In last week’s AIR, we shared that Walmart is seeing an uptick in people shopping at their stores. Many of those people are new to Walmart. Furthermore, this week, according to the latest Rabobank North American Agribusiness Review, consumers are adjusting purchases of food in response to inflation.
The August report said early indications point to consumers switching to cheaper food alternatives, such as lower-priced brands and private label options. Shoppers are looking for deals and more frequently shopping at discounters.
“From gas to rents and food, consumers are seeing their disposable income evaporate.” On a positive note, Rabobank noted that unemployment levels remain low, at 3.6%, roughly the same as pre-pandemic levels.
Discount grocery outlets are benefitting from rising price sensitivity, at the expense of premium and natural food stores.
Discounter retailer foot traffic is up 10% to 15% in 2022. Besides inflation, the rapid expansion of discounter store openings has contributed to increasing sales.
In general, Rabobank said the demand outlook for retail and foodservice is softening, as wage levels for most workers are not maintaining pace with rising costs and higher interest rates. Consumer disposable income levels will suffer.
Other observations from the Rabobank report:
- The Federal Reserve may be forced to hike interest rates beyond the neutral level and cause a recession in 2023 to “terminate” the wage price spiral.
- Global refrigerated container rates are expected to surge 9% in the third quarter of 2022 before normalizing. Even with price correction, reefer rates are likely to stay at higher than pre-pandemic levels.
- Trucking spot rates seem to be trending toward stability in recent weeks, at around 22.5% above the pre-pandemic 5-year average.
- Pent-up demand for eating out will wane for the cost-conscious consumer causing restaurant revenue growth to slow. A higher number of consumers will choose to eat an affordable meal at home instead of splurging at restaurants or ordering delivery.”
Editor’s Take:
Ok, ok – we know you’re likely tired of hearing this drumbeat, but it is difficult to ignore the reality of what is truly taking place in the overall economy. Despite all the diversions politicians attempt to create, the simple fact is inflation is very high and people are struggling to keep up or maintain their standard of living. Many are making difficult choices about what to purchase or not. Everyday necessities are now being questioned as a result of rapidly rising costs and lower real wages. Once again, the question must be asked and answered – who will be your best customers going forward? Answer: Farmers and ranchers! Reach out to the farmers/ranchers in your area today. Use AgTruckTrader.com, a platform specifically designed to reach agricultural buyers. It is a huge advantage that comes with being a CAD member, so why not use it and take full advantage of this amazing tool.
