch.com/story/wholesale-us-inventories-decline-02-in-novmber-2011-01-11?reflink=MW_news_stmp</a>

 iPhone:  <a href="http://www.tuaw.com/2011/01/15/iphone-increases-us-china-trade-deficit-by-2-billion/">http://www.tuaw.com/2011/01/15/iphone-increases-us-china-trade-deficit-by-2-billion/</a>