Food Commodity Prices Drop

The average shopper in America has probably noticed the changes in price for several commodity items in recent months. The falling prices are due to a combination of factors such as decreased costs of fuel and product packaging materials. Some other areas such as with meat and eggs, those commodities are in a cost reduction due to some external factors surrounding supply and demand.

The egg market segment has seen prices drop about 50% according to industry sources. The price of eggs, as many consumers will recall, increased sharply due to the avian flu epidemic. I recall going to my local grocery store and the signs that were hung just about everywhere in the cases surrounding the eggs and dairy products regarding the shortage of eggs due to the rampant spread of that illness.

The price of eggs had to adjust and correct itself when the supply levels returned back to normal levels with the increased number of hens into the system. That is the rationale behind the drop in prices for eggs as well as the shift in overall global demand for the product. The demand curve surrounding eggs in China and other parts of Asia has flattened, it has decreased over the past several months which creates a supply abundance and consequently lower prices.

The pricing shift on meat is a similar scenario. The cattle population in the U.S. had some issues between disease and other factors which impacted the population and created a supply issue. This lead to an increase in beef prices that many of us remember between the grocery store butcher department and the menus of our local restaurants.

The supply of cattle has increased over time and the supply for beef as a commodity is oversaturated due to current market demand factors. Some of this is driven by the healthier eating trends of Americans where red meat is more limited than at other points. The industry experts have reported that the supply levels of beef are so high compared to the demand that the prices will remain low until 2019.

The price points of other food products have come down in relation to supply, lower delivery costs, and a host of other scenarios. The timing on the price changes as we head into the Thanksgiving/Christmas/ Holiday Season is fortuitous for the food product suppliers, the distributors, and the retail grocery as well as club store channels.

The retail grocery channel is a low margin business structure to begin with and these price fluctuations over the past few years on certain commodities have cut into those profit margins even further. The ability for them to turn around and sell these products at the holidays is going to help their revenue forecast to close out the year.

The price points on so many other products and services are going up, I thought it would be comforting to note that our food prices are coming down, and considering the necessity of food, that is some welcome good news heading into the holiday season.

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