We are just starting to see the inflation begining. Why farmers are buying next YEARS crop inputs things like fertilizer seeds pesticides herbicides and other things needed to grow the food we need. My hubby has a family of farmers and all of them are saying to even grow crops next year is going to cost farmers between 80 to 90 percent MORE per acre than this year just for the needed stuff to grow the crops. Fertilizers are up over 100 percent from last year. Some fertilizers needed for wheat are going for over 100 a ton right now. Even generic Roundup is up by 80% over last years pricing. Farmers do not have to sell their crops right away if they have the storage space to hold it just remember that.
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[quote user=“Shadow the Cats owner”]
Fertilizers are up over 100 percent from last year. /quote]
Yes, the prices have gone up a lot year to year, but not over 100%.
(From a recently researched article)
In the breadth of a year, anhydrous ammonia increased by 53%, $487 per ton in 2020 to $746 per ton in 2021; DAP increased by 83%, $390 per ton in 2020 to $717 per ton in 2021, which is its highest price since 2008; and potash increased by 71%, $350 per ton in 2020 to $600 per ton in 2021 (Schnitkey et al., 2021, pp.2-3)
Words
How do the suppliers justify these increases? Yes, all things are increasing in price, but not 50% higher. Labor is not going up 50%, trucking is going up. But by 50%? Feedstock such as natural gas or petroleum, has already dropped back from it highs. I think some companies are testing their markets to see if they can get higher prices than they actually need. If I know farmers, many will find ways to avoid the excessive prices and/or do their price/cost analysis and we will see them say #%@@# and we will see food shoertages.
They don’t have to justify their prices. As long as they don’t collude with each other to agree to hold prices to match each other so consumers have no choice, they are free to set whaever price they want. But they do run the risk that any price increase can cause a loss of demand for their products/services. Then they might have to drop their price back to where it was or even offer discounts in addtion in order to win the lost business back. So they can lose money if they raise their prices too high.
Whether or not companies need a price increase is irrelevant.
When the oil platform burned in the Gulf, local gas stations quickly raised their prices (especially some of the larger chains).
In part, that’s justified, I guess. I’ve been told that your price at the pump reflects their next load, not the last one.
OTOH, several were prosecuted for price gouging…
Bottom line is that they’ll charge what the market will bear.
At one time gas/oil prices were dependent on the tank truck delivered price. Once OPEC started the gas crisises in the middle 1970’s that form of pricing began to change. Now a days consumer level pricing is dependent on what new stories are hitting the local media - the stories don’t even have to have any basis in fact for either supply or demand - they just have SEEM like they might have some effect. On top of that you now have petroleum refineries jacking their prices up because they need to perform routine maintenance of their plants - maintenance they have been planning for multiple years - and if they are anywhere near as professional in their business as they want us to believe - maintenance gets done with minimal if any restriction on total throughput of the facility over time.
Gouge them for every cent possible!
How should the price be determined if not by the seller?
A balance between what it costs the seller (including cost of goods sold and some form of profit) and what the buyer is willing to pay. That’s how it’s worked in the past.
It can be a delicate balance. You, as the seller, can certainly set your price wherever you want. But you have to hope that the buyer values your product enough to pay what you are asking.
The problem can be if the product is a “necessary,” like, say, gasoline. Some buyers will pay whatever price is asked because they need the product. Of course, that may now become part of the cost of goods sold for whatever they are selling, and so the circle begins…
Sometimes by the manufacturer. Still see a few item with boxes priced.
The principle is the same. Some people will pay $9.99 for a box of Christmas cards. Some won’t pay more than $1.99. There’s a product for each. If all were $9.99, some might still buy, others would send nice hand-written notes instead.
I once heard of a gas station that thought they could increase their profit at the station level by increasing the price of gas by a penny a gallon.
These days, though, the point-of-sale terminals/pumps are usually tied into the “mother ship,” and their supplier simply raised the cost to the station by a penny.
Penny? Penny? Penny?
I don’t think petroleum pricing even acknowledges the penny as a unit of measure - everything seems to move up or down by a nickle or dime or more - of course the 9/10ths is hard wired.
As I recall, this was an attempt by a local dealer - and dates back to dollar or so gas.
The point at the time was that said station operator was going to get X cents of every gallon sold, and not a red cent more. Had he raised the price by a nickel, his cost would go up by a nickel as well…
Of course you realize the seller is under no form of “duty” to pass his cost savings along to the consumer? That’s what these importers consider to be their “reward” for being enterprising enough to become “global” in their thinking.
When GE moved it’s production of refrigerators to Mexico, the prices it charged did not go down to reward the consumers with labor savings. The consequent broader margin was passed along to the stockholders as their reward for hiring astute management.
So, most businesses will charge whatever they can get away with, irrespective of production cost. I believe the actual principle at work is called “the dollar left on the table” or very similar.
Now, all those clever dawgs are paying their dues to that “global” mentality, while other members of that chain leverage their positions. “Dawg eat Dawg”, etc.[dinner]
I thought Murphy Siding said the cost to send a container full of doors across the ocean went up to like $20,000 from previously $1,500-$2,000? I didn’t write the figure down at the time, but that’s about what I thought he was saying, so when Midland Mike made a similar claim, it appeared to “track” with what I thought others were claiming.
So - if the price of a box went fron $2K to $20K - how does the increased transporation costs affect the price of the individual door. How many door are in a box? 100? 1000?
Is Murphy going to increase his selling price to 10 times the old price based only on transportation costs?
We actually had that conversation, because I had the same curiousity as you had. I believe he said 900 doors per container.
So, on the one hand, the increase per unit isn’t astronomical. But, at the same time that’s $18,000 out of someone’s margin, unless they pass it along.
I wouldn’t be shocked if the increase cost per unit was roughly equivalent to the cost savings of off shoring vs buying from a domestic source (in the prior “normal” market).
But there I go again…where is my tin foil hat? (we need a “tin foil hat” smilie)
I have seen that claim reported in many different sources. It may or may not be true. I have no way to verify it to be true or false. But I choose to have the opinion that it is not true. Others are welcome to believe whatever they want, but until they prove it, it is only an opinion.
To me, it seems improbable because it is a 1000% price increase seemingly within a very short period of time. That does not make sense to me. I understand that a 1000% increase on shipping price does not mean there will be a 1000% increase on product price to cover the shipping increase.
But shipping is likely to be a very large component of product cost, and a 1000% increase in shipping seems like it would trigger massive public reaction in the business community as well as the co
[quote user=“Euclid”]
Convicted One
Euclid
I don’t believe container shipment has inflated over the norm by ten times.I thought Murphy Siding said the cost to send a container full of doors across the ocean went up to like $20,000 from previously $1,500-$2,000? I didn’t write the figure down at the time, but that’s about what I thought he was saying, so when Midland Mike made a similar claim, it appeared to “track” with what I thought others were claiming.
I have seen that claim reported in many different sources. It may or may not be true. I have no way to verify it to be true or false. But I choose to have the opinion that it is not true. Others are welcome to believe whatever they want, but until they prove it, it is only an opinion.
To me, it seems improbable because it is a 1000% price increase seemingly within a very short period of time. That does not make sense to me. I understand that a 1000% increase on shipping price does not mean there will be a 1000% increase on product price to cover the shipping increase.
There are two forms of rate structures - contract and spot market. Those that ship under contract rates have a known cost for the period of the contract. The Spot Market is buyer beware as the rates are whatever the traffic will bear. Occasional shippers are the ones that are captive of the Spot Market.