BofA: Soaring Commodity Costs to Squeeze Consumer Staples Margins in H2 2026

Consumer staples companies face continued pressure from rising commodity costs in the second half of 2026, with a limited ability to raise prices likely to squeeze profit margins, according to a new report from Bank of America.

The analysis comes as food inflation remains persistent. The Food Consumer Price Index rose 3.0% year-over-year in July, with prices for food at home up 2.7%, according to the bank. While some categories like eggs and pork saw annual price declines, costs increased for key inputs like beef, cereals, and nonalcoholic beverages.

Volatile Commodity Markets

Bank of America attributes the cost pressures to significant volatility in commodity markets, citing geopolitical conflicts, energy price fluctuations, and weather-related events. The report highlighted several double-digit price swings in both spot and forward markets, reversing trends seen just three months prior.

Key drivers of the inflationary environment include:

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• Energy: WTI and Brent crude oil prices have surged 46% year-to-date, with U.S. diesel up 62%. The bank links these increases to geopolitical tensions, including the Iran conflict and disruptions in the Strait of Hormuz.
• Grains: The intensified Russia-Ukraine conflict has disrupted Black Sea trade, pushing wheat prices up 39% and soybeans up 23% year-to-date.
• Other Commodities: Cocoa prices have seen a dramatic 102% increase over the past three months. In contrast, protein markets have eased recently, with prices for chicken, lean hogs, and cattle declining over the last month.

Company-Level Exposure

Based on an analysis of company cost structures, Bank of America identified specific firms with varying levels of exposure to the ongoing cost inflation.

Companies identified as most exposed to the rising costs include Conagra Brands (CAG), Campbell Soup (CPB), Pilgrim’s Pride (PPC), Sanderson Farms, and General Mills (GIS). Conversely, the bank sees confectionery companies, diversified protein producers, Smucker (SJM), Kraft Heinz (KHC), and McCormick (MKC) as facing comparatively less inflationary pressure.