By all indications, the inflation of consumer prices in 2021 has only just begun. What does that mean on the homestead and to potential homesteaders? How high will prices go? How long will it last? When will things return to “normal?” How might we take advantage of the changes?
Life is pretty simple for most of us homesteaders. We work, pay the bills, do chores, and take care of our family. We moved out of the complexity and stress of the big city rat race for a reason: to make a simple life. The summer of 2021, and beyond, will bring some of those complexities to us whether we want them or not. This will present both challenges and opportunities. What those changes mean to you is based on where you are on your homesteading journey.
Lumber prices are up 400% and rising.
If you purchased a 2×4 lately, or a post to put in a fence, you have noticed that they are very expensive. Wholesale lumber prices are calculated per 1,000 board feet (a board foot is 12″x12″x1″). In January of 2020, prices were $435 per 1000 board feet of lumber. In May of 2021, the same lumber costs $1,640. While the price of a 2×4 at the store may have only doubled, the wholesale price of lumber has quadrupled.
What does this mean? It means lumber prices will be rising much more over the summer. If you need lumber and can afford to buy it now, buy all that you need. It takes a while for wholesale prices to work their way through the supply chain.
The trucking industry is short of drivers.
I recently spoke to the owner of a local trucking company. They have increased their prices by nearly 300% over last year. A shipment that used to cost the customer $500 now costs over $1,300. When I asked him why he raised his prices he said, “Because we can. There is no competition.”
Over this past year of COVID-19 and reduced economic output truckers—the people who drive everything from gasoline to groceries to (you guessed it) lumber—have been laid off and moved on to other jobs in other industries. There simply wasn’t any business during the shutdown.
I’m not a trucking expert, but I do know that the trucking industry has a fairly high turnover rate. It’s a difficult job in a highly competitive environment where the truckers spend large amounts of time away from home and family. If there is another job in another industry that pays the bills, a lot of them will take it. Because of this the trucking industry relies on newly trained drivers coming out of trucking schools to fill those empty seats.
In 2020 the trucking schools were closed due to COVID-19. Nobody was trained to replace the truckers who quit. Unemployment payments, stimulus payments, and better opportunities in newly opened industries have thinned the ranks of experienced truckers like nothing in history. This means that there is a massive shortage of truck drivers, and will continue to be one for most of 2021.
The increased costs of transportation and the scarcity of drivers will make some materials scarce or unavailable in certain areas at any price. This drives prices up. According to CNN, gasoline deliveries will be particularly impacted this summer since special certifications are required to drive hazardous materials (such as gasoline) deliveries.
Raw commodity prices are going through the roof.
Why would Clorox corporation need to raise prices on bleach, toothpaste, and make-up just because the cost of “PP Resin” tripled in price over the past year? It turns out that PP (or polypropylene) and PE (polyethylene) resin are used to make everything from plastic jugs to paints and packaging.
How does a weirdo homestead writer know this? I make it a point to read vague industry reports that I have no business reading. If you go to PlasticsToday.com and read the “weekly resin report” then you too can see that the cost of plastic resin has tripled along with other commodities. Oil itself is lagging, but the prices of all other industrial inputs have skyrocketed whether that be copper, plastic, iron, or cotton.
When most people read the news they avoid the rare, boring article about resin prices, trucking shortages, or wage pressure. There are more interesting articles about sports teams, political personalities, and celebrities on television shows.
One more, then I’ll tell you what it all means.
The 2nd worst drought in 1,200 years is happening in the Western United States right now. North Dakota and the grain belt of Canada are facing crop failures as you read this article.
This is not a doomsday article, I promise. I’m just reporting what is happening. There is plenty of rain in the lower U.S. Plains, like Kansas. But spring crops in the northern plains and Canada are in jeopardy of failing… right now!
What will this mean for grocery store prices on food made from wheat and corn (or meat animals that eat it)? What will the record drought in the West mean for succulent produce from California? The answer: prices are rising. Have you bought a steak lately?
What does all of this mean and what might we, as homesteaders, do?
First, I must apologize that I didn’t write this article six months ago. I was busy. But there is still time to do what I have done.
Over the past six months, I have bought what I call “The Last Cheap One” of everything that I might need. I bought new window AC units. I bought lumber and drywall and house fixtures like a water heater and dishwasher. I bought a new car. I bought TWO new carports and a new 16×40’ wooden storage building to convert to a cabin. I have even stocked up on over 100 bottles of high-quality bourbon and scotch. I actually borrowed money to do some of this. Why? Because I knew that prices were going to start skyrocketing “some time” in the future. I didn’t know exactly when.
Prices are going up now on NEW Inventory, but that doesn’t mean that you can’t buy the existing inventory for many things at the pre-inflation prices.
Buying “The LAST Cheap One.”
I drove 50 miles east to a Lowe’s in a tiny town to buy the last $339 dishwasher in existence. All the Lowe’s have displays for $339 dishwashers but none of them have any stock. Can you find the last one in your area? If you are going to need one in the next two years, it’s best to buy one now.
