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Protein Prices Drag Down April’s Food Price Index

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Nov. 20 2020, Updated 10:51 a.m. ET

Food items see mixed trends

The Bureau of Labor Statistics (or BLS) released April’s Consumer Price Index (or CPI) report on May 22. Food at home prices declined for a second straight month in April, by 0.2%. The food at home index measures food prices at the supermarket level. However, the price index for food away from home, which includes restaurant sales, rose by 0.2%. As a result, there was no change in the overall food index.

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Beef prices rise for the 15th straight month

Supermarket prices saw sharp differences among product categories. Most protein categories were pressured, with the exception of beef. Prices for meat, pork, fish, poultry, and eggs were down in April, by 0.7% month-over-month. Oversupply and lower exports primarily due to the stronger US dollar were mainly responsible.

The index for beef clocked its 15th straight monthly increase. Beef prices are seeing traction due to higher domestic demand and rising imports from China, Japan, and Vietnam. The ongoing drought and water shortage in Texas and Oklahoma have impacted the industry’s food production chain.

Trends in protein prices affect the financial results for Tyson Foods (TSN), which produces about one in five pounds of chicken, beef, and pork in the United States. These price trends are also a major driver for Pilgrim’s Pride (PPC), Hormel Foods (HRL), ConAgra Foods (CAG), privately held Cargill, and Brazil’s JBS (JBSAY), the largest meat producer in the world.

Food price trends also affect the top line of supermarkets and groceries like Sprouts Farmers Market (SFM) and The Fresh Market (TFM). Walmart (WMT), the world’s largest retailer, reported headwinds from deflationary food trends in its last quarter.

TSN, HRL, and CAG together make up 2.5% of the portfolio holdings in the Consumer Staples Select Sector SPDR Fund (XLP).

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