Eats & Street Cheats
Stagflation? Err, nothing to see here.
At least according to former Goldman Sachs chief economist-turned Federal Reserve President William Dudley, who recently told an audience that other than energy and food costs, there's no inflation problem right now. Super.
So, as long as we don't eat or drive, everything's aces, right?
Sensing the audience stirring in their seats, Dudley tried to explain away his cost of living stability lesson this way: "Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful."
According to reports, that prompted guffaws and one attendee quipping: "But I can't eat an iPad."
As the kids used to say in the '70s and '80s (coincidently, the last time inflation was a major issue): "Burn."
In the real world, food and fuel prices -- not Apple gizmos -- are what actually matter to us regular folks because they're essential, unavoidable commodities.
Just ask any fresh-food or grocery hauler who is seeing first-hand the meteoric parallel price increase for both the goods in their trailers and the fuel required to move them down the highway.
"We didn't expect to see a lot of inflation going forward, but the numbers we're seeing now are higher than predicted," says Gord Smith, president of Manitoulin Transport. "Where it goes from here is anyone's guess, not to mention fuel with how oil jumps around as much as it does with what appears to be very little change in actual market conditions."
Food shippers are under "brutal pressure from all sides," and that's rippling up and down the supply chain, says Jim Mickey of Surrey, B.C.,-based Coastal Pacific Xpress, a hauler of perishable fresh food to California. "They have food inflation which causes them a problem with their own customer. Then they have me coming to them these days for a 40-percent fuel surcharge. What used to be not too long ago a $4,000 load out of California is now $5,500. That shows up someplace."
Consumers, as they're quickly realizing at supermarket checkout lines, are undoubtedly paying a lot more, but to prevent full-blown sticker shock, low-margin suppliers and manufacturers are relentlessly pressured by influential big box retailers and grocers to slash (try absorb) evermore costs from the system.
The so-called "Walmart effect" is causing shippers to push back against transport providers, somewhat tempering the benefits of recent volume increases and capacity tightening.
For a carrier like CPX -- which is notorious for investing in above-average driver pay and new equipment to guarantee customers safe, stable capacity -- the game seems to be about carefully toeing that line.
"There was always a place for a guy who had a driver when no one else had one and we would always have capacity when the other guy couldn't find anyone to work for him," says Mickey. "However, I don't think we've had a satisfactory bottom-line return and haven't for the last few years because of all these pressures."
Customers are doing anything they can to get costs under control, whether it's tinkering with fuel surcharges or tendering more freight through RFPs to "see if there's a couple percent to be had in new pricing," says Wendell Erb, general manager of temp-control carrier the Erb Group in New Hamburg, Ont.
"We talk to our customers about a rate increase while they're being told by their major customers to lower prices," says Erb. "We're all eating and volume seems to have picked up in the last little while, but the challenges are certainly still with us."
FOOD VS FUEL
It doesn't help, add the critics of biofuels, that crops diverted to ethanol and biodiesel markets artificially drive up food costs even further. It's widely believed that subsidized corn- and sugarcane-based ethanol and soybean biodiesel are playing havoc with global food price stability.
"I think it's the biggest joke of our time that we think we can take all that agricultural land and turn it over to fuel and then have the other side come back and kick us in the head, too," says Mickey, who considers himself a green advocate -- or as much as "someone whose business by nature is to burn fuel" can be.
"How dumb is it when there's all kinds of green initiatives that actually make sense? That one seems highly political to me."
PSST …. WANNA BUY SOME CABBAGE?
... the vegetable, that is.
Apparently, cargo thieves are targeting trailer-loads of food -- even rarely stolen perishables -- as food prices escalate.
A story in the New York Times last month reported how food cargo thefts (and even food shoplifting) incidents are increasing, including a recent heist in Florida that netted six loads of tomatoes, one load of cucumbers and a truckload of frozen meat, valued at $300,000.
Unlike selling CDs out of a truck, produce is a lot more trouble to move expediently in the black market. But that didn't deter this gang, who police say had a buyer waiting.
You know food prices are high when someone would rather steal tomatoes than TVs.
Expect, then, insurers to respond accordingly, by keeping a lid on the market, increasing premiums in susceptible regions, or both.
Although Mickey doesn't expect an epidemic in produce thefts, specifically -- "there's so much more valuable cargo out there that you can park in a warehouse and take your time selling it" -- he agrees the higher value of other food commodities could be attractive to some organized thieves.
RCMP Staff Sgt Rob Ruiters is hardly ever surprised of the types of things that get stolen. "They take anything and everything they can," he says. "You can sell grommets or toothpicks if the price is right. If it's organized crime they have people that can sell all kinds of things."
Wendell Erb agrees that there are few barriers for sophisticated cargo theft rings.
"Years ago, I used to think there was no [black] market for refrigerated food, but there defiantly is. There's other things too like confectionery that are high in demand. Peel Region [Police] always send out a report of what was stolen this week and there's food on it all the time, it seems."
It used to be that most thieves would simply break down your gate and haul away your loaded trailer with a stolen tractor. Now, Erb and Mickey say, most thefts are orchestrated on the broker side where there tends to be very little visibility on loads that are sometimes double or triple brokered (as was the great Florida tomato heist).
"We've gotten to the point where we have so many desperate bottom food chain brokers that you could succumb and start working with people you don't know," says Mickey, who adds that his company is "hyper-sensitive" about who it does business with.
"In that case, you have this massive liability in that you have people [taking the load] and you might not have any idea who they might be. So much of it is just showing up and saying 'hey I'm here for the load' and they drive away never to be seen again."
Sometimes, a little more vigilance can make all the difference. And it doesn't cost as much as a trailer full of iPad 2s.