Scotts Miracle-Gro Is Buried in Fertilizer
Please consider the Wall Street Journal article From Shortage to Glut: Scotts Miracle-Gro Is Buried in Fertilizer.
Never in the modern global economy have businesses seen such a rapid shift from shortage to glut.
Just months ago, the chief executive of Scotts Miracle-Gro Co.was bracing for the biggest summer ever. After two years of struggling to fill store shelves, the company had ramped up production to catch up with consumer demand for lawn seed, fertilizer and other garden products. Investments in new manufacturing capacity were paying off as the 67-year-old CEO prepared for the usual rush of May orders from retailers looking to replenish their stocks.
The orders never came, and by Memorial Day, Mr. Hagedorn knew his company was in trouble. Scotts has already cut about 450 jobs, or around 6% of its workforce, since May, and more layoffs are coming.
Versions of this story are playing out across business sectors, where makers of everything from clothing to kitchen appliances have gone from trying to catch up to demand to buckling under the weight of their own inventory, in a matter of weeks. Now many companies are cutting jobs, idling plants and working to undo many of the other steps they took to ensure they would have enough products to sell.
Newell Brands Inc., the maker of Yankee candles and Sharpie markers, said that in a span of six weeks starting in early August, it went from being comfortable with its retailer stocks to cutting its sales and cash-flow forecasts for the year after chains slashed orders.
Illusion of Shortages Caused by Cheap Money
The never was a shortage of Miracle-Gro, Yankee Candles, or Sharpies.
Instead, there was an overabundance of free money from Congress and cheap money from the Fed.
Once the free money was spent, people already had their fill of Yankee Candles and Sharpies.
The same applies to housing. There was not a big shortage of houses in either 2008 or 2021 except at ridiculously low interest rates that never should have been.
Demand for everything soars if money is cheap enough. With housing, bidding wars stopped once interest rates got high enough.
The false signals given by free and cheap money caused many manufacturers to make too much stuff and many retailers to order too much stuff.
Housing Crash Underway
Please note New Home Sales Crash Accelerates, Sales Down 12.6 Percent in July
New home sales are down 12.6 percent from a month ago and 29.6 percent from a year ago.
And Mortgage Rate Locks Are Down a Whopping 57 Percent From a Year Ago
On August 18, I noted Existing-Home Sales Fall 5.9 Percent, Down Sixth Consecutive Month and 25.9 percent since January.
With mortgage rates at or near 6 percent, demand for houses have crashed.
There never was much of a housing shortage. Rather, there was artificial demand when the Fed had money at 0% and mortgage rales were below 3 percent.
FedEx Withdraws Full Year Guidance and Will Close 90 Offices
FedEx says “Macroeconomic trends significantly worsened” and has resorted to cost cutting measures including office closures.
63 Percent of Small Businesses SMBs Have Put Hiring on Hold
Please note that 63 Percent of Small Businesses SMBs Have Put Hiring on Hold
Orders have fallen off the cliff.
On August 3, Amazon announced it had slashed its work force by 100,000.
Increasingly Likely That Alleged Job Strength is a Mirage of Part Time Second Jobs
There is still a lot of slack in the leisure and hospitality sector, but it’s Increasingly Likely That Alleged Job Strength is a Mirage of Part Time Second Jobs
This post originated at MishTalk.Com
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manufacturers to make too much stuff and many retailers to order too
much stuff.”
Industrial producers and their buyers are the issue, not miracle grow. Miracle grow is largely a residential hobby garden fertilizer and is not what farmers will use.
Farmers cut back on fertilizer use due to high prices this year. There is a perfect storm of factors all converging on food next year that will result in very high food prices.
I fully expect that farmers will pay whatever the going rate is for fertilizer next year because:
1. They cut back this year. Potash isn’t like nitrogen and plants will not suffer greatly if left out of the soil for a year. Any longer than that and yield really suffer. Farmers in large numbers did not apply potash to their fields this year, though no one knows how many. They will be willing to next year to capitalize on higher food prices.
2. Weather this year was bizarre and not likely to repeat next year. If so, and no one can predict it, there will be a greater demand for fertilizer to compensate as farmers attempt to make up for fallow fields this year.
I’m playing this by buying as much NTR as I can. CF is also good but more reliant on nitrogen fertilizer. CF is doing very well now, but I expect NTR to pass it buy next spring as demand for potash is going to greatly exceed that of nitrogen as a result of making up for this years missed application.
