Hidden Price Tags Behind Your Burrito, Sneakers, iPhone, and Gas Tank

Summary

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Mary MacNamara  

So somewhere in Iowa, a corn future just traded. Somewhere in Chile, copper just settled. And somewhere in your life, that’s about to hit your wallet, your burrito, your iPhone, even your mortgage. Commodities aren’t some abstract Wall Street thing. They’re the invisible price tag underneath every price tag you actually see.

Today, we’re here with Ryan Gorman, the Manager of Retail Education at the CME Group. Welcome, Ryan. How are you?

Ryan Gorman

I’m doing really good, Mary. I really appreciate you having me on. This is a fun topic. It’s one of those questions that I get occasionally, when I tell people that I work in the commodity space or work for the exchange. People don’t necessarily understand how impactful the prices of a lot of these different commodities affect their day-to-day life, and really what it breaks down to is input costs.

And we’re going to dive into a bunch of examples, I’m sure. But a lot of these input costs, a small rise or a small, drop in these input costs of a lot of different things had a huge impact on just things that you might not even have thought about. So, it’s a very interesting topic

Mary MacNamara  

Awesome. Okay, so we’re just going to do fire out these questions and examples and let’s see where this goes. Okay, so the burrito bowl breakdown. Corned beef, avocado, rice, your Chipotle order touches four different commodity markets. Which one moved the price the most this year?

Ryan Gorman

I like that, burrito bowl breakdown. That’s a good start. This is a good example of it, like your day-to-day, what you’re eating, and how that cost can be affected with global commodity markets. Probably, beef is going to be the number one thing that goes in with something like a bowl like that.

You’re thinking your standard corned beef, avocado, rice. We have beef near, record high prices. We’ve seen feeder cattle, the futures, continue to climb at these elevated prices. But, thinking about the other things that are involved, that beef is going to be that number one thing that’s going to really determine what that overall price is.

Some of the other ones like a corn, rice, avocado. Some of these, they’re a little bit more seasonal so you’ll have different prices getting affected based on the seasonality. Specifically, like, especially with like a corn or an avocado. Rice, again, it’s a little bit more of a cheaper product.

So those are a little bit different. The thing with beef that’s interesting is beef, in order for the demand to change, it’s a long-life cycle process. So, for that demand to change, it takes a long time. But, different supply shocks, different things like that can really affect the overall price of if you’re just going out and grabbing lunch.

Instead of it being 12 bucks, it can be 20, out of nowhere. But the beef at that elevated price is definitely increased just that overall cost of building it and then going out and purchasing

Mary MacNamara  

All right, here’s the next one. So, this is the iPhone question. Your iPhone got $100 more expensive this year, or even more. I don’t know, I’m just saying 100. How much of that is copper prices, how much is tariffs, and how much is just Apple margin and chips?

Ryan Gorman

Yeah that’s another good one. First of all, I hope my iPhone only goes up $100 next time I buy a new one. That’d be fantastic. It’s getting to that point where, these smartphones, all these things are people have, just rely so heavily on them, your going to pay what they ask which is a whole other topic.

But thinking about it from, copper tariffs, Apple, just in general. So copper, an iPhone it has not a huge amount if you have massive swings in like the price of copper, that’s going to be one of those major input costs that’s going to affect it. Tariffs, that’s going to be another big one as well, because the tariff situation is very complicated.

But to put it like in very, very simple terms, it affects the entire supply chain. So from top to bottom, from building these inputs of the phone to the manufacturing to shipping, every single part of that has the potential of getting hit. If every part of that is getting hit, that is potentially going to end up on the consumer.

There are really only two options. It’s going to end on the company that’s doing the manufacturing, or it’s going to end on the consumer, and what we see more often than not is that does end up on the consumer. But, thinking about it generally, Copper has been kind of moving a little bit higher.

