Topline: As Americans stock up on groceries during the coronavirus outbreak, wholesale and commodity prices of common staples like wheat and flour, rice, eggs and orange juice have skyrocketed; the uptick in demand is putting pressure on American supply chains and squeezing margins at grocery stores.
- The price of wheat futures trading in Chicago has risen 15% over the past two weeks, and rice prices are following suit: One benchmark variety of Thai rice trading internationally is up 20%this year.
- Orange juice futures have also spiked more than 20%—their biggest monthly gain since October 2015, Yahoo Finance reports, and the wholesale price of “Midwest large” eggs has tripled since early March.
- The spiking prices reflect an uptick in panic buying—there’s no shortage of wheat in the United States, for instance, but worried consumers are stocking up on household staples just in case.
- “In the food industry, everyone went for bread, flour . . . just the basic staples,” says Virginia McGathey, the founder and president of McGathey Commodities.
- This consumer behavior in the grocery store drives up commodity prices, and those prices spiked even further as managed funds who might have otherwise balanced their portfolio with stocks and bonds turned to commodities (the S&P 500 is currently down about 25% from its peak in February).
- But these recent commodity price swings have almost “no relation to the fundamentals of what’s happening” in commodity markets, McGathey says. On the whole, corn, wheat and soybean markets have been on a decline that was sparked by the China trade war that began last summer.
Crucial quote: Frustrated grocery stores are also facing higher costs from suppliers that they are reluctant to pass on to customers. “It is unconscionable that the egg industry has doubled prices because of increased demand. It is hitting low-income New Yorkers the hardest, as so many have lost their jobs working in restaurants and hotels,” a spokesperson for Morton Williams grocery stores—where egg prices have increased by 14% in New York—told CNN.
Tangent: It’s not just consumers who are worried: Yesterday, 11 members of Congress wrote a letter to the Department of Agriculture urging the agency to take immediate action to prevent a shortage of refined sugar in the United States. “The challenges presented by the COVID-19 pandemic make it ever more critical that we maintain national food security with adequate sugar supplies, as we must do for other commodities,” the Sweetener Users Association added in a statement this morning.