Unless you've stocked up on enough food to hold you through next year, you won't be able to avoid the effects of food inflation.
According to the U.S. consumer price index, overall food prices rose 4.7% in September from the year before. That's more than the 4.6% increase in August and 4.2% jump in July.
And the price pain will continue.
Global food prices are expected to increase 4% next year, and could climb even higher on supply squeezes. Droughts and floods have disrupted global crop yields, meaning higher prices at both grocery stores and restaurants.
Food at home prices rose 6.2% in September from the previous year. Grocery stores were eating most of the price increases earlier in the year, somewhat insulating U.S. consumers, but recently that's begun to change.
"The era of grocers holding the line on retail-food cost increases is basically over," John Anderson, a senior economist at the Farm Bureau in Washington, told Bloomberg News.
Food away from home didn't rise as high as food at home, up a more modest 2.6%. That's the widest gap between the two price measures since 1990.
The faster rise in grocery store prices has led some restaurants to start boosting prices to catch up. They think consumers are less likely to be deterred by increases now that food at home costs more, too. "If people go to the supermarket and see that the core items they're purchasing are on the rise, then they are less likely to be surprised if restaurants are raising prices as well," Jeffrey Bernstein, an analyst with Barclays Capital, told Bloomberg.
Many chains have tried to avoid changes, but the third-quarter's 8% surge in commodity prices has pushed some to their breaking point. Now popular eateries like McDonald's Corp. (NYSE: MCD) and Panera Bread Co. (Nasdaq: PNRA), which have already adjusted their menu prices this year, are considering more price hikes.
Since food companies and restaurants are charging more for their products, brands that are consumers' favorites are raking in profits. Higher prices have boosted the Consumer Staples Select Sect. SPDR exchange-traded fund (NYSEARCA: XLP) about 15% in the past two years, while the Standard & Poor's Supercomposite Restaurants Index has soared 64%.
This means now's the time for you to offset your bloated food budgets by hunting for the sector's most successful stocks.
Here are five food-related stocks positioned to grow along with food prices:
"Over the past 12 weeks, Kraft has seen retail strength out of dry dinner, lunch meat and cookies," Citigroup said. "As consumers cut out-to-eat spending and cook more meals at home, Kraft stands to benefit."
"General Mills operates with a stronger brand portfolio than ConAgra," said Morningstar Inc. (Nasdaq: MORN) analyst Erin Lash. "That's one of the things that we think serves General Mills well and will continue to serve them well in this tough consumer environment."
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