Your tax cut may end up in a grocery cash register Corporate America’s new dilemma: raising prices to cover higher transport costs (Reuters) Excerpts: The prospect of higher prices on chicken, cereal and snacks costs comes as inflation emerged as a more distinct threat in recent weeks. The U.S. Labor Department reported earlier this month that underlying consumer prices in January posted their biggest gain in more than a year. As U.S. economic growth has revved up, railroads and truck fleets have not expanded capacity to keep pace - a decision applauded by Wall Street. Shares of CSX Corp, Norfolk Southern, and Union Pacific Corp have risen an average 22 percent over the past year as they cut headcount, locomotives and rail cars, and lengthened trains to lower expenses and raise margins. Quickening economic growth, a shortage of drivers and reduced capacity, and higher fuel prices have driven up transportation costs, prompting some companies to threaten to raise prices on goods ranging from chicken to cereal. == Cream of Wheat maker B&G Foods Inc, Cheerios maker General Mills and Tyson Foods Inc, owner of Hillshire Farms brand and Jimmy Dean sausage, said they will pass along higher freight costs to their customers. Tyson Chief Executive Officer Tom Hayes told Reuters in an interview that its price increases ”should be in place for the second half” of its fiscal year, and that it has begun negotiating price increases with retailers and food service operators. The company declined to specify how much its freight costs increased in recent months, but a spokesman said they are up between 10 to 15 percent for the total industry. General Mills informed convenience store and food service customers of the price increases directly, a spokeswoman told Reuters in an emailed statement, declining to provide specifics. Chief Executive Officer Jeff Harmening cited logistic costs and wage inflation as factors. ”It feels to me like an environment that should be beneficial for some pricing,” he said in a presentation at last week’s Consumer Analyst Group of New York conference. Hormel Foods, the maker of Skippy peanut butter and SPAM, has been talking with retailers about raising prices, according to Chief Executive Jim Snee. “We don’t believe we’re going to recoup all of our freight cost increases for the balance of the year,” Snee told Reuters in an interview, noting operating margin sank to 13.2 percent, from 15.6 percent due to higher costs - including freight - in the most recent quarter. Two things about that last bit. 1. Any supermarket would love to have double digit operating margins (the range for the American giants is 5 to 7.5%) so it’s not like they’re just going to lie down for the changes. That means the bodegas and their customers will get hit harder since the independent shops don’t have the leverage of a chain. 2. jacking prices on the likes of cereal, SPAM and peanut butter will affect food pantries, college students and SNAP recipients, the latter already scheduled for more cuts to benefits. As for the uber-wealthy, how much can it matter if the already rare sale on a $2 box of Cheerios (must buy 8 boxes) becomes a faint memory in 2018. But we’re not anywhere near food riots yet. Whew. Can go back to figuring out which segment of American industry is more likely to miscalculate on this gig. Gotta short something in a market getting fat... let’s see... well if we’re all gonna pay for the transportation industry’s previous and intentional failure to maintain capacity to meet rising demand, maybe what to short becomes whatever we’re not going to spend past the grocery bill any more. So “the market” awaits our decisions: Why replace a roof when it’s not actually raining inside the house yet? Why replace a car when fewer trips to the grocery get made in order to cover the higher tab at the checkout? Why buy new clothes when the price of dining out goes through the roof and there’s no reason to dress up just to eat rice and beans at home. Why buy groceries when you’re laid off? See how that works? Good luck to the Fed’s new chair. He’ll be taking flak no matter what they do about the rest of the rate hikes for 2018.