(BFM Bourse) – The price of basic products for the first meal of the day has increased by more than 50% year-on-year, according to broker Etoro’s breakfast index. Metrological conditions weighed heavily on harvests.
Breakfast is an important meal of the day. But for several months, it has become more and more expensive with the rise in the cost of the raw materials that make up a typical breakfast.
The price of basic products has increased by 55% in a single year, much more than overall consumer price inflation in France which stands at 2.2%, according to the “breakfast” index concocted by Etoro. This index* covers essential products such as wheat, sugar, cocoa, oats, orange juice, coffee, milk, pork and tea.
Big hit of cocoa heat
Since the start of the year, the breakfast index has increased by 33% and 38% over the last two years, driven by major increases in the price of cocoa and to a lesser extent orange juice and Coffee.
The price of cocoa has seen the most dramatic rise of any breakfast-related commodity, increasing 270% over the past year. A severe drought in West Africa, the region that produces 80% of the world’s cocoa, has largely contributed to the supply shortage and rising prices.
Note that the broker Etoro stopped its index at the end of April. However, since their records last month, cocoa prices have experienced a severe correction. The July contract in New York even fell by almost 20% in a single day on May 13, recording its largest historical decline since market data has been compiled, i.e. more than 60 years.
However, this drop in the price of the raw material is a “sham” considers Coface in a note published this week, which recalls that cocoa prices remain “three times higher than their level a year ago year and should stay there. Moreover, “the rise in cocoa bean prices, which is partly explained by a speculative frenzy on the markets, also reflects a supply deficit, problematic in the medium term,” continues the credit insurance expert. which predicts an 11% drop in global cocoa bean production this year.
The study also points to unfavorable weather conditions and crop diseases as a factor in disrupting the cocoa market. Which is also the case for orange juice, the prices of which have also experienced a major surge over the past year.
The orange juice market is also experiencing similar supply pressures due to crop diseases and extreme weather events in the United States, Southern Europe and Brazil, with an increase of 39% over the last Last 12 months.
“Extreme weather conditions and crop diseases in the Global South have led to increased price volatility for some key breakfast foods. Cocoa, orange and coffee harvests have been hardest hit over the over the past year, many producers now operating at reduced capacity, are turning to reserve stocks where possible,” explains Antoine Fraysse-Soulier, global markets strategist at Etoro.
Less coffee and more milk
The most economical breakfast formula would therefore consist of a bowl of milk accompanied by slices of bread. Oats, milk or wheat are in fact less expensive than a year ago, with drops of between 4% and 10%, notes the study.
“It is possible that the dramatic price divergence we are seeing in breakfast raw materials is starting to impact consumer behavior, given that the price of some breakfast products, such as wheat and milk, are decreasing and other products, such as orange juice, cocoa and coffee, are reaching record levels”, notes Antoine Fraysse-Soulier.
Source: Etoro
*Simple weighted index of spot prices of nine commonly used breakfast raw materials. Data from Refinitiv as of April 22, 2024. Wheat (No.2, soft Red, US$/Bushel), raw sugar (ISA, US$c/lb), cocoa (ICCO, US$/MT), oats (No. 2 Milling Minneapolis, US$/Bushel), orange juice (Refinitiv CRB CMP), milk (Non Fat Dry Grade A), coffee (ICO Composite ICA, US$c/lb), pork (Bellies, 12-14lbs, Mid-US, US$/lb), tea (Medium, PF1, Kenya, US$/Kg).
Sabrina Sadgui – ©2024 BFM Bourse