Soybean acres fall (LANC, UTZ)
Last week’s USDA’s June acreage report raised the number of corn acres and reduced the number of soybean acres. The USDA also reduced grain stocks below market expectations. According to the USDA, farmers made a large reduction to their intended soybean acreage to 83.5M acres, down 5% YOY, from 87.5M in March. Corn acres planted by farmers were revised up from 91.9M in the March Prospective Plantings report to 94.1M acres, up 6% YOY. Wheat acres were revised down slightly to 49.6M acres, a 9% YOY increase, from 49.9M in March.
The USDA currently reports corn stocks of 4.106B bushels, down 5.6% YOY. Soybean stocks are currently at 796M bushels, down 17.8% YOY. The end of season soybean stocks will be tight based on the USDA’s yield projections. Demand is not robust with weakness in exports and ethanol production lagging.
The U.S. corn crop was rated 51% good to excellent, down from 64% a year ago. The current rating is the lowest for corn at this time of year since 2012. The U.S. soybean crop was rated 50% good to excellent, down from 63% a year ago. Similar to corn, soybeans have the lowest rating since 2012.
Soybean oil prices were one of the highest inflationary food sub-categories in 2021 and 2022. The PPI for fats and oils refining and blending has decelerated significantly in recent months and decreased by 15.1% in May. Soybean oil futures have increased 7% since June 29 and the publishing of the USDA report. Soybean oil is used in numerous food products from chips, dressings, and frozen meals. It has been a particular headwind for Lancaster Colony and Utz Brands.
More craft beer? (SAM)
For the first time since the survey was conducted by the Brewers Association’s annual Harris Poll, the number of craft beer drinkers who said they were drinking more was equal to the number who said they were drinking less. The number one reason more than 50% that respondents gave for drinking less craft beer was that they were drinking more of something else. Choosing a healthier lifestyle was given by less than 30% of respondents who said they were drinking less craft beer. At the same time, the number one reason respondents gave for drinking more craft beer was that they were drinking less of something else. The survey does not include those who stopped drinking craft beer altogether. Craft beer’s share has peaked and volumes are roughly flat compared to 2015. Spirit based RTDs have grown seemingly capping craft beer’s share.
UK Inflation (SBRY.LON)
J Sainsbury, the second largest supermarket group in the U.K., issued an FQ1 sales update call yesterday. The company said inflation in the U.K. increased by 1% quarter over quarter. Disinflation was the main topic on the call. Some notable comments on inflation:
- “Clearly, what we’re seeing here is the beginning of food inflation starting to come down.”
- “As lower input prices come through, we’re really committed to pass the benefits on to customers as soon as we can. We’re seeing that happen first in fresh foods. We’ve seen that clearly in products like bread and butter, dairy products – milk, and chicken.”
- “We’d expect those products that saw the impact of inflation first would be those that would see this rollover happen first. So it will take some time in other categories, particularly packaged, canned goods – it will take longer for the impacts to pass through.”
- “We’re not going to see lower labor costs. Those costs are fixed in.”
- “In terms of over the balance of the year, we do expect inflation to come down, but we expect to still retain a situation of inflation. I think it’s just prices that is going to be going up less quickly that they have been.”
- “We think it [inflation] will be low-single, mid-single digits at year end.”
Food inflation in the U.K. has grown at a faster rate than in the U.S. with food prices 19% higher in April compared to the prior year. According to the OECD, the U.K. is the only G7 country and one of the three worst among the wider 38-nation group where inflation was still rising in May. The U.K. is the third largest net importer of food and drink leaving it more exposed to inflation trends in other countries as well as foreign currencies.