I’m probably going to look for an entry point for NTR in the low 80’s and then will buy hard. I own it already, just want a bigger position.
Lending by the banks is
inflationary. Lending by the nonbanks is noninflationary, other things equal.
The correct response to stagflation is the 1966 Interest Rate
Adjustment Act. “while the aggregate of time and demand deposits continued to
increase after July, the proportion of time to demand deposits diminished.
Whereas time deposits were 105 percent of demand deposits in July, by the end
of the year, the proportion had fallen to 98 percent. These were all desirable
developments.” – L.J.P.
I.e., you drain the money stock, while increasing the
transaction’s velocity of funds.
This is like the Japanese asset price bubble in
Japan from 1986 to 1991 in which real estate and stock market prices became
very overbought.
impoundment and ensconcing of monetary savings in their banks. The BOJ has
unlimited transaction deposit insurance, the Japanese save more, and keep more
of their savings impounded in their banks.
“Japanese households have 52% of their money
in currency & deposits, vs 35% for people in the Eurozone and 14% for the
US.”
economists, banks don’t lend deposits. Reg Q ceilings were removed because the
ABA convinced the world that banks were intermediaries [sic]
McChesney Martin Jr., re-established stair-step case functioning (and
cascading), interest rate pegs in c. 1965 (like during WWII), thereby using a
price mechanism (like President Gerald Ford’s: “Whip Inflation Now”), and
abandoning the FOMC’s net free, or net borrowed, reserve targeting position
approach (quasi-monetarism), in favor of the Federal Funds “bracket racket” in
1965 (presumably acting in accordance with the last directive of the FOMC,
which set a range of rates as guides for open market policy actions).
Using interest rate manipulation as the monetary
transmission mechanism is non sequitur. Interest is the price of credit. The price of money is the reciprocal of the price level.
The brackets for these two
rates were set & buying operations in the open market were used to prevent
rates from rising above the bracket, and selling operations when rates tended
to fall below the bottom of the bracket. The effect of these misguided procedures was to allow any and all banks
to acquire added legal reserves (legal lending capacity) by simply entering the
federal funds market and bidding u-p the federal funds rate to the “trigger”
level. And FED credit was used for profit.
Since the demand for bank credit, and subsequent
increase in the money supply, is reinforcing and not self regulatory, an
inflationary environment was quickly fostered. Consequently, the prevailing pressures in the credit markets were on the
top side of the federal funds brackets. Demands for bank credit to finance real estate and commodity speculation
soon became excessive.
We should have
learned the falsity of that assumption in the Dec. 1941-Mar. 1951 period. That
was what the Treas. – Fed. Res. Accord of Mar. 1951 was all about.
The effect of tying
open market policy to a fed Funds rate is to supply additional (and excessive,
& costless legal reserves) to the banking system when loan demand
increases.
Since the member
banks (when reserves were binding), operated without any excess reserves of
significance (beginning in 1942), the banks had to acquire additional reserves,
to support the expansion of deposits, resulting from their loan expansion.
Apparently, the
Fed’s technical staff either never learned, or forgot, how Roosevelt got his “2
percent war”. This was achieved by having the Fed stand ready to buy (or sell)
all Treasury obligations at a price which would keep the interest rate on “T”
bills below one percent, and long-term bonds around 2 -1/2 percent, and all
other obligations in between.
Assume the buy order is for T-Bills. The effect is
to bid up their prices, reduce their discounts (interest rates) and add to
free-gratis commercial bank legal and excess reserves. The expansion of
costless excess reserves increases the quantity of loanable “federal” funds
thereby pegging or retarding the increase in the Fed Funds rate – but the longer
term effects of these operations are to fuel the fires of inflation.
federal funds rate, nominally the rate banks charge each other on overnight
loans of deposits at the Fed. In fact, what the NY Open market Desk sets
each day is the one-day repo rate on Treasuries, that is, the one-day
cost-of-carry on government bonds. This is the true policy instrument —
and it affects huge amounts of money (essentially, the one-day return on all
government securities), while fed funds transactions daily, in comparison, are
a trivial amount.
commercial banks, indeed sponsored by the most dominant economic predator, the
oligarch: the American Bankers Association, is vitiated on largely false
premises on which deregulation is based, viz., that deposits in commercial
banks constitute the “savings’ of the depositors, that these are “lent” to the
banks, and that the commercial banks are only a “medium” through which this end
is affected.