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Food in Focus: Eggs, vegetables drive wholesale price gains in October

A significant jump in the supplier prices of eggs and fresh vegetables lifted wholesale prices in October, but grocers' margins are still likely to remain positive given the sustained rise in the on-the-shelf prices.

Overall, the producer price index, or PPI, which represents wholesale prices that grocers and other food retailers pay to stock their shelves, increased 2.0% in October. The gain is twice as high as September's year-over-year increase of 1.0%. Wholesale prices for eggs rose 54.3% year over year during the month, while fresh and dry vegetables increased 22.5%, according to data from the Bureau of Labor Statistics released Nov. 13. Producer prices for fresh fruits and melons also jumped 12.7%.

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Meanwhile, the food at home category of the consumer price index, or CPI, rose 4.0% in October over the same month one year ago but is slightly lower than September's 4.1% growth. The subindex represents the prices that consumers pay for groceries.

Consumer prices for meats, poultry, fish and eggs notched a 6.1% gain during the month, while nonalcoholic beverages and beverage materials rose 4.4%, dairy and related products advanced 3.8%, and cereals and bakery products were 3.0% higher.

Analysts use the difference between the two metrics to determine the state of grocers' profit margins, subtracting the growth rate of the PPI subindex from the growth rate of the CPI subindex. When the result is positive, grocers' margins are more likely to expand.

In October, the difference was positive by 2.0 percentage points, according to data compiled by S&P Global Market Intelligence.

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Notable food industry deals in the month to Nov. 12 included the acquisition of Nestlé SA's U.S. unit of meal delivery service Freshly for $950 million and the planned purchase of seafood distributor Clearwater Seafoods Inc. by Canadian packaged food producer Premium Brands Holdings Corp. and a coalition of Mi'kmaq First Nations represented by FNC Holdings

The J. M. Smucker Co. on Oct. 26 said it agreed to sell its Crisco oil and shortening business to B&G Foods Inc. for about $550 million in an all-cash transaction.

Heron Holding Corporation on Nov. 11 said it agreed to buy chips-and-salsa maker Truco Enterprises LP from private equity firm Insignia Capital Group LP for $480 million.

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