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Food in Focus: Wholesale prices continue rising faster than retail

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Food in Focus: Wholesale prices continue rising faster than retail

Wholesale food prices rose faster than on-the-shelf costs for the fourth straight month in September, with pork and vegetables powering the increase.

The "final demand food" index of the Producer Price Index, or PPI, rose 2.7% over the same month one year ago, according to the U.S. Bureau of Labor Statistics. The subindex represents what food retailers pay to stock their shelves.

Over the same period, the "food at home" index of the Consumer Price Index, or CPI, rose 0.6%. The subindex represents the prices that consumers pay for groceries at retailers such as Costco Wholesale Corp. and Walmart Inc.

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Grocery 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 negative, grocers' margins are more likely to narrow.

In September, the difference was negative by 2.1 percentage points, according to data compiled by S&P Global Market Intelligence.

Producer prices for pork, fresh and dry vegetables and oilseeds grew the fastest, while prices for fresh fruits and melons, eggs for fresh use as well as shortening and cooking oils declined.

Consumer prices for dairy and related products lead the food at home category higher, notching an increase of 1.4%. Cereals and bakery products rose 1.3%, while nonalcoholic beverages and beverage materials also advanced 1.3% and the category for meats, poultry, fish and eggs moving 0.3% higher.

Other food at home, which includes products such as candy and salt, increased 0.4%. Fruit and vegetable prices were the only category to decline in September, moving 0.4% lower.

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The highest-value food industry deal during the month to Oct. 10 was Danish salmon processor P/F Bakkafrost's $486.7 million purchase of The Scottish Salmon Co. PLC. Under the deal, which closed on Sept. 25, Bakkafrost acquired the company from private equity firm Northern Link.

Other notable deals during the month included Coca-Cola HBC AG's plans to acquire Italian soft drink and mineral water maker Acque Minerali Srl for an undisclosed amount. Coca-Cola HBC, which is an independent bottling partner of Coca-Cola Co., announced the deal Sept. 18.

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