FOOD INFLATION REMAINS HOT IN CANADA (LBLCF)
CPI in Canada increased 3.4% YOY in May, decelerating from 4.4% in April. The CPI for food was well above other consumer categories. Food purchased from stores inflation increased 9.0% YOY in May, decelerating slightly from 9.1% in April. Leading the inflation were the bakery (+15.0%), cereals (+13.6%), edible fats & oils (+20.3%), and non-alcoholic beverages (+10.9%). Food purchased from restaurants increased by 6.8% in May, decelerating from 6.4% in April. Food inflation has been north of 10% since August in Canada. The SVP of the Canadian Federation of Independent Grocers said, “I don’t see any relief in the short-term coming.” The political pressure in Canada from food inflation is much greater than it is in the U.S. Despite the greater scrutiny the Canadian consumer is experiencing unrelenting pressure from their grocery bills.
Office ceiling (KR)
Office occupancy increased 10bps from the week of June 14 to 49.8% for the week of June 21. Office occupancy appears to be capped at 50% as seen in the chart below. For the past week occupancy levels on Friday of 31.8% were roughly half the mid-week peak on Wednesday at 58.6%. The Texas cities have had higher office occupancy levels than the rest of the cities in the ten-city index. Their occupancy levels appear to have a higher ceiling of 60%, but it is still a ceiling. At this point the “return to the office” is not a headwind for the grocers or a tailwind for restaurants in the cities.
Avocado surge (AVO, CVGW)
Avocado prices have been significantly below average since December 2022. Last week avocado prices surged to their third highest level in the past ten years for the 25th week of the year. Strong seasonal demand ahead of the 4th of July and a late start for Mexico’s Lora crop has created a supply imbalance. Imports from Mexico were down by half week over week and are expected to continue to fall in the near term until the new crop is harvested in two weeks. Most large buyers have contracts that negate short-term price changes. Mission Produce forecasts its sourcing costs and enters into fixed price contracts with customers for a season. Receiving crops late can be more of a financial burden than a price spike benefit. On its Q2 call management said their expectation was for pricing to be 35-40% lower YOY.