It’s been steady relative to some of the other precious metals. But, high level, the tariff is going to be the more impactful on a thing like an iPhone because it’s a deliverable product to people that goes through many phases. So, seeing that, increase or decrease will have a long-standing effect.

It might take some time for that to trickle down a little bit because it’s that whole supply chain that’s really getting hit. So that’s going to be the big one there. The copper prices and then the pricing power of Apple as well are a little bit less. But, as that tech advances, you never really know where the pricing’s going to be.

Going out and buying a new iPhone, any smartphone that you’re going to want depending on how all these new features come out, you never know where they’re going to put it, but again, this hints back at that supply chain and those input costs. It all kind of comes back together, and copper is an interesting one to look at

Mary MacNamara  

Another one that’s close to us is sneaker prices, which keep climbing. Walk me through how rubber futures and freight cost from Vietnam factories end up on the price tag at Foot Locker.

Ryan Gorman

Yeah, it’s funny you say. I’m wearing Jordans right now, Jordan 1s, great shoe. This is the similar idea where the journey from the raw commodity to retail shelves rely on cost plus pass-through modeling and supply chain lead times. You basically, when it comes to actually obtaining the raw material itself, obtaining that raw material in order to make these shoes, if that price goes up, that’s going to already get passed down to the consumer.

You could have additional overhead from these factories overseas where, there might be more costs associated. They might have to pay a little bit more for that raw material, and then that can affect the entire process of building what then we would go out and purchase. Then you have things like, freight, you have shipping, and assuming that all goes perfectly smooth, which isn’t always the case.

Oftentimes, we see issues with shipping. There might be delays, and it’s not really something that you can plan for, but you have to account for when you’re, thinking about the costs. And then just your wholesale retail markup. Depending on the demand.

There’s a huge demand for, like specifically for, certain types of these shoes that, maybe it’s somebody that everybody is really into, like a Michael Jordan, where it’s a high demand shoe, and sometimes due to the input cost, prices might be a little bit higher. Prices might be a little bit lower, and you might have a lot of people coming in and trying to do their own speculation, with the physical shoe itself from these retail stores.

Buying at one and going and selling at the other. There can be markups at these different places that you try to do that at. So, it kind of goes again from really from top to bottom, where you can have these input costs, like a slight rise there from the top will rise the next level, could rise the next level, could be heavier shipping, could be longer shipping times, and then it goes to the retail stores or, these online websites where you’re getting shipping then from them.

And it just keeps going in that loop. So, seeing the price rise or fall of that base commodity is going to be super key to understand. If you are someone that’s, trying to dial into a specific market, it can be super helpful to kind of trace that all the way back and go, “Where does this start? What is happening with the price of where it starts? What does the future look like for that price, and what can I do in order to try and protect myself or help myself against the rising or falling of that price?”

Mary MacNamara  

Okay, another one. So, you filled up for $65 this week. We’re talking gas. How much of that is crude oil? How much of it is refinery margin? And why does it feel like gas prices move faster than anything else in your life? Also recently, major oil companies have reported massive second quarter profits for 2026, driven by soaring global energy prices due to the war in Iran and shipping disruptions in the Strait of Hormuz.

Ryan Gorman

There’s a lot that goes into that. So, thinking about it, let’s start off with kind of that first part. So, when you think of it, how much is crude oil refinery margin? When you fill up, it’s about 50, 55% crude oil, CME, WTI, or ICE Brent oil. That’s like the underlying raw material cost.

The refining margin’s going to be probably 20, 25%, and then little bit expanded from there. The rest is going to be taxes, distribution retailers, you know, upping the price a little bit from there. But the main question there is why the prices go up. So, we saw that huge supply issue.

People were worried about the supply due to the conflict in the Middle East. Prices skyrocket, and then you go to the pump, and the prices have already skyrocketed as well. And people often say “How is that possible? How is it already there?” And one thing, if you look at like crude oil futures, for example. The crude oil, say it’s the September futures contract. That doesn’t necessarily mean that’s where the market is predicting oil to be in September. That’s just, it has to do with the basis, and it has to do with expectations of where prices might be. There can be a little bit of confusion when it comes to what the futures actually means.

