Eggs and Inflation
It’s literally been years since I made fresh guacamole. Because, while I can be pretty extravagant at times, I ain’t payin’ the runaway inflation price of $3.50 for one stupid avocado…
So my heart fluttered a little at the Winn-Dixie the other day – Haas avocados for $1 each. I splurged, bought 4 and gorged on chicken-chorizo burritos smothered with fresh guac last night. Ooo, mama…
(I’ve been perfecting chicken-chorizo burritos for a decade, so if you’re interested, here’s what I got: 2 chicken breasts (chopped as small as you want), 4-6 oz of chorizo, 4-6 oz of medium heat salsa verde, onions, garlic, sprinkle of red pepper flakes, bigger sprinkle of Adobo seasoning, salt and pepper, then cook till the juice thickens a little. For the refried beans, I go with black beans (2 cans rinsed), onion and garlic, cumin, cayenne pepper, just a little molasses, and lemon or lime juice. 3 oz really sharp Cabot cheddar. Using 10” tortillas, that’ll get ya 4 monstrous burritos. Some regular salsa on top (not drawing), then 15-20 min in the oven at 350.)
Now I can’t speculate as to why the gods of inflation all of a sudden decided to take it easy on avocados. At least to my mortal brain, they work in mysterious and unknowable ways..
Because if you dig into the real causes of inflation – oil prices, supply chains, massive chicken virus outbreak, etc – some of it makes sense, some of it doesn’t at all.
You wanna tell me that wheat prices are high because 2 of the world’s three biggest wheat producers are at war, ok, I’ll buy that as a reason for Ritz crackers to be more expensive. But $5.50 for a bag of Tositos Hint of Lime chips? Hmm, that’s corn not wheat…
The fact is – many companies raise prices when they can. And nothing provides better cover for companies to raise prices for their products than an inflationary environment where customers expect to see higher prices.
Like the crazy surge for egg prices we’ve seen. Millions of chickens got wiped out by a virus, and the price for a dozen eggs doubled. So why are chicken breasts selling for $2.25 a pound at Winn-Dixie…
With 20% market share, Cal-Maine (NASDAQ: CALM) is the biggest egg-seller in the U.S. The company made a lot of money over the last few months.
According to its Q1 earnings report that came out this morning, total revenue for the quarter was up 108%, to $997 million. But net profits? Holy moly…Cal-Maine reported net income of $39.5 in the same quarter last year. This year, reported net income was $323 million!!
That’s not a typo – Cal-Maine saw a nearly 10-fold jump in profits from a year ago.
Now I can’t tell you that Cal-Maine hatched some evil Montgomery Burns-style plot to gouge consumers, but it seems pretty clear that Cal-Maine did more than just pass its own higher costs off on consumers…
A Wall Street Recession?
I don’t know enough American families to say that no one is struggling with higher food prices. But I can tell you that retail sales numbers, consumer spending numbers, GDP numbers, employment numbers and consumer sentiment numbers tell a somewhat different story than we might expect to hear given where inflation and interest rates are.
GDP growth is running at 2.7%. Retail sales have remained strong, and are expected to finish the year with 4%-6% growth. The unemployment rate remains stubborn below 4%. And yesterday, consumer confidence came in way above expectations.
It always bugs me a little when I hear economists and strategist-types talk about the differences between “Main Street” and “Wall Street.” As if “regular Americans” are a bunch of yokels that just have no idea how the world really works…
I live a lot closer to Main Street than I do Wall Street. And I gotta say, I smile a little when I see these banks fail because their sophisticated managers can’t do simple math…when venture capitalists for whom money is mostly a game start to panic when the game starts to go against them…how the legions of layoffs at big tech companies like Meta (NASDAQ: META) and Google (NASDAQ: GOOG) don’t yet have a corollary down here on Main Street…
Oh there’s plenty of time for the venture capitalists, bankers and Wall Street-types to screw it up for the rest of us. I’m sure we haven’t seen the last of the fallout from those bank failures. Regional banks around the country are just screwed as account holder money gushes out of them and into the likes of Citi (NYSE: CITI) and Bank of America (NYSE: BAC).
The stock market continues to act like there’s nothing to worry about, while the bond market has been screaming recession for months.
We’re in the last days of the first quarter – one that featured bank failures! And the market is doing a darn good job of simply ignoring it. I gotta admit, the show of strength for stocks is enticing…
I also gotta admit I don’t think the going will be so smooth in the second quarter. Just like it’s easier to charge more for eggs or avocados when people expect to pay more, it’s also relatively easy to get a big sell-off going when investors are worried about recession.
Briton Ryle
Chief Investment Strategist
Pro Trader Today
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