Australian Flu (PRGO)
This year’s flu season may be one of Australia’s largest flu seasons on record. Australian media has called it “kindy flu” due to the high rates of children getting it. The Australian government is concerned because nearly half the children have received their annual flu vaccine this year compared to 2020. The 2023 flu season is on track for a similar season as 2019, which was the largest on record for the country. There have been 107,941 recorded flu cases this year of which 48,873 have been children under the age of 15. Children comprised nearly 80% of the flu cases admitted to hospitals. The flu strain itself does not seem more severe as the 7% admitted directly to ICU is similar to previous seasons.
Health researchers in the U.S. look to the influenza season in the Southern hemisphere where it is now winter for foreshadowing clues about what to expect this fall. Last year’s early flu season in Australia was an accurate indicator of what our flu season would be like. The flu season in Australia is currently tracking below last year, but ahead of the other recent years. We were effectively sold out of some cough/cold medicines last winter. Cough/cold is between 15-20% of the company’s revenues.
Going Discount (GO, SFM)
Traffic to Grocery Outlet stores has remained strong since the expiration of the emergency SNAP benefits in 32 states in March. Traffic increased 9.5% YOY in May, a deceleration from the 11.6% increase in April. Traffic to Sprouts Farmers Market stores decreased 8.1% YOY in May, decelerating from -5.2% in April. In contrast to Grocery Outlet, Sprouts’ traffic has weakened since the expiration of the benefits as seen in the following chart. Grocery Outlet would seem to be more impacted by the decrease in SNAP benefits because it has more SNAP recipients as customers. However, Grocery Outlet and other discount grocers have demonstrated their savings to shoppers and tighter budgets drive more traffic to the stores.
Are higher beef prices on the way? (TSN)
The CPI for beef and veal rose 1% YOY in May, much less than the overall CPI for food at home increase of 5.8%. Everyday meat case prices for beef are close to year ago levels. Beef prices for consumers may rise at a faster rate in the future as seasonal demand increases with less supply available. Earlier this month cattle futures reached their highest prices on record.
Many ranchers shrank their herd sizes last year due to the drought and high cost of feed. The cow herd is now at the smallest it has been since the early 1960s. Live cattle prices hit a record high earlier this month as seen in the chart below, rewarding ranchers after several difficult years of depressed margins from lower prices and higher costs.
To rebuild the herd more cattle will have to be removed from the market. Feeder cattle prices traded up one-third this year, a record since November 1971. Feeder cattle, which are cattle purchased for the feedlot market, ultimately become live cattle, which have reached slaughter weight in the feedlots. The herd size will only grow when the market provides a price signal.
