The COVID-19 Pandemic created a great deal of supply chain issues, which, when coupled with stimulus checks going out the door to consumers, led to a significant increase in inflation. We all recall some of the more notable items, such as egg prices surging. As the Fed aggressively raised interest rates, inflation began to fall from a peak of 9.1% down to a much more manageable level of 2.4% in September 2024. This decline in inflation has allowed the Federal Reserve to begin reversing course and lowering interest rates. The strong stock market gains in 2024, have largely been driven by the expectation of lower interest rates and the Federal Reserves ability to navigate a “soft landing”; lowering interest rates without increasing inflation or sending the economy into a recession. 

Recently, we’ve begun to see a noteworthy increase in Global food inflation due in large part to rising orange juice and egg prices. 

In recent years, freezing conditions, citrus greening disease, and Hurricanes Ian and Nicole severally impacted citrus groves in Florida. Hurricane Milton has now exacerbated those problems, and U.S. orange production is set to reach its lowest level in more than a century. Brazil, the world’s top Orange Juice producer, had ramped up shipments to the U.S. to help meet demand; however, they are now facing unique challenges of their own. Brazil has been experiencing widespread disease and its worst drought in over 50 years. To offset the decline in production, the cold storage supply of Orange Juice has been tapped into and recent data from the USDA shows cold storage levels are now approaching their lowest levels since the 1970s. This constrained supply has sent Orange Juice futures surging to over $5/lb, marking a 433% increase from the $1/lb lows seen in 2020. 

 Meanwhile, an outbreak of H5N1, a highly transmissible bird flu strain, continues to impact egg prices. According to the CDC, over 100 million birds have been affected since the start of 2022. The latest inflation report showed that egg prices rose 8.4% from August to September, and egg prices are now up 40% from just one year ago. 

We believe these are relatively isolated issues and not representative of a more widespread turnaround in inflation, but you may begin seeing higher prices at the grocery store the next time you shop for breakfast. 

By Ryan Zywotko, CFA, CMT

Director of Investments

CAISSA Wealth Strategies