Why has food gotten more expensive in the US?
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London (CNN Business) -
Shopping for food has become increasingly expensive.
Unfortunately, going to the supermarket is not expected to be much cheaper in 2022.
What's Happening: Pegged demand, high shipping costs, fertilizer costs, and bad weather could continue to prop up the price of products like corn, cocoa, and sugar.
That could keep world food prices high, even if inflation falls in other parts of the economy.
"We expect prices to remain at these high levels," Michael Magdovitz, Rabobank's agricultural commodities analyst, told me.
The FAO (United Nations agency) food price index rose to a 10-year high this year.
Disruptions from the pandemic, including labor shortages and a lack of containers for goods, increased costs for producers just as demand increased, especially in China.
Extreme weather, including droughts and floods, made the situation worse.
Agricultural commodity prices have risen about 28% in the past year, and are about 40% above pre-pandemic levels, Rabobank said in its year-end report.
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China urges families to stock up on food as supply challenges mount
According to data from Refinitiv, corn futures are approximately 28% higher than at the beginning of the year.
Wheat rose 24% and coffee prices soared more than 80%.
Shipping costs dropped a bit recently.
But that may not be enough to change the situation significantly.
One problem, Magdovitz said, is that before the pandemic, consumers bought many agricultural products when they needed them.
Then covid-19 came along and buyers regretted not building up their stocks, especially as demand soared.
If prices drop now, many will rush to rebuild inventories.
"If there is a big break in the market, which we don't necessarily see in many of these commodities, consumers will take it with both hands," Magdovitz said.
"That will limit the ability to drop prices."
When it comes to agriculture, producers can't just quickly increase supply.
It is difficult to rapidly increase arable land or dramatically improve yields.
Food banks, the lifeline for families in the US to face alarming inflation in the country
Another problem is the current expectations of erratic weather.
La Niña conditions emerged in the Pacific.
That generally brings drier and warmer weather than average in Argentina, southern Brazil, and the southern United States.
Meanwhile, the flash floods, surprise frosts and other droughts that occurred in 2021 could be extended or repeated next year.
"That La Niña event is having a huge impact right now," Magdovitz said, pointing to the recent jump in soybean prices.
The Big Picture: The price of items like soybeans and corn is just one reason for the impact of stickers in the grocery store.
Food companies are also grappling with more expensive packaging and higher distribution costs.
Workers' wages are also increasing.
Some of these factors could be mitigated in the next 12 months.
But, for now, manufacturers don't predict much change.
Kraft Heinz (KHC) and Mondelez (MDLZ) have already said they plan to raise prices for their retail clients in early 2022.
The 'Santa Claus rally' is in full swing
Trading on Wall Street is notoriously light this week.
But investors who are still changing their portfolios before the end of the year see reason to be optimistic, despite the rapid spread of the omicron variant.
The Latest: The S&P 500 ended at an all-time high on Monday following positive news of a strong holiday shopping season.
Mastercard found that US retail sales increased 8.5% year-over-year as Americans returned to stores and showed increasing comfort shopping for gifts from their couches.
Oil prices have also been rising.
West Texas Intermediate futures, the US benchmark, rose again on Tuesday, the fifth consecutive trading session of earnings.
The CNN Business Fear & Greed Index is back in "greed" territory.
A week ago, it showed an "extreme fear" reading.
Markets tumble as Wall Street fears turn to China
Did you know
Wall Street may have stopped believing in Santa Claus (apologies to our readers under 10).
But he does have faith in the so-called "Santa Claus rally."
December is usually one of the best months for stocks.
That's partly due to the strength of the last five days of the year.
The good times also tend to extend into the first two trading days of the following year, according to Ryan Detrick of LPL Financial.
"Why are these seven days so strong? Whether it's optimism about the new year ahead, holiday spending, holiday merchants, institutions balancing their books, or the Christmas spirit, the bottom line is that the bulls they tend to believe in Santa, "Detrick said in a recent note to clients.
The seven-day "Santa Claus rally" has happened nearly six times since the mid-1990s. And on those occasions, the following year used to be rough.
However, so far everything is going well in 2021.
Goldman Sachs Announces Covid-19 Vaccine Booster Order
Last week my colleague from CNN Business Chris Isidore wrote that booster vaccination orders were coming.
He was correct.
Goldman Sachs told employees on Monday that everyone entering the bank's offices in the United States will need to show proof that they received a COVID booster shot.
The new policy goes into effect on February 1 and applies to both employees and visitors.
The move comes as an increase in Covid-19 cases complicates the return of office workers.
Goldman Sachs cuts US economic growth forecast due to lower spending on services
Goldman Sachs also plans to double the mandatory testing to twice a week for those entering US offices beginning Jan.10.
Remember: Andy Slavitt, former covid-19 adviser to President Joe Biden, told CNN earlier this month that there is "no question" that CEOs should require employees to get booster shots in light of what contagious which is the omicron variant.
"If everyone gets a booster, that's their best chance for everyone to come back," Slavitt said.
Covid-19 vaccination mandates are divisive, but they can work.
Europe is showing how
On the radar: Dr. Anthony Fauci, America's leading infectious disease expert, said Monday that the US government should consider requiring that people get vaccinated to fly domestically.
That conversation, along with the Goldman Sachs move, sends a clear message: the rules on vaccination will stand.
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