As inflation rises, grocery stocks have emerged as major beneficiaries, particularly those tied to egg production.
The price of eggs has skyrocketed due to supply constraints, sending shares of Vital Farms (NASDAQ:VITL) up 154% and Cal-Maine Foods (NASDAQ:CALM) up 90% over the past year. We will discuss more on that later, but before that, let us see how investors looking to capitalize on these trends can consider ETFs with significant exposure to the aforementioned stocks and the food industry in general, such as the Invesco Food & Beverage ETF (NYSE:PBJ) and the Invesco S&P SmallCap Consumer Staples ETF (NASDAQ:PSCC).
The Invesco Food & Beverage ETF offers exposure to companies engaged in food production, distribution, and retail. It holds leading names in the food industry, including packaged food manufacturers and grocery retailers. With a focus on consumer staples, PBJ provides investors with a diversified approach to food sector investing, helping them capitalize on rising grocery prices while mitigating risks associated with individual stocks. Companies such as Vital Farms, and PepsiCo are among its top holdings.
Also Read: Egg Prices Hit Record Highs, New York Bodegas Get Creative And Sell Three Packs For $2.99
The ETF's allocation to food manufacturers and retailers ensures it benefits from higher food prices. The recent surge in egg prices, along with elevated costs for other breakfast staples like orange juice and coffee, positions this ETF well for continued growth. The price of the ETF has surged around 2% in the past 5 days.
The Invesco S&P SmallCap Consumer Staples ETF focuses on small-cap consumer staples companies, including food producers and distributors. Given that smaller food companies can experience outsized gains during price surges, this ETF is an attractive option for investors looking to capture high-growth opportunities in the grocery sector.
Key Holdings include Cal-Maine Foods and Vital Farms, both of which have seen explosive stock price growth amid the egg price spike.
With its targeted exposure to smaller, high-growth food companies, PSCC offers a direct way to invest in the ongoing food inflation trend. The ETF stands to benefit from continued price increases in essential grocery items, making it a compelling choice in the current market environment.
Egg Price Surge And Inflation Impact
Inflation in the U.S. picked up in January, driven by higher grocery, gasoline, and rent prices. The Consumer Price Index (CPI) grew 3% year over year, up from December's 2.9%, marking the highest increase since June.
Monthly, the index rose 0.5%, the largest uptick since August 2023.
Among the key drivers of inflation were food prices, with grocery costs rising 0.3% in December following a 0.5% increase in November. Notably, egg prices soared 15.2% from December and 53% from the prior year, the steepest increase since June 2015. This surge--attributed to adverse weather and bird flu outbreaks--has led to significant gains for egg producers.
As food inflation accelerates, ETFs like PBJ and PSCC offer investors a way to gain exposure to grocery stocks poised to benefit from these trends.
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