Bernanke Did Not Hear The Chipotle Conference Call

Chipotle spoke a lot about food inflation on their conference call. There are only two possibilities for corporations in regards to higher commodity costs. Absorb the increases and hurt margins or pass on the increases to consumers. Neither is bullish. Ben Bernanke did not listen to the Chipotle conference call because he is still busy fighting deflation. From Seeking Alpha:

Commodity inflation has continued to push our food costs higher in 2011 already, and we expect continued inflationary pressure on many of our ingredients, especially chicken, beef and avocados during the year.
In addition to the growing underlying food inflation, we're in the process of sorting through the impact of recent freezes in Mexico and Florida, where our tomatoes, green peppers and tomatillos are currently grown. The cost of these items has surged threefold as a result of severe crop loss, which, if we remain fully supplied, would increase our food cost by over 200 basis points. 
Over the next few months, until the Florida harvest season resumes normal production, we will evaluate the quality and quantity of tomatoes, green peppers and tomatillos available and make sure we only serve high-quality produce that our customers have come to expect from Chipotle. And during this time, we may experience shortages or surging food costs or both.
So it's obvious that food inflation is real, and it appears will get worse before it gets better. But what's not obvious is the exact timing and magnitude of inflation on the items we serve, how much is sustainable versus driven by temporary conditions such as weather and, perhaps most importantly, what's the appetite our customers have to absorb these higher costs.

No comments: