Our Scarce Resource theme once again drives food inflation 

Aside from uncovering data points that support our thematic perspective, we also like to connect the dots between our themes as well, given the potential for one theme to be a catalyst for the other. We’ve seen that in the past with droughts — a recurring aspect of our Scarce Resource theme  — and we are seeing it once again as a current drought as this article from the New York Time details:

British shoppers began noticing in recent weeks that hummus prices were up significantly. The cause: a drought thousands of miles away.Insufficient rains in India have resulted in several years of poor harvests of chickpeas, the main ingredient in hummus. The country, by far the world’s largest producer of chickpeas, mostly grows the legume for domestic consumption. But worse-than-expected harvests mean that it has had to buy more chickpeas from growers elsewhere, putting pressure on supplies worldwide and driving up prices.Those limited supplies of chickpeas have combined with rising demand for hummus in Britain to send prices higher. Average prices for the dish at supermarket are 12 percent higher than a year ago, according to the trade magazine The Grocer and the research consultancy Brand View. That is significantly more than grocery price inflation of 3.6 percent, and overall inflation of 2.7 percent.

Source: Rising Hummus Prices? Blame a Drought Half a World Away – The New York Times

As food prices climb, we tend to see Cash-Strapped Consumers switch their spending to different items, usually trading down in one item for another to match their budgets. With revolving credit, largely a reflection of credit card debt, having grown at an annual rate of 6.0% to $1.03 trillion in December, consumers are poised to feel the pinch of higher interest rates on their spending dollars.

Said another way, it looks like more will be skipping the hummus in the coming days because they may not be able to afford it.



About the Author

Chris Versace, Chief Investment Officer
I'm the Chief Investment Officer of Tematica Research and editor of Tematica Investing newsletter. All of that capitalizes on my near 20 years in the investment industry, nearly all of it breaking down industries and recommending stocks. In that time, I've been ranked an All Star Analyst by Zacks Investment Research and my efforts in analyzing industries, companies and equities have been recognized by both Institutional Investor and Thomson Reuters’ StarMine Monitor. In my travels, I've covered cyclicals, tech and more, which gives me a different vantage point, one that uses not only an ecosystem or food chain perspective, but one that also examines demographics, economics, psychographics and more when formulating my investment views. The question I most often get is "Are you related to…."

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