Trickle-Down Potatoes – Will French Fries Prices Go Up?
If you talk with Idaho Potato farmers, they will tell you that it’s a crisis. According to many sources, it is difficult to get a truck to haul a potato right now – shortages of truck capacity are at crisis levels in areas where it is needed the most. Potatoes are just the tip of the iceberg, expect prices for a lot of things to go up because of truck shortages.
We’ve been talking about the diversion of trucking assets for some time, and it’s playing out just as we had feared. Truckers are accepting high-yielding loads that are headed to Texas and Florida for post-hurricane rebuilding activity – and it strips capacity out of other regions of the country. Capacity that is available (not participating in the Texas/Florida swelling of freight demand) wants to be able to “turn” loads quickly. Many truckers will seek loads in heavily populated areas because those supply chains are seeing rapid turns and they can take on more loads in a given week – increasing their revenue and decreasing their general costs.
That leaves shippers in remote areas with bulk commodities in a tough spot. It’s difficult to get transportation companies to “look their way”. It’s expensive to get an asset (truck, rail, barge, etc.) to a remote location.
I’ve shown you this recently, but the DAT spot market shortages map has a lot of red on it at this time. There are significant shortages all over the country – and especially in areas outside of the hurricane-impacted regions around Texas and Florida. That’s because, again, assets are displaced disproportionately to those markets – creating shortages in other parts of the country.
Watch your supply chain costs, they are going to continue to go up as modes and assets shift to help keep the US distribution system moving.
My comment in the headline was a bit tongue-in-cheek, but the impact is serious. Heavy bulk commodities (especially produce and items with high degrees of spoilage risk) will see significant increases in price. That will trickle-through to end consumer prices.
When the trickle-through inflationary increases are more of a supply-side adjustment (and not because of higher consumer demand), it hits discretionary income harder.
Those of you in retail and selling products that are discretionary in nature need to pay attention – this problem is “flanking” you and you might not see it coming.