Your tax cut may end up in a grocery cash register

Discussion in 'Politics, Religion, Social Issues' started by LizKat, Feb 26, 2018.

  1. LizKat macrumors 601

    LizKat

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    #1
    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.
     
  2. jerwin macrumors 68020

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    #2
    of course, those with the least food security recieved the least in tax cuts.
     
  3. LizKat thread starter macrumors 601

    LizKat

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    #3
    ... and have to spend a way higher fraction of their income on groceries anyway, often at stores the least able to stave off price hikes from their own suppliers and so forced to pass on most if not all those cost increases to their broke customers.
     
  4. samcraig macrumors P6

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    #4
    I still can't bring myself to say tax cuts. Because for now, as I've said, it just seems like a no-interest loan until taxes are due. Then for many, they will pretty much return all/some/more money than the "extra" they got in their paycheck all year.
     
  5. RichardMZhlubb Contributor

    RichardMZhlubb

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    #5
    Not to mention the estimated increases in health insurance premiums directly resulting from the elimination of the individual mandate under the tax bill (estimated to be as high as $2,000/year for a family that buys insurance through the ACA exchanges).
     
  6. SusanK macrumors 68000

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    #6
    I don't say tax cuts because my Federal tax liability increased. Thanks GOP!
     
  7. LizKat thread starter macrumors 601

    LizKat

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    #7
    :D don't think that will let you skate at the great grocery checkout counter heist though...
     
  8. SusanK macrumors 68000

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    #8
    I noticed grocery prices increasing not too long ago. No issue with the grocery store. I am getting my bargained for consideration. GOP not worth a dime to me.
     
  9. chiefsilverback macrumors 6502

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    #9
    There's another element to this as well that hasn't manifested itself yet, but that's the issue of 'undocumented' labor keeping food prices artificially low. US agriculture needs the low paid 'migrant' workers to keep costs down, and it isn't really understood by the majority that if you take that pool of workers away the cost of everything from a gallon of milk to a bag of corn will likely increase, and not by insignificant amounts.

    I wonder how many people would readily pay 50-100% more for their milk in order to reduce 'undocumented' migrants?
     
  10. LizKat thread starter macrumors 601

    LizKat

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    #10
    And then there are the new tariffs on imported steel, solar panels etc.
     
  11. edk99 macrumors 6502a

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    #11
    Nothing like good old slavery to keep the prices down. I'm glad you support paying illegals dirt wages. The hell with minimum wage for them.
     
  12. chiefsilverback macrumors 6502

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    #12
    Where in my post did I make any reference to my personal view? I merely pointed out that food prices are kept artificially low by undocumented labour, and that if Trump and co. get their way a lot of people are in for a big shock.
     
  13. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #13
    Obviously you can't cut something that doesn't exist.
     
  14. SusanK macrumors 68000

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    #14
    Actually GOP can. Rubio's refundable child credits nonsense come to mind. Unfortunately that minimum wage earning parent of two kids gets about $75/yr. A high income is needed to receive the max $2000 credit.
     
  15. LizKat thread starter macrumors 601

    LizKat

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    #15
    Tell that to the GOP. They don't have a problem cutting steadily declining benefits to the poorest of the poor in order to help pay for the tax cut delivered to the wealthiest among us. They want to cut SNAP benefits even more in 2018, and further to provide half whatever benefit is left in the form of boxes of state-determined specific foods instead of cash to buy desired foods.

    A Republican nanny state, who'd a thunk it, especially with Paul Ryan forever going on about personal choice and people climbing the ladder to independence as they learn to find bliss in workfare while living on benefits promptly reduced as they nominally join the ranks of taxpayers. LOL so those pre-selected groceries will be "come and get it" style at some regional centers? Or dropped off on porches with the assumption no one will steal it? And the mother who would select cereal and powdered milk may receive canned pasta with cereal-fillered mystery meat that the family would not choose to consume? Or the other way around... since there are people who like that canned pasta stuff and will skip breakfast cereal if the milk is not fresh... and what's one to do if a food allergy would suggest purchase of items not in that box and the remaining cash benefit doesn't cover enough alternatives?

    And here come the price hikes at supermarkets just in time to make that cash shopping not stretch as far as it did, for either food pantry managers or for the poor who rely on them and SNAP benefits to stay alive month to month. All this so shareholders of cost-cutting transport companies can be satisfied that double-digit operating margins remain alive and well.. and hang the fact that the effects of artificial transport capacity shortages and now the hikes to be able to restore capacity as the economy recovers result in price hikes filtering down to the consumers least able to absorb the hit. It's not a world class argument for the so-called free market system unless one discounts the pain for human beings enmeshed in the downsides of it.
     
  16. Huntn, Feb 26, 2018
    Last edited: Feb 26, 2018

    Huntn macrumors P6

    Huntn

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    #16
    I suggest more emphasis on our rail network, and a lot less on long haul trucking. Of course that's Bad news for a huge profession in the country, truck drivers, but they are already on the endangered professions list. This also gives urban farms a big leg up.
    --- Post Merged, Feb 26, 2018 ---
    Our GOP Congressional hypocrite, incompetent, tellers of tall tales, curmudgeons are SO WISE... :oops:
     

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15 February 26, 2018