While many commodities are experiencing a long-overdue correction as the inflation trade takes a breather, lean hogs continues to surge higher, and at last check were just off record highs. Which is why many are following the presentation the company is currently conducting at the JP Morgan global protein conference to get a sense of whether consumers are finally balking at protein purchases. Apparently the answer is no. As Reuters reports, "U.S. consumers have not yet slowed purchases of pork at grocery stores and casual dining restaurants despite this year's much higher prices, U.S. pork producer Smithfield Foods Inc said Wednesday." And why should they: with millions living mortgage free, since the average mortgage delinquency length is now 537 days, that many more people can afford it, and everything else, at virtually any price. Ironically the Fed, by indirectly cutting out on this key expense (not to mention the FASB's ongoing MTM freeze which permits banks to mark mortgages, even delinquent ones, at whatever price they want) is allowing the population to experience an effect comparable to wage growth. Which is one of the key aspect ignored by the media and those who perceive deflation as imminent: while wage growth is surely a key component to stimulating pernicious inflation, eliminating key consumer overhead ends up having the same net effect. And since banks are in no rush to kick squatters out, expect to see increasing price pressure not only on pork but on all other commodities too.
More from Reuters:
"At this point we have not seen a dramatic amount of consumer fatigue due to pricing," Bo Manly, Smithfield Foods's chief financial officer, said during a presentation at the J.P. Morgan Global Protein Conference.
However, he said there could some consumer reaction later if prices continued to rise, particularly for higher-priced premium brands of meat.
Look for many other retailers to realize just how much more resilient the consumer is, and to continue passing on through prices in lieu of now obsolete mortgage paymanets.
Smithfield's full presentation link: