00:00The disruptions that we've seen on fertilizer as a result of the war in Iran, the Strait of Hormuz
00:06closure, we spoke at the top of our program about what an open Strait of Hormuz could look like and
00:13when that could happen. Hint, we're still no closer than we were three days ago, is what our
00:17Bloomberg News team says, Chris Kennedy over at Bloomberg Economics. If the Strait were to open,
00:24how quickly soon, how quickly would we then see fertilizer prices drop and that actually hit
00:31worldwide agriculture? You know, it's interesting, the prices would drop quickly, even though the
00:37supply itself would be delayed behind it. But these are markets that are always looking forward.
00:42So the same thing that drove them up quicker than the product disruption would take the prices down
00:47faster than the product actually arriving to the markets. Dr. Swanson, one of the themes that we've
00:53been talking about a lot is this idea that consumers are trading down on certain items,
00:58they're trading down on staples, but splurging, for example, on certain categories. Where are you
01:02seeing this when it comes to food trends? You know, it's interesting. You can see it clearly in the
01:08protein space. I mean, when you look at the value of chicken and pork relative to beef right now,
01:13clearly it's really bidding up that demand in a big way. But on the flip side, when you look in
01:17the
01:17beverage categories, some of the probiotic soft drink replacements, they are super premium pricing,
01:24but they're not finding any problems looking for good demand. They have plenty of product demand,
01:28even at that super premium pricing. You know what I noticed over the weekend,
01:31I was buying some chicken and it said 20 grams of protein per serving on it. And I'm thinking to
01:35myself, is this a result of the protein craze coming from GLP-1s that, you know, even foods that
01:43have had the same protein content in them for generations, like forever, are now advertising
01:49that protein because that's what at least American consumers want to see?
01:52That's exactly what you're seeing. So we're seeing across every single category. If you have a protein
01:57component, you're going to highlight that first on your packaging. And it's interesting how packaging
02:02really responds to that question that's on the consumer's mind. But you're exactly right. This is
02:06something that's going to continue and it's going to be very prominent. I think you're going to see it
02:10clearly in every single category. Is this protein craze? Is it like other food crazes in the past
02:15where we've, we've seen people, you know, consumers are fickle and, and Americans are fickle when it
02:21comes to sort of what we follow, or is this protein craze here to stay? You know, it's a great
02:26question
02:26and it's here to stay. I mean, you, you and I can all name diets that have come and go
02:30paleo,
02:31Atkins, things like that. But when you're talking about a medicine, that's going to be prescribed,
02:36it's going to be the new statin. When you think about it, there's like 90 million,
02:40prescriptions for statins out there right now. This is going to be the new statins.
02:45And since Americans are pretty good at taking their pills, this is going to be one that's
02:49going to stick around. This is not a fad that's going to walk away. It's going to be here for
02:52a
02:52long time. Consumers are very much feeling the sticker shock of prices when they go to the grocery
02:58store, even as some agricultural commodity prices have actually come down. At what point
03:03do consumers feel some of that relief in the stores?
03:07You know, it depends on the category. Take eggs, for example. Last year's avian, highly pathogenic
03:13avian influenza was just an enormous shock. But we're actually below the price starting that cycle
03:19right now. But we're not seeing consumers really take away a lot more eggs, even at these really
03:24low prices. So it takes an awful lot to shake an American out of his particular diet that they
03:29really like. But we will see some relief as we, for example, the dairy industry right now,
03:34they're chasing more cows to produce more beef, which means more milk. So we're seeing good dairy
03:39pricing as well. So the consumer does have some opportunities if they're willing to look for them.
03:44As we head into the summer months, are there any categories in food that might see inflation pick
03:49up any that you're expecting for it to be worse than others?
03:53You know, right now, what we're seeing is a little bit in the vegetable and fruit category.
03:57We started out the year with a tough spot with the freeze in Florida, which really put up the price
04:02tomatoes. And we're going to wait to see what happens with the labor, with the transportation
04:08costs, because diesel is a major cost for moving it around the country and bringing it into the
04:12country. So probably fruits and vegetables will probably be the most pressure, thanks to the
04:16recent events we've seen.
04:18So my same question to you about fertilizer has to do with diesel prices. If the straight does open
04:24and diesel prices come down, will we stop seeing those price increases in fruits and vegetables?
04:30You know, probably not, because the bigger driver is going to be that long term availability
04:34of wages. And wage inflation is probably still running at a three, four percent range right now.
04:40So diesel would be a nice relief factor. Don't get me wrong on that. But the wages are going to
04:46be a
04:46bigger piece for the longer term. Once they go up, they almost never come down.
04:51What about our farmers, Michael? There is a disconnect between how much farmers are earning
04:56and how much consumers are paying. Are American farmers getting squeezed right now as grocery
05:01bills remain elevated?
05:03You know, it's a great question. It really is farmer by farmer. You know, when we look at the
05:08micro data that we have last year, we saw some amazingly good returns in the same year as very
05:13bad returns. And I think what they're really driving a lot of it is the technology. What we're hearing
05:19from the farmers is technological change is so rapid and so difficult. They're having a hard time
05:24implementing it if they're not on top of it. So, yeah, we're seeing some squeeze. It'd be nice for
05:29them to get some price relief from the higher crop prices, which would be inflationary, or lower input
05:33prices, which would be great. But what's not going away is a vice of technological change, which is
05:40just really putting them in a tough spot. You mentioned the rising prices of protein. The story in
05:45the Washington Post over the weekend got my attention about how the Texas barbecue industry is struggling
05:51due to rising meat prices. The cost of brisket increasing 28% over the past year. Imports coming
05:57from outside the United States. I mean, that is what an import is. Is that going to put a dent
06:02in
06:02rising beef prices?
06:04You know, not really for that type of a category. So grind that goes into hamburger? Absolutely.
06:10This industry has discovered that Brazil is a goldmine of hamburger, and they're going to mine it for the
06:17foreseeable future. But when it comes to identifiable cuts, steaks, and brisket, things like
06:22that, no, we don't really have another source because we want a certain quality. So this industry is
06:29pretty bullish right now about their ability to keep prices high. And it usually is a sign that things
06:35will change when they think nothing will change.
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