9 Goods Seeing Sky-High Price Inflation

by Jeff Reeves | March 12, 2012 12:03 pm

inflation investingCrude-oil prices are on the rise, and gasoline costs are soaring as a result. There are many reports out there that hint we could see $5 gas this year[1] as a result of commodity inflation and rising oil prices.

And it’s not just crude oil that’s on the rise. The spike in energy prices is driving up the cost of a host of products, including both raw materials and finished goods. Even some services are increasing in price due to rising oil.

Furthermore, there are many supply-and-demand issues beyond the price of oil that are unfavorable for some of the most popular consumer goods. This double whammy has resulted in substantial price inflation that is hurting American consumers at the cash register.

Here are nine goods and services that are soaring in price as a result of current conditions:


Complex macroeconomics and inflationary pressures are at play here, but also simple supply and demand. A smaller number of cattle in 2012 will drive up beef prices for the second year in a row. The Agriculture Department reported a tally of 91 million head of cattle in the U.S. on Jan. 1, the lowest level since 1952. That has lead to forecasts of a 4% to 5% rise in beef prices this year — on the heels of a staggering 10% increase in 2011. Turkey burgers, anyone?

Organic Milk

Even though organic milk costs more than “regular” milk, its sales are growing briskly as health-conscious Americans aim to avoid the hormones and antibiotics that find their way into this dairy staple. The trouble is that the organic grain and hay used to feed most cows is rising in price. (Grass-feeding is cheaper and produces healthier milk, but that segment of production is still tiny.)

That means farmers must either pass on those costs to consumers or feed their cows less grain — and get lower milk output as a result. Either way, there are pressures driving up the price of organic milk right now. A half-gallon of organic milk typically sells for $3.99, but that could jump to $4.39 or higher in 2012 — a 10% increase.


Don’t want to eat your peas? That’s probably a wise move for your grocery budget. Canada’s Blackburn Agri-Media reports that “there were poor pea crops right across North America,” which could lead to an increase of as much as 20% in pea-processing agreements. Other vegetables are rising, too, with sweet-corn prices are on pace to rise roughly 3.5% — but the big jump in pea prices is worth calling out alone.

Peanut Butter

When food banks stop stocking peanut butter[2] because it’s too costly, you know you’re seeing a disturbing trend. The average price of peanut butter has gone up approximately 57%, according to one food bank, and that means smaller portions or fewer hungry people served.

Again, it’s more than complex global currency trends here — hot weather in states like Texas and Georgia hurt this year’s peanut crop. Also, farmers switched to more profitable crops and cut down on supply. The result is a peanut shortage and sky-high prices of Skippy, Peter Pan and Jif.


Are you surprised? Fuel costs are rising. AMR Corp. (PINK:AAMRQ[3]), parent of American Airlines, just declared bankruptcy. Carriers are abandoning less profitable routes, resulting in crowded planes and increasing fares for anyone looking to travel in 2012. Routes where there is competition from discounters may see less pressure, but you can bet your tickets are going to be flying higher this year.

According to the Los Angeles Times[4], “the nation’s airlines buy about 48 million gallons of fuel each day at a price that jumped nearly 40% in the last year.” Ouch!

Palm Oil

While we Americans don’t use a lot of palm oil in our kitchens,  the oil is nevertheless a component in many things we use everyday — from candy bars to biofuel. Prices have soared to a seven-year high as drought has cut into South American crops, and developed nations are seeing a modest economic recovery that has boosted demand.

Experts are predicting[5] a nearly 8% rise in palm oil by mid-April. Though it’s slippery to quantify exactly what that means for a host of products, one thing is clear: Rising prices always get passed on to consumers eventually.


India has banned cotton exports[6] as of this month, and the action immediately pushed U.S. cotton-futures prices higher. The result has been a huge surge in cotton — including the biggest one-day percentage gain since May 31 in early March that halted trading in cotton futures.

The export ban has seen some rollback in the days since the announcement roiled global cotton markets, and more emerging markets are producing more cotton to fill the void. But in the short term, cotton prices have soared about 5% in short order.


Another victim of high gas prices is seafood. Many fishermen and shrimpers are reluctant to go out on trips unless they can be certain of a good haul. The result is less fishing in general and less seafood appearing in markets across the coastal U.S.

Prices vary wildly depending on the seafood you’re shopping for, but increases can be as little as 25 cents a pound to an extra $3 if you pick an in-demand item. As the summer approaches and beach-town tourists head to their favorite local restaurants, they could be in for big sticker shocks if this trend continues.

Rubber and Tires

Rubber and therefore vehicle tires have seen a red-hot rise in prices recently. And it’s not just the increase in price for petroleum-based rubber via more expensive oil. There’s also the relative cooling of the eurozone crisis, which has allowed some vendors in Europe to order more rubber.

Then there’s the seasonality of winter that led to decreased production in the last several months, hurting the supply/demand dynamic. Throw in booming emerging markets and you see what’s skewing rubber higher. According to the Rubber Board of India, for example, India’s rubber production has increased to a record level of 902,000 tons, but its shortfall is likely to exceed 70,725 tons for the 2012. There simply isn’t enough rubber to go around even if oil were cheap — which it decidedly isn’t these days.

Jeff Reeves[7] is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.

InvestorPlace.com Assistant Editor Adam Patterson contributed to this report.

  1. we could see $5 gas this year: https://investorplace.com/2012/02/5-reasons-youll-see-5-gasoline-in-2012/
  2. food banks stop stocking peanut butter: http://mv-voice.com/news/show_story.php?id=5350
  3. AAMRQ: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAMRQ
  4. Los Angeles Times: http://articles.latimes.com/2012/mar/08/business/la-fi-gas-airlines-20120309
  5. Experts are predicting: http://www.bloomberg.com/news/2012-03-04/palm-oil-seen-climbing-7-to-year-high-as-inventories-decline.html
  6. [Image]India has banned cotton exports: http://deltafarmpress.com/cotton/india-bans-cotton-exports-prices-rise
  7. Jeff Reeves: https://investorplace.com/author/jeff-reeves/

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