Merchant Wholesalers Hoarding Groceries

Click to enlarge.

The red line shows the inventory to sales ratio for merchant wholesalers' grocery and related products (January 1995 = 100).

The black line shows the producer price index for crude foodstuffs & feedstuffs adjusted by the consumer price index (January 1995 = 100).

The blue line shows the overall inventory to sales ratio for merchant wholesalers (January 1995 = 100).

As seen in the red line (and the commentary in red), merchant wholesalers in the United States have transitioned from de-hoarding groceries to hoarding them. As seen in the black line (the real price of crude foodstuffs and feedstuffs), that's probably been a good plan in hindsight (at least at the wholesale level).

As seen in the blue line, merchant wholesalers don't seem all that eager to hoard merchandise in general though, at least over the long-term. That's especially true of electrical and electronic goods. What's the useful shelf life of a TRS-80?

The hyperinflationists will have it right if the blue line begins to rise in earnest. That seems like a very, very long way off to me, at best. That said, we should not be encouraged that grocery hoarding is apparently part of the long-term plan for a stronger and more prosperous global economy. It's not going to work. That's especially true in the emerging markets where food makes up such a large part of household expenses. Something's bound to break again (in a deflationary and/or civil unrest sort of way).

April 11, 2011
Commodity Prices, the Economic Outlook, and Monetary Policy - Janet Yellen

In my view, the run-up in the prices of crude oil, food, and other commodities we've seen over the past year can best be explained by the fundamentals of global supply and demand rather than by the stance of U.S. monetary policy.

Past year? How about the past decade? For what it is worth, and as a risk-averse retired saver, U.S. monetary policy certainly got me to hoard food and oil-based garbage bags as an alternative to three-month treasury bills. Perhaps Janet Yellen believes that I was just a global exception?

From 2004 to 2006, a third of my net investment worth was in gold and silver. That's gotta be very confusing to her. Although, I can't even eat gold or silver from a "fundamentals" standpoint, they both treated me quite well (50% gain). Probably just a coincidence!

This is not investment advice. My hoarding days are mostly over. I will continue to keep a stockpile of basic necessities, but for the most part I'm leaning deflationary now. I think ZIRP may be here for a very long time. We could easily be joining Japan in the deflationary (lack of inflation) mud. Time will tell.

Source Data:
St. Louis Fed: Custom Chart