Eight-cent eggs: Consumers gobble cheap food as grocers squirm
Call it the Great Grocery-Store Giveaway of 2016.
In Austin, Texas, Randalls slashed prices for boneless beef ribs by 40 percent, to $3.99 a pound. Not to be outdone, the H-E-B grocer down the street charged $1 a pound less. Albertsons recently advertised a deal you don't normally see on your finer cuts of meat: "buy 1 get 1 free" specials on "USDA Choice Petite Sirloin Steak."This is not news to our long time readers but it does reflect what the ag commodities markets have been saying for the last few years. Falling grocery prices are not news to the United Nations either although they have to be careful about recency bias in their reports; when things turn it could be fast and dramatic.
And what does $1 buy these days? In North Bergen, New Jersey, you could pick up a dozen eggs at Wal-Mart. (OK, the price was actually $1.14.) A mile away, check out Aldi, the German supermarket discounter, which can actually break the buck -- 12 eggs for 99 cents. A year ago you would have paid, on average, three times that price.
In a startling development, almost unheard of outside a recession, food prices have fallen for nine straight months in the U.S. It's the longest streak of food deflation since 1960 -- with the exception of 2009, when the financial crisis was winding down. Analysts credit low oil and grain prices, as well as cutthroat competition from discounters. Consumers are winning out; grocery chains, not so much. Their margins and, in some cases, their stock prices, are taking a hit.
Eggs and beef have have grown especially inexpensive, and it isn't only an American phenomenon: In England, Aldi recently offered its prized 8-ounce wagyu steaks from New Zealand for about $6.50 -- a little more than the price of a pint of beer.
"The severity of what we're seeing is completely unprecedented," said Scott Mushkin, an analyst at Wolfe Research who has studied grocery prices around the country for more than ten years. "We've never seen deflation this sharp."
Mushkin, who researches local markets, recently found that prices of a typical basket of grocery items in Houston had fallen almost 5 percent over the past year.
He credits, in part, the discerning behavior of shoppers like Manny Sinclair. On a weekday lunch break, the 43-year-old contractor stopped by a Wal-Mart in Secaucus, New Jersey, to pick up turtle food and paper towels.
Sinclair typically buys groceries at his local ShopRite but has recently noticed the steals he now finds at discounters. He glanced at the meat case, where a 12-pack of "Angus steak burgers" fetched $15.82 and grass-fed ground beef could change hands for $4.96 a pound.
Sinclair was intrigued but, in the classic logic of a shopper in an age of deflation, figured he might find even lower prices elsewhere. Along with two Wal-Marts, a Target and an Aldi, the area even offers a Family Dollar that features a small refrigerated section....MORE
See, for example July 5's:
Commodities: 'Era of high ag prices quite likely over' - OECD, UN report
Gosh, I don't know. We're bearish, have been, unabashedly and out in public for what seems a long time but that is quite a statement.*
On the other hand, wheat prices collapsed (again), down 16.25 cents (3.65%) to hit generational lows:
...So we're now up to 26 consecutive years without a major weather problem in the U.S. and with only (relatively) minor disruptions in the rest of the world over that time. Knock wood.January 2016
Deflation: "Food prices fall at fastest pace in 7 years amid 'timid demand'"
Sept. 2015
"World food prices hit lowest level in almost seven years, UN agency reports"
Remember, the rule of thumb is it takes around 10 crude oil calories to produce 1 row crop (mainly corn and soybeans) calorie.And many more.
Most other food prices are similarly dependent on their input costs.
One oft-cited bit of nuttines is the fact it takes 127 calories of aviation fuel to get a head of lettuce from California to London....
