June 06, 2006 MILKING VALUE Commodity arbitrage spreads into plastics. Ilan Brat reports in the Wall Street Journal on the case of the missing milk crates:
"Missing milk crates used to wind up in college dormitories as bins for clothes, books and CDs. Today pilfered crates -- as well as pallets, bakery trays and other containers made from a pricey high-density plastic resin -- are going into grinders in recycling plants, say dairy and soft-drink industry loss-prevention officials and police. As oil prices have climbed, so too have prices for the petroleum-based resin used in milk crates, pallets and other such items. Prices of the resin jumped more than 40% after Hurricane Katrina, rising to 87.50 cents per pound in November, according to Plastics News. Today prices are hovering in the 70 cents-per-pound range, nearly double the price just three years ago. Dairy and soft-drink industry people cite mounting evidence that the thieves are either plastic recyclers or bandits who sell to recyclers, who then grind up the plastic and sell it to toy makers or other manufacturers who may not know that they are buying stolen goods. Recyclers have been arrested in southern California and Detroit for grinding up stolen plastic, and dairy and soft-drink industry officials and police suspect recyclers in Pennsylvania, Georgia and Florida are doing the same.
Some companies are staking out recycling plants, hiring private investigators and asking lawmakers to help curb the losses. A bill in the California Assembly would require recyclers to request proof of ownership for any bakery trays and milk crates they buy. A Florida dairy group is considering supporting legislation that would require grocery retailers to pay deposit fees on milk crates.