Rabobank: US consumers spend less money on food to face inflation

Consumers are adjusting their food purchases in response to inflation, according to the latest report from the Rabobank North American Agribusiness Review.

The August report indicates that early indications are that consumers prefer cheaper food alternatives, such as lower priced brands and private label options. While shoppers are looking for deals and shopping more frequently at discount stores, according to the report.

“From gasoline to rent to food, consumers are seeing their disposable income evaporate,” the report says. On a positive note, Rabobank points out that unemployment levels remain low, at 3,6%, more or less the same as before the pandemic.

The Rabobank report notes that discount supermarkets are benefiting from increased price sensitivity, at the expense of premium and natural food stores.

According to the report, the traffic of discount retailers will increase between 10% and 15% in 2022. “In addition to inflation, the rapid expansion of discount store openings has contributed to increased sales,” the report points out. .

Overall, Rabobank notes that demand prospects for retail and foodservice are softening as wage levels for most workers are not keeping pace with rising costs and higher interest rates. Consumers' disposable income levels will be affected, according to the report.

Other comments from Rabobank:

-The Fed may be forced to raise interest rates beyond the neutral level and trigger a recession in 2023 to “end” the wage price spiral.

-Avocado prices tend to fall after several consecutive months of high values. According to the report, the abundance of supplies from Mexico, “potentially at a record level”, will reduce the possibility of a price increase in the coming months.

-Global reefer container rates are expected to rise 9% in the third quarter of 2022 before normalizing.

“We expect reefer container rates to stabilize in [Q2022] 2023 and even contract slightly in XNUMX due to easing supply chain issues and a general recessionary environment,” Rabobank estimates. Even with the price correction, the report points out that fridge rates will likely remain at higher levels than pre-pandemic values.

-Spot rates for trucks seem to tend towards stability in recent weeks, around 22,5% above the average of the last five years prior to the pandemic and 35,5% below the maximum reached in January 2022.

In this regard, Rabobank points out that fuel surcharges have decreased in recent weeks, alleviating the general inflationary pressure on road transport. “We expect trucking contract rates to continue to normalize, which may lead to capacity exiting the market.”

-The pent-up demand for eating out will decline for the cost-conscious consumer. Restaurant revenue growth will slow but remain positive, according to the report.

"More consumers will choose to eat at home at an affordable price instead of splurging at restaurants or ordering food for delivery."

-As the peak of the California strawberry season is over, the availability of these fruits will decrease and provide price support.

– The supply of fresh potatoes will alleviate the market's need in the short term, but the scarce supply and the strong demand favor the rise in prices throughout the campaign.

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