Because there has been very little new content posted, I'm going to try to fill the gap while still adhering to the politics ban ...


(snip)"Your grocery bills are climbing at a much faster pace than restaurant prices.

By Howard Penney and Rory Green, Hedgeye

According to the latest government figures, the consumer price index for food at home increased by 60 basis points year-over-year to 6% versus the 10 basis point gain in food away from home CPI inflation to 2.7%.

Food inflation is now the most important household expense, according to Wal-Mart's (WMT) commentary during its earnings call last month. Food prices, according to the Bureau of Labor Statistics, continue to accelerate higher. The charts below illustrate food cost trends and food cost trends versus core inflation. It's worth noting that the spread between food at home inflation and core inflation widened month-over-month while the spread between food away from home and core inflation narrowed.

Grocers like Whole Foods (WFM), where the customer is more loyal and willing to pay higher prices, are reporting no problems passing price through but other concepts where the price elasticity of demand may be higher will likely see more attrition as they look to protect margin. To the extent that grocery inflation continues to outstrip price increases in restaurants, it should be a positive for comparable sales trends at restaurant chains. Whether or not restaurant margins can withstand the pressure or not, however, remains to be seen."(snip)

Commentary regarding the above story raised two major points ... that the 'labor' component of restaurant prices makes up a far higher percentage than the 'labor' component of grocery store prices ( with labor costs remaining stagnant or dropping ), and that despite rising prices at both grocery stores and restaurants these businesses are absorbing some of the actual food cost increases in the form of reduced profit margins.


(snip)"Cattle futures that gained 16 percent in the past year in Chicago may reach an all-time high of $1.36 a pound in as few as seven months, said Rich Nelson, the director of research at McHenry, Illinois-based Allendale Inc., who has been studying agricultural markets since 1997. Feed costs have surged, with corn heading for the highest annual average price ever.

The 11 months through August were the driest since at least 1895 in Texas, and the state’s farm losses may top $5.2 billion. Ranchers may sell or slaughter 500,000 beef cows they would normally keep for breeding because it’s too expensive to feed them, Texas A&M University estimated. Tighter supply in the $51.5 billion U.S. cattle industry is boosting global meat costs already rising faster than any other food group.

“We’re going to be talking about a historically large reduction in beef-cow numbers,” said David Anderson, an economist at the university’s Texas AgriLife Extension Service in College Station, Texas, who has been following the livestock industry for almost two decades. “If nothing else changes, that’s tighter supplies and less beef and higher prices.”

Global food prices are within 3 percent of the record reached in February, according to a United Nations gauge of 55 commodities. The meat component of the index has more than doubled since 2002 and is up 8.7 percent this year, more than the changes in dairy, cereals, sugar, oils and fats."(snip)

Commentary regarding the second story appears to center on the issue that a large number of price increases have already entered the 'channel' from the bottom up ( i.e. fertilizer costs, fuel costs, raw commodity feed costs etc. ) and now have no alternative but to work their way upwards towards retail consumers regardless of what else happens in the US / world economy in the near future.