I drove 75 miles to buy the last cheap shower stall. I’m converting that storage building into a house. Shower stalls are made out of Polyethylene resin (or polypropylene, I’m not sure which… probably both). Once the local stores sell the last one in stock they can only order new stock at higher prices.
I special ordered (through Home Depot) window AC units that have historically cost $418 and $459 (with free to-store shipping) so I will have them when I need replacements for my existing units. I have already seen the same units being sold online for as high as $699 plus $75 shipping. Once the price reset happens, they will be 50% more expensive. Why not use my covid relief money to buy two now?
Part of the reason for these price increases is demand based on stimulus money and the end of pandemic lockdowns. The bigger reason for the price increases is basic problems with labor and manufacturing due to covid plus the extended unemployment insurance which is making a solid percentage of the manufacturing and service labor force delay going back to work until after September.
How to Profit.
Have you ever heard the phrase “buy low, sell high”? There will be plenty of opportunities to do that over the next 9 to 12 months. That’s not why I’m buying what I am buying, but I know for a fact that many people are stocking up on appliances—even used appliances—because they know that entry-level appliances (like the $339 dishwasher) will NEVER sell for those prices again. By the end of the summer, $450 might buy you an entry-level dishwasher for your home.
Food is going to get a lot more expensive, and a lot more profitable for those who have the rainfall this summer to grow it. Tomatoes, particularly red and orange bell peppers, and other popular produce will be “ripe” (excuse the pun) for profit to the roadside or farmer’s market seller. It is more difficult to directly sell meat, but pork and beef prices are also going through the roof.
PLAN NOW and BUY NOW those things you will be needing later this year. The calendar isn’t a magical unknown device. If we look at it, we can see that school clothes and supplies will be required in August. (Cotton prices have more than doubled while you were watching the latest reruns of whatever show is on Hulu.) Christmas and Thanksgiving Turkeys and Hams can be purchased early and frozen.
Christmas gifts will be fewer and more expensive than ever if you buy them in November. Why not buy them now and stick them in the attic?
I’m not going to make any economic predictions other than to say high inflation leads to higher interest rates. Rising materials costs lead to higher finished goods prices. Price changes take months to take effect and there is a lag time. Now can you see why I purchased my new 2021 Toyota Corolla Hybrid in September of 2020 for $21,000 after a $3,000 manufacturer rebate at low-interest payments? If one were inclined to take on FIXED interest rate debt for a high dollar purchase, I would think that one might be happy about doing that now—assuming, of course, that one can afford it. “Rebate” will be an ancient word in the car world for a while, like “thus” or “forsooth.”
Because I’m a weirdo, I bought my used motorcycle in the winter when nobody wants to ride one. I bought my used wood-burning stove in July when nobody wants to use one. I buy my used riding lawn mower when the grass isn’t growing, and buy bulk turkey for meat canning after the holidays when they are clearing out inventory. I’m not sure why. Maybe I took the parable of the grasshopper and the ant a little too literally when I was a child.
In the coming days of high inflation and some scarcity of products, you might consider being like the ant and storing for the future. The squirrel knows that winter is coming, so she fills her little cheeks with acorns so she can fill her little hole in the tree with food. Inflation is coming. What might you want to fill your little nest with before you can’t afford it anymore?
When will it pass and how bad will it be?
I’m not a prophet or an economist (both are right about the same percentage of the time). Everything I have written in this article has already happened. It just hasn’t hit retail prices fully yet. I can imagine that a year from now the trucking industry will be fully staffed again. I can imagine that a year from now the manufacturing industry will have replaced much of their inventory. There will be a lag period of demand coming once everyone has bought what they want or the prices have gotten so high that they can’t afford them. Then the coupons and sales fliers will start up. Will that be 12 months, 18 months, 30 months? Nobody knows.
Once lumber prices hit a peak everyone will be cutting down trees as fast as they can find help. The truckers will get back on the road. The 2×4 that cost $3.75 in 2020 and $8-10 in 2021 might go back down to $6 or even $5.95. I don’t think it will ever go back down to $3.75. And that dishwasher? I think $429 will be the new floor for an entry-level model. But corn can go back to $375 a ton (it’s over $750 a ton now!). It went up by $45 today while I was writing this article. When will it drop again? It depends on the rains, transportation, labor, fuel prices, and much more.
Some people claim that hyperinflation will happen or that the dollar will collapse due to Federal Reserve printing or Government actions. I’ve looked into it. All I can say is this: if the bottom falls out of the economy there is nothing that any homesteader can do but sit on the porch and watch it happen. Grow some pigs, keep your chickens away from the neighbor’s dog, and don’t have a mortgage if you can avoid it. That’s what helps me sleep at night.
Postscript: what if I’m wrong and everything is sunshine and roses in 2021? Then we’ll all have a happy Christmas!!