Rising Wooden Pallet Costs Contribute to High Consumer Prices

A giant robotic arm loads pallets of chainsaws at the Stihl Inc. production plant in Virginia Beach, Va., on May 25, 2017. (AP Photo/John Minchillo)

Against a backdrop of ongoing supply chain concerns, a key but often overlooked aspect is the cost and availability of wooden pallets, the price of which has shot up during the pandemic and is driving up prices for consumers.

Market data shows that prices have increased by up to 60 percent, creating unexpected challenges for industries and undesired consequences for consumers.

Dominick Davi, President of Greenway Products and Services, one of the largest suppliers of wooden pallets in the mid-Atlantic region, told Fox Business that he’s “never seen anything like this at all” after 25 years in the wooden pallet industry.

“Ninety percent of everything in the United States is shipped on a pallet … it’s a very integral part of the whole entire supply chain,” he said on Tuesday.

Davi told Fox that before the pandemic, the wooden pallets cost approximately $12. Now the price has risen to $21 apiece.

Wooden pallets, despite their innocuous appearance, are a crucial technology of the supply chain. While they are seldom considered by consumers outside of the shipping industry, wooden pallets are used in the shipping of food, household products, and virtually all everyday goods sold in retail. A shortage of pallets can have wide-ranging impacts on the entire economy, as scarcity results in higher costs of doing business. This results in higher prices for consumers, with the impact of inflation felt most acutely by lower-income Americans.

As with most features of the supply chain issues which have become a well-known economic concern of late, the causes of wooden pallet price inflation are numerous and complex. However, it follows that pallet price is correlated with the raw materials used to make them, chief among which is lumber.

While the price of lumber is currently down from a high of $1,670.50 per 1,000 board feet last May as listed on the Nasdaq, the effects of inflation are still manifest in the cost of this essential commodity, with the price sitting at $906 per 1,000 board feet as of Dec. 3, higher than at any point recorded prior to the CCP (Chinese Communist Party) virus pandemic. And it isn’t just lumber that has seen an unprecedented rise in costs.

“Core prices are going through the roof. Nail prices are up. Fuel prices are up,” said Christ Lasseter, general manager of Summerford Pallet Company, to Supply Chain Digital.

The consequence of this challenge to the supply chain is accompanying inflation of consumer prices. Last month, it was reported that food prices had risen to levels not seen in over a decade. And in October of this year, the consumer price index increased by over 6 percent, with price hikes in fuel, energy, food, and vehicles. As concerns with supply chains and inflation continue unabated, wages struggle to keep up with the growing cost of living, and the burdens of high prices are borne by everyday Americans.

Tom Ozimek contributed to this report.