Sizzling rise of food inflation
Commodity costs moved abruptly higher when the Ukraine/Russia war broke out February last year. Key food sector inputs (i.e., wheat, corn, soy, packaging, freight, oil, etc) started rising at that time. The way in which these costs flow through to on-shelf food prices differs by product, company and geography.
Companies typically employ hedging strategies which delays the impact of input cost moves giving companies time to adjust pricing. Many companies began bringing prices up as they saw these costs rise, made material price increases in July/August 2022, and continued taking price incremental increases through the fall 2022 and into the winter of 2022/early 2023. With commodity prices rolling, there is a view that it will be difficult for companies to raise prices significantly in H2 2023. Therefore, as we annualize the higher prices pushed through last summer and if the input cost environment remains benign, it is expected that food inflation will moderate.
Karen Miki Behr, portfolio manager, Newton Investment Management
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