CEO of Giant Trucking LLC Talks About the Correlation Between Gas Prices and Food
"Transportation in the trucking world is the heartbeat of the economy. If you want to see what's happening in the economy, follow the transportation."
For our Report to Wyoming Podcast, I talked to the CEO and co-founder of a massive trucking company headquartered in Illinois right on the border of South-side Chicago.
It's a family business that Mike Kucharski's father started. They specialize in hauling frozen and refrigerated food products—cheese, meats, eggs, bread, candy, you-name-it. They haul foods from the Midwest to the West Coast and have "so many trucks going through Wyoming." Cheyenne is one of their big fueling spots.
We dive into the correlation between gas prices and food. "It definitely goes hand-in-hand," says Kucharski. As gas prices go up, so do food prices (and everything else). He's noticed that when fuel prices increased during and after the pandemic, their profits began to decrease.
There's also something he calls "volume volatility." Kucharski says that consumers are more cautious about spending these days. "They're buying less food and changing their diet. There's also less available." In years past, the trucking CEO says there would've been as many as five different kinds of stuffings on the shelves in your local supermarket. Now, maybe there's only two or three, and that's, in part, because producers are more hesitant to invest in variety when returns dwindle.
Is the juice worth the squeeze? Kucharski says producers are racked with that question. They've also got the added cost of increased interest rates. The USDA forecasts that the total farm sector debt will increase to a record high of $535 billion this year.
As a share of production expenses, interest expenses are the third largest. They also are the fastest growing farm production expense, increasing 19.1 percent in 2023 and 33.2 percent in 2022.
Kucharski admits he isn't an economist, but his LLC is seeing food suppliers buying less and less. When interest rates go up, it brings down profit margins. Other variables include "war and weather." Whenever there is a war, prices go up.
Since Covid JKC has had to shrink. They have less trucks. "Our margins are razor thin, we have none. We're just trying to weather the storm." Consumer consumption has dropped. "We're in a dogfight to get it [bids]." All our costs are higher and you're seeing this every day in the newspaper. Trucking companies going out of business because we're not making enough money to sustain.
Findings from the Economic Analysis Division back up his claim about rising food costs. Here in the Cowboy State, the second half has seen inflation across the board:
- Apparel - 8.2%
- Food - 7.0%
- Housing - 6.1%
- Recreation & Personal Care - 4.2%
- Medical - 3.8%
- Transportation - 1.5%
The Government Accountability office reported that in 2022 U.S. consumers saw the largest annual increase in food prices since the 1980s. Gas played a role, but there were other factors—like global disruptions to the food supply chain—that may have had a greater impact.
As it stands, analysts don't have a straight answer on when or if grocery prices will drop. It relies on a number of factors, including consumer demand, supply chain shortages, and -- like Kucharski said -- war and weather.
Round and round and round she goes. And where it stops Nobody knows.
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