The Baltimore Bridge Collapse, Home Depot’s “Pro” Business, and Cocoa and Egg Prices

Editor’s Note: Happy Friday, dear reader! And Happy Easter if you celebrate!

What Impact Could the Baltimore Bridge Disaster Have on the Economy?

Analysts have mixed opinions on what impact the tragic collapse of the Francis Scott Key Bridge in Baltimore, Maryland (my hometown) will have on both the local and the national economy.

The Key Bridge collapsed early Tuesday morning after a Singapore-flagged ship, Dali, lost power and struck one of its supports. Danish shipping giant Maersk had chartered the ship, which was bound for Sri Lanka.

After the disaster, marine traffic to the port — which is now blocked by the bridge wreckage — was suspended. And Maersk has stated that it has removed Baltimore from its list of destinations for the time being.

“We are omitting Baltimore on all our services for the foreseeable future until it is deemed safe for passage through this area,” a statement from Maersk said.

Baltimore isn’t the biggest port in the U.S. But it’s the closest East Coast port to the Midwest. And it’s also the top U.S. port for cars and light trucks. Last year, the port handled 850,000 vehicles.

“Last year, we received, processed, and shipped approximately 100,000 vehicles through Baltimore for U.S. dealers located in the Northeast and Mid-Atantic,” a statement from German carmaker Volkswagen said.

“We do not anticipate any impact on vessel operations, but there may be trucking delays as traffic will be rerouted in the area.”

The Baltimore Harbor has also become a popular embarkation port for cruise lines. Last year, roughly half a million passengers boarded a cruise ship in the city’s port.

In addition, the Key Bridge was one of only three highway routes across the Patapsco River, which forms the Baltimore Harbor. The other two routes involve tunnels, making the bridge the main route for large trucks.

The bridge also provided easy access to the Interstate 95 corridor for Amazon (NSDQ: AMZN), which operates a huge logistics hub nearby.

Truck traffic will need to be rerouted through the city or around Baltimore’s Beltway. Both options add considerable time to a trip.

And of course, tens of thousands of travelers and commuters relied on the bridge every day.

According to Mark Zandi, Moody’s Analytics chief economist, the bridge collapse will not have a meaningful, long-term effect on the local or national economy.

“This specific event should not show up in the national economic statistics,” Zandi said. “It complicates things. But there’s already a lot of disruptions in the international supply chain.”

However, Oren Klachkin of Nationwide Financial said in a note that the collapse could “disrupt logistics activity up and down the East Coast” due to the highway closure.

And Judah Levine, head of research at Freightos (a logistics firm) said that the event could have a significant impact on trucking and rail prices.

“If some congestion does develop, and vessels are kept waiting, it could cause delays for importers using these ports. Congestion could also put some upward pressure on Asia-U.S. East Coast and trans-Atlantic freight rates,” he said.

Anirban Basu, CEO of Baltimore-based Sage Policy Group, is concerned, too. “It’s not just the Port of Baltimore that has been compromised,” he said. “It’s also the railroads, the trucking industry, the regional distribution centers, commuters, and other segments of the economy.”

He has set the economic toll of the collapse at somewhere in the tens of millions of dollars per day while the shipping lane remains closed.

“The tentacles here are far-reaching,” he said. “And they’re all negative.”

Home Depot Leans on the Pros

Home Depot (NYSE: HD) announced this week that it is purchasing SRS Distribution, a specialty trade distributor, in a deal worth $18.25 billion. That makes it the largest acquisition in Home Depot’s history.

According to CEO Ted Decker, it’s all part of a plan to expand Home Depot’s “pro” business. Already, the retailer gets about half of its sales from professionals such as contractors, rather than “do it yourself” amateurs.

Decker reported that the acquisition will expand the company’s total addressable market by $50 billion.

SRS, which is currently owned by private equity firms Leonard Green & Partners and Berkshire Partners, sells supplies to roofing, pool, and landscaping businesses. The acquisition follows two similar purchases last year: that of International Designs Group and Home Depot’s takeover of Temco, an appliance delivery company.

In addition, Home Depot purchased distributor HD Supply back in 2020 for roughly $8 billion.

Home Depot also reported earlier this month that it plans to open four pro-focused distribution centers this year in Detroit, Los Angeles, San Antonio, and Toronto.

Each of these facilities will be about 500,000 square feet large — roughly five times the size of a typical Home Depot location. That will provide enough space for the kinds of larger, bulkier orders that contractors require. Home Depot has already opened 14 of these facilities since 2020.

The retailer has been leaning into its “pro” business due to weakening consumer sales. Home Depot was a winner of the early COVID-19 pandemic days. Back then, bored consumers took on home repair jobs in droves.

However, in the ensuing years, rising prices and interest rates have led consumers to tighten non-essential and big-ticket spending.

The company said last month that it’s expecting full-year sales to show growth of about 1% from last year. However, at the same time, it’s expecting comparable sales to show a 1% decline.

Year to date, Home Depot’s stock has risen by about 11%. In the past 12 months, the stock has shown a gain of more than 36%.

The High Cost of Easter Eggs

Egg prices are close to historic highs thanks to outbreaks of avian flu, rising chicken feed costs, and steady demand.

In the U.S., the average price for a dozen eggs reached $2.99 in February. Although that’s lower than last year’s average of $4.21, it’s still significantly higher than 2021’s level of $1.59.

The trend is also apparent in Europe, where eggs are roughly twice as expensive as they were back in 2021.

According to the World Health Organization (WHO), more than 131 million chickens either died or had to be culled due to outbreaks of avian flu in 2022. And the incidents of the disease have continued.

In December 2023 alone, 11.4 million birds here in the U.S. were affected.

And even when the disease abates, there could still be a lag time before the egg market returns to normal, thanks to the three to six months it takes to replenish a poultry flock, according to the American Egg Board.

Meanwhile, chicken feed — which accounts for roughly 70% of poultry farmers’ costs — has doubled in price thanks in part to Russia’s war on Ukraine. The war has driven up worldwide costs for wheat.

However, the U.S. Department of Agriculture is predicting that the egg situation will somewhat improve by the end of the year. Prices should drop by about 2.8% in 2024, according to the agency.

Cocoa vs. Nvidia

This year, what investment would have shown you greater returns than Wall Street darling Nvidia (NSDQ: NVDA)?

Cocoa, of course!

So far in 2024, prices for cocoa beans have surged by more than 120%, with cocoa futures rising to more than $10,000 per metric ton.

Compare that to Nvidia’s 80%-plus runup:

Infographic: Forget Nvidia! Here Comes Cocoa! | Statista You will find more infographics at Statista

P.S. Don’t miss out on the cryptocurrency boom. The gap between traditional and digital markets is narrowing, as Bitcoin (BTC) soars to new heights.

Bitcoin exchange-traded funds (ETFs) are reporting massive inflows of new capital. The cryptocurrency market has embarked on perhaps the most powerful bull market in its history.

It’s clear that every portfolio should contain crypto assets. However, you need to be informed, to make the right choices. Direct investments in crypto coins or crypto-linked ETFs can be volatile.

In our coverage of the crypto market, we separate fact from myth, the wheat from the chaff. Start receiving our FREE e-letter, Crypto Investing Daily. Click here now!