Bank of America has cautioned that persistent commodity cost inflation will continue to weigh on consumer staples companies through the second half of 2026, as limited pricing power erodes profit margins.
The bank attributes the volatility to renewed geopolitical conflicts disrupting trade and logistics, fluctuating energy prices, climate-related disruptions to agricultural output, and speculative trading tied to El Niño conditions. Food price inflation remains a key concern, with the consumer food price index rising 3.0% year-over-year in July, though food-at-home prices dipped 0.1% month-over-month.
Energy markets have also contributed to cost pressures, with WTI and Brent crude oil up 46% year-to-date and U.S. diesel prices surging 62%. Retail gasoline in the U.S. has climbed back above $4 per gallon, driven in part by the ongoing conflict in Iran and disruptions in the Strait of Hormuz.
Agricultural commodities have seen uneven price movements, with wheat up 39% year-to-date due to the Russia-Ukraine war disrupting Black Sea trade routes, soybeans up 23%, and cocoa prices jumping 102% over the past three months. Coffee prices, however, have declined 2% year-to-date despite a recent 12% rise over three months.
Protein markets have shown signs of stabilization, with chicken prices down 1%, lean hogs down 19%, and cattle down 6% over the past month. Analysts attribute this to improved herd survival rates, the reopening of the U.S.-Mexico border, and plant consolidations boosting supply.
Bank of America identified Conagra Brands, Campbell Soup, Pilgrim’s Pride, Sanderson Farms, and General Mills as companies most exposed to cost inflation due to their cost structures. In contrast, confectionery firms, diversified protein producers, Smucker, Kraft Heinz, and McCormick face comparatively lower inflationary pressure.