But if the futures price rise, and you’re an oil company or are working at a gas station, anything like that, you have to account for purchases in the future, and you have to go out and utilize the futures market. So, if you’re worried that future prices might be significantly higher, you are going to go in, you’re going to buy that futures contract.

Because if prices go up, then you are still essentially locking in the price that it was at today, and then you get the profit from when the prices went up. It’s a basic hedge. So, these companies, they will up the price because of the futures contract, because the futures contract is saying these prices are higher.

And those big spikes, typically you’ll see those big spikes, and then it might take a little bit slower for prices to trickle down. And the market is so volatile you see these massive back-and-forth swings, and so These oil companies won’t do it in the same fashion, where they’re upping the price, bringing it down.

It makes forecasting difficult; it makes reporting very difficult. But that’s a big thing that we see right now. You mentioned what’s going on in the Middle East. It all trickles down to the consumer at this point. Right now, that’s kind of the way of the world, unfortunately. It’s just kind of how things have gone.

But, when there’s the, the idea of there’s going to be a global conflict, the idea of that is also this typically don’t end very quickly. So, there could be a potential in the future. So, a lot of it is these companies are buying these contracts in order to hedge their exposure, which inherently can drive the price higher. So, it kind of comes from there and it just continues in that direction.

Mary MacNamara  

Okay, here’s an FX question. The dollar got stronger against the peso. Shouldn’t that make avocados cheaper, and why didn’t it?

Ryan Gorman

So that’s a good point. So, these FX currency markets, there’s a lot of back-and-forth price action that you see and a lot of it can be a little bit short term, but, you have to kind of weigh what the short-term price action is saying versus what the overall trend is saying. So, in theory, like a stronger dollar buys more pesos, reducing the import cost of goods priced in pesos, if that makes sense.

However, retail prices do not fall due to, a bunch of different market dynamics. So, supply and demand fundamentals. So, if weather shocks reduce avocado yields, for example, somewhere in South America or somewhere in Mexico, the reduction in the physical supply outweighs that savings you would get on the currency.

And a lot of things are done also in US dollars. Like trade relationships between US and Mexico, a lot are done in US dollars in general. So, seeing these swings, although it has strengthened against the peso, it would need to be, probably longer and a clear trend of this is going to continue to grow.

It’s going to continue to be, quote-unquote, “a problem” or continue to be something that we have to account for. It’s an old saying, if you get the dollar right, you get a lot of things right, because it kind of trickles down because you use dollars to buy other currencies, which you can then use to buy anything.

So, it’s really interesting but technically speaking, it doesn’t necessarily make it cheaper. But I use that a lot. If you see something moving in the dollar, you can kind of then go look at the bond per market. You can look at the precious metals. You can look at some, soft commodities, anything you want to look at, and it could have potentially a change, even the equity indices, for example.

But it’s funny to put it that way. So technically, I guess it could, but also technically it couldn’t. It’s kind of one of those things where once the trend lasts long enough, you might see that effect. If we get like severe inflation or severe, deflation, stagflation, these things, once they compound, can have effects that will eventually trickle down to the consumer.

But in the short term, it’s not necessarily, this huge concern that you have to worry about these, you know, intraday, intraweek swings in the currency markets.

Mary MacNamara  

I guess that’s kind of good news. So, here’s a freight question. A cargo ship delay in the Pacific, how does that turn into a $20 price hike on sneakers three months later? Or does it?

Ryan Gorman

$20 hike. Yeah, it definitely can for, this– It depends on a lot of things. There’s a ton of variables there. How long what is the cargo, all that. But for example, say sneakers, you’re going to have a three-week ship, and it’s going to take an extra two weeks to get there.

