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The awkward truth about food prices in 2022

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What’s happening: Cumulative demand, high shipping and fertilizer costs, and bad weather could continue to drive up the price of products like corn, cocoa, and sugar. This could keep global food prices high, even if inflation in other parts of the economy is low.

“We expect prices to remain at these high levels,” Michael Magdovitz, Rabobank’s agricultural commodity analyst, told me.

To break it down: the UN FAO food price index rose to a 10-year high this year. Pandemic disruptions, including labor shortages and lack of containers for goods, increased costs for producers just as demand increased, especially in China. Extreme weather, including droughts and floods, worsened the situation.

Prices of agricultural commodities rose by about 28% last year and are about 40% above pre-pandemic levels, Rabobank said in its year-end report.

According to Refinitiv, corn futures are about 28% higher than at the beginning of the year. Wheat has increased by 24%, and coffee prices have skyrocketed more than 80%.
Shipping costs have been recently go down a bit. But this may not be enough to significantly change the image.

One problem, Magdovitz said, is that before the pandemic, consumers bought a lot of agricultural products as needed. He then hit the Covid-19 and buyers regretted not accumulating their stocks, especially when demand soared. If prices go down now, many will rush to rebuild inventories.

“If there is a big break in the market, which we don’t necessarily see in many of these goods, consumers will take it with both hands,” Magdovitz said. “This will limit the ability of prices to fall.”

When it comes to agriculture, producers cannot rapidly increase supply. It is difficult to increase arable land quickly or improve yields dramatically.

Another problem is the continuous expectations for irregular weather. conditions La Niña have emerged in the Pacific. This usually leads to drier, warmer-than-average climates in Argentina, southern Brazil, and the southern United States. Meanwhile, sudden floods, surprise frosts and other droughts that occurred in 2021 could spread or repeat next year.

“This La Niña event is having a big, big impact right now,” Magdovitz said, noting the recent jump in soybean prices.

Big picture: The price of items like soybeans and corn is just one of the reasons for the impact of stickers on the grocery store. Food companies also face more expensive packaging and higher distribution costs. Workers’ wages are also rising.

Some of these factors could decrease in the next 12 months. But for now, manufacturers don’t predict much change. Kraft Heinz (KHC) i Mondelez (MDLZ) they have already said that they plan to do so increase prices for your retail customers in early 2022.

The ‘Santa Claus Meditation’ is in full swing

Wall Street trading is notoriously light this week. But investors who are still changing their portfolios before the end of the year see reason to be optimistic, despite the rapid spread of the Omicron variant.

The latest: The S&P 500 ended Monday at an all-time high after positive news about a good holiday shopping season. Mastercard (MA) found retail sales in the U.S. rose 8.5 percent year-over-year as Americans returned to stores and showed growing comfort buying gifts on their couches.

The price of oil has also been rising. The futures of West Texas Intermediate, the U.S. benchmark, are up again on Tuesday: the fifth straight earnings session.

He CNN Business Fear & Greed Index returns to the territory of “greed.” One week ago, he was showing an “extreme fear” reading.

Did you know? Wall Street may have grown old because of its belief in Santa Claus (sorry to our readers under 10). But he does have faith in the so-called “Santa’s rally.”

December is usually one of the best months for stocks. This is due in part to the strength of the last five days of the year. Good times usually extend to the first two trading days of the following year, according to Ryan Detrick of LPL Financial.

“Why are these seven days so strong? Whether it’s optimism for the coming new year, holiday spending, holiday merchants, institutions that fit their books, or the holiday spirit , the bottom line is that bulls tend to believe in Santa Claus, “said Detrick. in a recent note to customers.

The seven-day “Santa’s rally” has materialized almost six times since the mid-1990s. And on those occasions, the next year is usually tough. So far, so good in 2021, though.

Goldman Sachs announces a strengthening mandate

Last week, my CNN Business colleague Chris Isidore wrote that reinforcement warrants were coming. He was right.

Goldman Sachs told employees Monday that all people who come to the bank’s offices in the United States will have to show proof of a Covid booster shot.

He new policy comes into force on February 1 and applies to both employees and visitors. The move comes as an increase in Covid-19 cases complicates the return of office workers.

Goldman Sachs also plans to double the mandatory tests to twice a week for those entering U.S. offices starting Jan. 10.

Remember: Andy Slavitt, a former Covid-19 adviser to President Joe Biden, told CNN earlier this month that “there is no doubt” that CEOs should demand that employees get reinforcements in the light of the contagious which is the Omicron variant.

“If everyone is driven, this is the best chance to get everyone back,” Slavitt said.

On the radar: Dr. Anthony Fauci, the top infectious disease expert in the United States, said Monday that the U.S. government should consider requiring people vaccinated to fly home.

This conversation, along with the Goldman Sachs movement, sends a clear message: Vaccination rules are going nowhere.

Until next time

The October FHFA home price index arrives at 9 a.m. ET, along with the S&P Case-Shiller home price index.

Tomorrow: The latest US crude oil inventory data.

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