Grocery sales boom, and consumers will pay more. But food makers get less?

One of the many odd things with the last month's events include the fact that despite millions of layoffs around the nation, some parts of the economy have benefited since the COVID-19 pandemic hit the States. For example, grocery sales are booming as people stay at home, and Wall Streeters think the strong business will continue, even after the initial deluge subsides.

Though shoppers may be done with their initial stockpiling, which sent sales of grocery and household necessities soaring in March, analysts say [consumers will] likely maintain shopping activity to replenish essential items.

BMO Equity Research data shows that grocery sales grew 83% for the two weeks ending March 22. Sales were up a whopping 89% for the week ending March 15 and up 77% for the week ending March 22.

And because of the added demand for food at the store, major food distributors are going to raise the prices they demand from the stores, and it means consumers will likely see higher prices on the store's shelves.

In a note published Friday, JPMorgan analysts said 22% of food on store shelves is discounted, according to the companies under its coverage, and the average discount is 23%. Retail sales would increase 5% if all discounts went away.

“In a normal environment, reduced discounts — that is, higher prices — would lead to lower volumes, but we are not in normal times,” JPMorgan said. “We think elasticity will be minimal as long as food-at-home is benefiting from COVID-19 to this degree.”

Analysts noted that J.M. Smucker Co. has already announced that it will be cutting discounts, saying in a March 19 letter to retailers that terminating promotions scheduled to start between April 17 and Nov. 30 is one of the measures it’s taking to deal with the coronavirus pandemic.

Yet with all of this extra demand for food, and the increase in prices that corporate food companies are going to get, the prices farmers are getting for their products keeps going down. .

And one of the worst declines has come with milk prices continue to the point that this scene happened in multiple places around Wisconsin in recent weeks.

Milk prices have collapsed more than they did last year, when 2-3 dairy farms a day were closing in Wisconsin. May futures dropped below $12 per hundredweight on Wednesday, which is a collapse of more than 1/3 since January.

Soybean and corn futures are also significantly down since the start of the year.

I also wouldn’t count on things getting better for pork or beef producers, based on these charts.

If grocery stores and manufacturers can jack up prices while the base producers are getting less, then someone in between is making a helluva lot of profit. Nice deal if you can get it, but maybe some people in DC should look into why.