Flu monitor (PRGO, HLN, RKT.LN)
Seasonal influenza activity started slowly but has picked up. Nationwide, 5.1% of patient visits reported through the CDC were due to respiratory illness. Respiratory illness is now above the national baseline, with multiple viruses co-circulating, as seen in the cart below. The CDC estimates that there have been at least 5.3 million illnesses, 54,000 hospitalizations, and 3,200 deaths from the flu so far this season. Reckitt and Perrigo recently acknowledged the difficult comparisons in the U.S. from last year’s cough and cold season. They both expressed confidence in reaching their targets, which was still early in the season. Last year’s cough and cold season started off strong but tailed off. We are more likely to hear about difficult comparisons in the first half of the season, but there is potential for Q1 to have higher illness incidences. Cough/cold is between 15-20% of Perrigo’s revenues, roughly 15% of Haleon’s revenues, and 2% of Kenvue’s global revenues.
Fading El Niño (HSY)
The latest computer forecast models from World Weather Inc. suggest that El Niño peaked a few weeks ago and will be in steady decline to begin 2024. El Niño’s impact has not been as severe as earlier predicted, but it is still forecasted to be “historically strong.” NOAA forecasters still believe El Niño will remain the major climate driver through the winter. El Niño is caused by trade winds weakening over the tropical Pacific Ocean, typically extending the jet stream eastward and southward, carrying more moisture. The forecasts for January are warmer temperatures in the northern states and greater precipitation on the West Coast and Southeast of the U.S. Snow cover in the U.S. is low at 13.2% on December 22, the lowest in at least two decades.
After the rapid decline in the El Niño weather pattern, additional cooling of ocean surface temperatures is possible, which could lead to neutral conditions and the redevelopment of La Niña. However, the projection of a weather condition in the second half of 2024 is far from accurate this far out. World Weather wrote, “Years in which moderately strong El Niño events gave way to neutral ENSO conditions have a tendency to receive less-than-usual rainfall in the spring and summer in the U.S. corn belt with temperatures that vary mostly in a seasonable to slightly warmer bias. If that occurs and precipitation stays below normal during the balance of winter in the Northern Plains and western Corn Belt there would be potential that dryness might return to stress crops in the spring and summer.” El Niño often has an adverse effect on cocoa and sugar crops, leading to higher prices.
New Blend (STKL)
Blue Diamond is introducing a new product, an almond and oat milk blend, that will be on retailers’ shelves in January. As the co-op of more than 3,000 almond growers, Blue Diamond is the leading almond milk brand. The company had trademarked its slogan, “Almonds are all we do – Don’t just milk it. Almondmilk it.” A smart hedge for Blue Diamond as oat milk will overtake almond milk as the leading plant-based milk. However, customers likely have a strong association with Blue Diamond and almonds. Blue Diamond is one of SunOpta’s customers.
