BofA sees continued inflation pressure on consumer staples

Investing.com -- Bank of America reports that commodity cost increases continue to pressure consumer staples companies in the second half of 2026, with limited ability to raise prices adding to margin concerns.

Food Consumer Price Index rose 3.0% year-over-year in July, with food at home prices up 2.7% annually but down 0.1% month-over-month. Price increases were recorded for beef, fruits and vegetables, cereal, bread and crackers, nonalcoholic beverages, and candy. Eggs, pork and bacon, chicken, and cheese prices declined on an annual basis.

Commodity prices have shown double-digit percentage swings in both spot and forward markets, reversing trends from three months earlier. The bank attributes this volatility to renewed geopolitical conflicts affecting trade and logistics, energy price fluctuations, weather impacts on agricultural production, and speculative trading related to El Niño.

WTI and Brent crude oil prices are up 46% year-to-date, while U.S. diesel prices have risen 62% year-to-date. U.S. retail gasoline for regular unleaded has returned above $4 per gallon. The bank links these increases to the ongoing Iran war and disruptions in the Strait of Hormuz.

The intensified Russia-Ukraine conflict around Black Sea trade routes has disrupted grain exports, pushing wheat prices up 39% year-to-date and soybeans up 23% year-to-date.

Protein markets have eased, with chicken down 1%, lean hogs down 19%, and cattle down 6% over one month, reflecting expected supply increases from improved flock survival rates, Mexico border reopening, and plant consolidation.

Cocoa prices have risen 102% over the past three months, bringing the year-to-date gain to 9%. Coffee prices have increased 12% over three months and are down 2% year-to-date.

Bank of America identifies Conagra Brands (NYSE: CAG), Campbell Soup (NYSE: CPB), Pilgrim's Pride (NASDAQ: PPC), Sanderson Farms, and General Mills (NYSE: GIS) as the companies most exposed to cost inflation based on their cost structures. The bank sees confectionery companies, diversified protein producers, Smucker (NYSE: SJM), Kraft Heinz (NASDAQ: KHC), and McCormick (NYSE: MKC) as facing less inflation pressure.

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