🐑 The price of sheep

What’s going on here?

A record number of bargain hunters are expected to check out Black Friday sales, yet retailers still gave investors a warning.

What does this mean?

Americans have been too pinched by the rising cost of living to fully treat themselves. So it’s no wonder the National Retail Federation expects over 182 million shoppers to scout out discounts between Black Friday and Cyber Monday, nearly 10% more than last year. But if recent retailer results are anything to go by, those hoards could be doing more window shopping than credit-card swiping. After all, savvy shoppers know prices can’t stay high forever, and the longer they hold out, the more likely they are to lock in a better deal. That’s why retailers like Best Buy, Abercrombie & Fitch, and BJ’s Wholesale Club told investors to manage their expectations this holiday season.

Why should I care?

For markets: Don’t shop unless they drop.

Even if shoppers wait it out, there’s no guarantee that retailers will yield. After all, when shops slim their prices, folk assume there’s plenty of stock to get rid of – so if they wait a little longer, the discount labels might come out once again. That standoff could last a while, unless the looming holiday deadlines encourage shoppers to pull the trigger. Either way, retailers that have nailed their inventory levels will fare better: that’s those with enough stock to sell, but not enough that they need to cut prices to shift the lot.

The bigger picture: You’re on your own now.

The US economy has held steadier than expected this year, not least because Americans were especially resilient: consumer spending has managed to tick upward over the past few months. But the pandemic savings they used to cushion their bank balances are running out, so the next lot of data may well indicate a more cautious approach to splashing the cash.

What’s going on here?

Australian farmers have lost count of their sheep, and not because they’re trying to nod off.

What does this mean?

Australian sheep have been living lives of luxury for the last three years, gorging themselves on plentiful, hydrated, and simply delicious grass thanks to unusually heavy rainfall. But they’re in for a rude awakening now. Healthier animals mean more successful breeding seasons, and all that romance means farmers across the country now own more sheep than they can handle. And while many farms are offering to give their animals away for free, it seems there aren’t many folk in the market for unconventional pets. That means there’s plenty of – look away now, animal lovers – meat in the market, and that excessive stock has driven prices down 70% over the past year. Sunday dinners are cheaper now, sure, but spare a thought for the country’s skittish, sleepless sheep.

Why should I care?

For markets: Gold, bonds, and pork.

Protein matters, and not just at the gym. China has shown us just how much meat prices count when it comes to inflation: “porkflation” hit in 2020 and 2022, when the country’s favorite meat became more expensive than ever, running up the cost of grocery lists. And when pork prices let up, inflation did too – so much so that China’s now bracing itself for deflation. The government even started stockpiling pork meat to prop up prices, accidentally creating the world’s saltiest snack drawer in the process.

The bigger picture: From mutton to mealworms.

As countries get richer, they want more meat on their plates. That’s why the world now produces three times as much meat as it did 50 years ago. But with climate change and deforestation wreaking havoc on land and water, farmers may struggle to ramp up production at that same pace. So make the most of cheap Australian mutton and Chinese pork while you can, because the future may be full of vegetables and insects.