Some prices of light basic commodities are rising, adding to consumers’ problems

Rising prices of soft goods, from orange juice to live livestock, complicate the inflation picture.

Prices for a range of agricultural commodities have risen in recent months, driven by weather-related damage and rising climate risks around the world, leading to supply shortages. Rising prices add another layer of pain to consumers’ wallets at a time when stubborn core inflation, excluding food and energy, reached 4.3% in August.

Orange juice, live cattle, raw sugar and cocoa futures hit their highest levels of the year this month. Everyone is in a “supply-driven bull market right now,” said Paul Caruso, director of commodity investments at Standard & Poor’s. Ancora.

the S&P GSCI Software IndexIt is a sub-index of the S&P GSCI Commodity Index that measures soft commodities only, and has jumped more than 18% so far this year.

Orange juice has surged due to global citrus supply shortages and hurricanes that struck last fall in Florida, the main producer of orange juice for the U.S., and major exporters, including Brazil and Mexico, have also cut their estimated production of this year’s orange crops due to rising temperatures. Temperatures make harvesting more difficult.

The juice futures market has arrived Record $3.50 per pound This month. Live cattle futures likewise Hit a recordTo reach $1.9205 per pound.

Meat prices were driven by shrinking US cattle herds, continued demand for beef, as well as higher labor and fuel input costs. a Dehydration for long periods In the Midwest earlier this year it destroyed grasslands and hay crops, forcing some farmers to abandon their crops Culling their herds Data from the USDA expect supplies to decline this year and next, and perhaps into 2025 and 2026, before supplies rebuild.

It’s not just breakfast or lunch that has become more expensive, dessert has also become more expensive.

Raw sugar and cocoa prices have risen in recent months. Sugar futures reached 27.62 cents per pound last week, the highest level since 2012, while cocoa futures rose to $3,763 per metric ton this month, also the highest level in more than a decade.

Sugar prices rose earlier this year as demand rose alongside downward crop revisions from major producing countries, such as India and Thailand, as a result of extreme weather conditions. India, for example, is The second largest sugar producer in the world After Brazil.

“Soft goods in particular are very fragile and very sensitive to weather change,” which can disrupt production, said Darui Kong, head of commodities and natural resources at DWS. “That’s why we see prices rising, and there’s no short-term solution because there are only a few people who can produce. This is not as sensitive to demand as it is to the production side.”

Since food and energy are not included in core inflation calculations, Kong added that consumers may face higher daily prices than central bank policymakers take into account. He said that could create a “bifurcation” in views on inflation that would be tougher on consumers, at least in the short term.

Shoppers are bearing the brunt of rising prices as the world’s largest food companies try to get ahead of rising input costs.

“It is certainly not the time to talk about deflation [or] “The decline in prices is due to the significant decline we have seen in gross profit margin…we continue to see a high level of input cost inflation,” François-Xavier Roger, Nestlé’s chief financial officer, said at the Barclays Consumer Goods Conference earlier this month.

The Nestlé CEO pointed to increased costs for sugar, cocoa and Robusta coffee beans, adding that “obviously some of the other items have come down like energy, like transportation, but the bottom line is still a few billion higher in terms of input cost inflation in 2018.” 2023.”

Likewise, Gram David Pitkeathley, Unilever’s chief financial officer, noted at the Barclays conference that the company – maker of Ben & Jerry’s, Magnum and Breyers – is still seeing inflation in the nutrition and ice cream categories. In late July, Unilever mentioned Pitkethley said there was a 12.6% rise in “core prices” in the nutrition space and 11.5% in the ice cream segment, the latter being Unilever’s most discretionary category where “private label is attractive to the consumer”.

“We have lots and lots of inflation and pricing… the consumer feels that pricing,” the CFO said.

To be sure, prices of other agricultural commodities, such as corn and wheat, have come down from their highs earlier this year, improving the outlook for consumers.

Standard soybean futures It fell to the lowest level in one month Last week after the USDA reported weaker than expected soybean export sales. Corn and wheat hit their highest levels since the beginning of the year in January and February, and have declined since then.

Some analysts are counting on rising interest rates and a slowing economy to curb consumer appetite.

“I think volatility persists because we understand what the harvest is, but as important as the harvest is, it’s all about understanding demand,” said Jeff Kilburg, founder and CEO of KKM Financial.

If demand is affected, it could portend a decline in stocks, Kilburg said.