Commodity prices are surging.
Corn, hogs, lumber, oil, soybeans, and wheat are all climbing to highs not seen in years.
Lumber demand is so strong, it’s outpacing inventory. Oil rose above $65 on Wednesday, its highest level since mid-March. Hog prices have risen 52% so far this year, and corn futures have more than doubled over the past year with other grains following suit.
Overall, crop prices are at their highest level in 8 years, with some analysts warning that a speculative bubble may be forming. And with higher commodity prices comes higher prices for consumers.
“As an investor, you really have to be kind of dusting off the old economics book and bringing out what we call ‘products that have price elasticity’ and that is that those prices can be raised incrementally without seeing a fall-off in consumer demand,” said Joule Financial president Quint Tatro.
But with that in mind, Tatro says that investors need to seek out those companies that can pull off that price elasticity.
“That’s why we’re seeing strength in names like Coca-Cola (NYSE: KO), Procter & Gamble (NYSE: PG), Clorox (NYSE: CLX), the staple-type names,” Tatro said. “But ultimately, traders I think can still look to some technology stocks that I think are trading at reasonable prices but also have that price elasticity.”
One more name Tatro pointed to was Amazon (NASDAQ: AMZN), which he believes could pass on rising costs to consumers without seeing a dent in demand.
Amazon reported a 44% year-over-year jump in revenue to $108.52 billion in its latest quarter after the bell on Thursday, with the pandemic supercharging the retailer’s business enabling it to more profitably deliver packages, cloud-computing services, and streamed movies. And the company expects the trend of online shopping to continue even as consumers get back to work and resume their pre-pandemic lives.