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'Breakfast will get a whole lot more expensive': strategist

If you haven’t noticed yet, your grocery bill is likely much higher than it was just a few months ago. Prices are skyrocketing on a number of consumer staples — everything from coffee to milk to soap — as companies try to offset surging costs due to supply constraints and production challenges.

And relief may not be coming anytime soon. In fact, industry experts are warning that consumers will need to dig even deeper into their wallets as we look ahead to next year.

“I can tell you breakfast will get a whole lot more expensive,” Phillip Streible, Blue Line Futures' chief market strategist told Yahoo Finance. “Oats are up more than 80%. [The price of] sugar and lean hogs are up. This stems from a couple of different things — there was a cross between adverse weather conditions, which no one can really control, as well as the supply-chain bottlenecks.”

One commodity that’s seen a significant jump in cost so far this year is coffee, with prices skyrocketing 60% due in large part to a massive drought in Brazil, the world’s top coffee producer. As a result, Brazil’s coffee crop is expected to drop by about 25% this year, compared to its record 2020 season following a nearly 40% decline in Brazil’s arabica coffee crop, according to Conab, Brazil’s national agricultural statistics agency.

Coffee beans in bags. Fresh coffee beans background.
Brazil’s coffee crop is expected to drop by about 25% this year, compared to its record 2020 season following a nearly 40% decline in Brazil’s arabica coffee crop, according to Conab. [Credit: Getty]

“What we are seeing right now is the ramification of [Brazil’s coffee production issues]. Many of the trees had to be completely removed, and new trees had to be planted, so you've got this serious supply strain,” Streible added. “The demand is continuing to increase with the reopening of the economy. Cruise ships are coming back online as well as airlines. Those are major consumers of coffee, so supply will be severely strained.”

This week, a number of consumer product makers warned higher prices will continue to be passed on to consumers, adding to fears that inflation could become more permanent. In a call with analysts on Wednesday, Nestle CFO François-Xavier Roger said consumers should expect higher prices into next year as the company is expecting "to have higher input-cost inflation" as it grapples with supply chain challenges.

And some of its peers are warning of similar cost pressures. Procter & Gamble CFO Andre Schulten told analysts on the company’s earnings call that it’s taking a "market-by-market, category-by-category" approach to raising prices on products as it faces higher costs of shipping and raw materials, while Unilever, the company behind Ben & Jerry’s and Lipton, warned of sustained price pressures.

Unilever announced in a statement that it has "continued to take pricing action across foods and ice cream in response to commodity inflation," with CEO Alan Jope adding that “cost inflation remains at strongly elevated levels, and this will continue into next year.”

“Going into the holiday season, you're going to see another spike in demand so coffee prices, and they're just one element of this big inflation play going on, will go a lot higher,” Streible added. “I really believe new all-time contract highs are just right around the corner.”

Seana Smith anchors Yahoo Finance Live’s 3-5 p.m. ET program. Follow her on Twitter @SeanaNSmith

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