The Crop Report: Commodities & The Grocery Store

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I love food. My favorite part is eating it of course but there’s just something special about knowing where your food came from and the process between it growing on the farm and reaching your table. I’m also very much into forecasting my grocery prices (aka estimating how much something may cost in the future) because groceries are an essential part of budgeting. Something about the whole process makes me feel like some sort of wizard, or at the very least Raven Symone.

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One of my favorite movies of all time is Trading Places with Eddie Murphy and Dan Aykroyd. Watching it as a kid was always interesting to me and it taught me alot. It taught me that money can really change people. It taught me that unlikely allies can form against a common enemy. More importantly it taught me the relationship between the financial markets and our groceries.

Look how money changes people lmao

Trying to figure out what's going down with bacon

Trying to figure out what I should do about wheat, on some investment tip and on some in my fridge tip lolol

How are the financial markets connected to our groceries you ask? Well, it’s the financial markets that decides what our groceries prices are through trading. If you get texts from the homie Benjamin you probably caught the definition of commodities last week.

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Knowing the price of commodities is important. It determines the price of everything around us. The price of our bread, phone, clothes, gas, and many more. Knowing the price of commodities and executing properly can actually save you alotta dough at the grocery store and can help you forecast what prices will be that next week. Forecasting can help you decide whether you should stock up on an item right now, or if you should refrain from buying an item until later. I for one am notorious for filling canisters with gas when I get news that crude oil (WTI Crude) will increase in the next few months.

So currently commodities are traded on numerous exchanges. Here are a few in the US:

The Chicago Mercantile Exchange (CME Group) is a finance company & exchange that creates financial products out of large outputs of commodities. This exchange also trades meats (porkbellies for example), and different currencies (euros for example).

The Chicago Board of Trade (CBOT) in Chicago trades Grains, Ethanol (corn oil), treasuries (United States bonds), and different financial instruments based on those products. Many of the options that are traded on the open market actually derive from this exchange. This is one of the OG’s of commodities exchanges.

The New York Mercantile Exchange (NYMEX) is an exchange owned by the CME Group that trades oil, natural gas, electricity, propane, gold, silver, copper, aluminum, and many more types of gases and metals.

The Intercontinental Exchange (ICE for short) is a company based in Atlanta, GA that owns exchanges focused on both financial and commodities markets. They mainly focus on different types of oil and gas, they also trade electricity.

A Commodity ETF for your portfolio:

GLD: The SPDR Gold Trust ETF is The first US traded gold ETF and the first US-listed ETF backed by a physical asset. Currently has over $33 billion under management and is on the market for $120 a share. Fees are very low and it's cheaper to invest in this than actually investing in gold which is on the market for 10x the price ($1271 an ounce as of today 6/25/18). The fund is managed by State Street which has some of the best portfolio managers out there.

I hear you Carl, so what does this have to do with the grocery store?

So you’re probably saying to yourself “This info is cool and all but how do I make this work for me?” Don’t worry, I got you. To save money on groceries I watch news on the markets and identify whether there will be issues with very important commodities. For example: I listen out for OPEC’s meetings to hear whether they will increase or decrease their supply of crude oil. This will help me determine whether the price per gallon for gas will increase or decrease. For groceries I was the exchange activity but more importantly I use some fire ass tools every week to see what’s about to go down in the grocery store next week.

Here are some of my tools:

The Produce Price Index:

This tool shows me how much grocers are moving products in the store for. I tend to look at historical prices to determine what the price of an item should be or to estimate what it will be before I make my next grocery store run. The data provided from this website is from the United States Department of Agriculture (USDA) so if they get it wrong its because the federal government got it wrong. The retail prices are broken down by region so the prices will vary depending on where you live in the US. Either way I think it’s a great resource. It also helps me determine whether I should buy double the amount of avocados this week if it will cost farmers more to produce them or grocers more to bring them to the store in the near future.

Favado App:

Favado is a food grocery store app that performs price comparisons in store all via one space. Imagine all of your weekly circulars in one app but you get to sit down and compare them all to each other. I use this all the time to determine which store I should shop at this week.

Ibotta App:

Ibotta app is a rebate app that gives you cash back when you shop at certain stores and purchase certain items. The items and stores are OD broad though so you’re very likely to catch hella rebates. It also tells you ahead of time which places have sales for which items IN YOUR AREA. All you have to do is take a photo of your receipt and upload it to the app. It views your purchases and hits you with the cash back on a gift card via the app. You can also get actual cash if you use Venmo. Ibotta App is the TRUE finesse y’all.

 Me Leaving Whole Foods after finessing the price comparisons and getting hella cash back.

Me Leaving Whole Foods after finessing the price comparisons and getting hella cash back.

See….. it’s all connected. Understanding the relationship between financial markets and the grocery store is ESSENTIAL to saving that bread which in the long term can help you make better investments. In every part of your life you need to be prudent. If you have ANY questions at ANY time don’t hesitate to hit the boy Benjamin you know he always got you.

Keep Stacking That Paper,

CJB

Disclaimer: Please use your own due diligence before making any investment decisions. Past performance does not guarantee future results.