That, there’s a ton that goes in. There are costs of actually the freighter, of the shipping, of the oil needed. All of that’s going to increase. So that’s increasing the input costs right there. It can hurt inventories, at these retailers, and if inventories are lower, that means the supply is lower, and that means the price is going to go higher.

So that can go from one-day delay, 30-day delay, 60-day delay, 90-day delay, and the longer it goes, the more and more impact it’s going to have because it just goes back to the basic supply and demand fundamentals, because essentially what you’re saying is the demand didn’t change, but the supply is very delayed.

The supply is not meeting that demand, which is just going to, make the curve go even higher. So having these delays can be a a huge problem, and that’s why there’s all these different instruments that these companies will try and use to try and hedge whatever they can in order to eliminate that because, this is one of those things that you might not be able to not only predict, but you might also not see coming.

You can’t do anything to stop like a delay from happening potentially. If it’s weather, if it’s anything you want to be able to protect yourself, and that’s why you see a lot of these, bigger companies or anybody that is, importing anything is going to take a lot of precautions there.

But, when you see these delays, that’s when you’re going to see from the top all those input costs are going to continue to rise, and it can be a problem, and that’s going to be what drives the supply, to get hurt, the demand to remain the same. And then it could even make the demand go higher.

Knowing that there’s less of something always makes us want it. So that’ll increase the demand, and that is kind of that cycle that will increase the price

Mary MacNamara  

All right, last question. So, gas, rent, groceries, and your phone all just got more expensive at the same time. Is this related to a Fed decision rippling through everything or four separate commodity stories that just collided?

Ryan Gorman

So, it’s probably a lot of both. In the world over the last five years, really since the pandemic, we’ve had a lot of major… including the pandemic, have had a lot of major events that have affected supply of all goods across the world. The pandemic right off the bat was a huge supply shock for a lot of different goods. You have, oil right now. There’s, very, un- a lot of uncertainty, I’ll say, about what’s going on with oil, because there really is no, “I know what’s happening. This is where it’s going.” It’s very uncertain. So, when you think about that, oil’s in everything. Everything.

Everything you look at the grocery store, gas, everything that has to do with utilities, all of that kind of stems from oil, and a lot of these inputs that you’re thinking of when you think of, you could just think of it as gas, rent, groceries, but if you really break down what you’re eating, what you’re buying, what goes into your rent, all of those input costs are going higher and higher.

Now, the Fed, it is important to understand what the Fed is doing and understanding what the Fed is planning on doing. So, it’s one thing to say, to look at CME’s Fed Watch tool and say, “Oh, they’re going to hike rates, or they’re going to keep rates the same.” But if you look at the bigger picture, what have they done over the last year?

Are they maintaining that or changing that currently? And what does the outlook look for the next six months to one year? That’s going to really help you understand it a little bit more. The Fed isn’t always necessarily a surprise. Typically, when you look at the probabilities of what they’re going to do and, the, how often that these people at the Fed are speaking, you’ll see, and you’ll get an indication of where things are going.

So, I think that understanding the Fed is super important, and it can have a big effect on prices going higher. I also think there’s just been so many things that have happened globally with global conflicts and the pandemic that have at the very least, hinted at the fact that there could be supply disruptions on major imports and exports.

Things like corn, wheat, soybeans across the world. Oil coming out of the Middle East. It all gets impacted whenever there’s any sort of thing, like any conflict like that. So, it’s important to kind of understand that and, do your best. Some of these things, as everyday people, we can’t really control, and it is what it is.

It can be beneficial to, at the very least, track it and, go back to that raw commodity, that raw material we talked about earlier, and understand why that price might be rising, why it might be falling, and kind of where it lands. Does it land with me, the consumer? Does it land with the, the companies that are importing? Where does it actually land?

Mary MacNamara  

So, Ryan Gorman from the CME Group, thank you so much today for joining our podcast.

Ryan Gorman

Thank you, Mary. Thanks for having me.