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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Hi, good Herdon.

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Speaker 3: For the last few years, whenever I've needed a little

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Speaker 3: extra morning sustenance, I visited a food cart outside the

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Speaker 3: Bloomberg office. Could I have a egg and cheese sandwich,

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Speaker 3: extra cutup, salt and pepper, please.

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Speaker 4: Egg and cheese ease a five dollar?

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Speaker 3: It used to be three fifty.

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Speaker 4: Or they actually says thanksy.

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Speaker 3: It must have been a while since I stopped by

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Speaker 3: the cart, because Karen Hidalgo and her coworker Francisco told

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Speaker 3: me two months ago they had to raise prices. Their

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Speaker 3: egg and cheese sandwich on a roll went from three

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Speaker 3: point fifty to five dollars, and their bacon, egg and

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Speaker 3: cheese has reached six dollars. Add in the cost of

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Speaker 3: a cup of coffee and a tip, and my once

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Speaker 3: reliably cheap breakfast just ran me seven bucks. It's not

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Speaker 3: just my beloved breakfast cart. Bloomberg actually tracks the price

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Speaker 3: of the key ingredients in a bacon, egg and cheese

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Speaker 3: plus a cup of coffee on a special bacon, egg

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Speaker 3: and cheese index. It's updated every month using data from

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Speaker 3: the Bureau of Labor Statistics or the BLS, and this year,

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Speaker 3: the index has reached record highs.

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Speaker 1: Our breakfast foods are very consistent consumer staples, and so

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Speaker 1: they sort of become outsize indicators of inflation.

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Speaker 3: Aileena Pang covers agriculture and commodities for Bloomberg.

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Speaker 1: Even though economists really like to look at the rate

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Speaker 1: of inflation, as a consumer, you tend to think, oh,

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Speaker 1: my coffee costs this much today, and my coffee used

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Speaker 1: to cost that much five years ago.

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Speaker 3: In March twenty nineteen, the commodities that make up an

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Speaker 3: average BC plus a coffee cost almost a dollar ninety.

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Speaker 3: If you adjusted for inflation, that means the meal should

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Speaker 3: cost nearly two forty today, but as of March twenty

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Speaker 3: twenty five, it three dollars three twenty three to be exact.

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Speaker 3: So the story of why these foods have gotten so

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Speaker 3: expensive isn't just about inflation. It's also about supply and demand.

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Speaker 5: When my customers complained to me recently at the price

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Speaker 5: of gouging, you're gouging.

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Speaker 3: Global weather patterns and.

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Speaker 6: Disease, experienced veterans would tell me, like, young man, we've

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Speaker 6: seen everything that could possibly happen in the egg marketing.

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Speaker 3: Land wars, and trade wars.

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Speaker 4: We're used to handling the natural barriers. The man made ones,

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Speaker 4: we kind of struggle.

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Speaker 3: With them, you know, the winds of consumers and the

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Speaker 3: complexities of financial markets. Now, as Trump's sweeping tariff orders

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Speaker 3: send shockwaves through the global economy and put new pressures

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Speaker 3: on domestic commodities markets, we wanted to look closer at

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Speaker 3: one sandwich that helps explain it all. Today on the show,

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Speaker 3: we talk to people up and down the bacon, egg

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Speaker 3: and cheese supply chain, from a Kentucky week farmer to

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Speaker 3: a VP at an egg brokerage, to a coffee roaster

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Speaker 3: in Lower Manhattan, and along the way. Bloomberg's expert commodities

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Speaker 3: reporters helped us make sense of how this sandwich got

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Speaker 3: so expensive and what it says about the American economy, tariffs, inflation,

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Speaker 3: and more. This is the big take from Bloomberg News.

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Speaker 3: I'm Sarah Holder. If you had to pick one ingredient

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Speaker 3: to blame for the rising costs of a breakfast sandwich,

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Speaker 3: it'd probably be eggs.

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Speaker 6: Eggs have a weird pulse on the economy.

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Speaker 3: Brian Muskajeri has worked in the egg industry for over

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Speaker 3: a decade. He's currently a vice president at an egg

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Speaker 3: brokerage called Eggs Unlimited. It also helps farms distribute their

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Speaker 3: eggs to retail customers.

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Speaker 6: When I got into the egg industry, my mom said, like,

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Speaker 6: somehow you belonged in this industry. You just always loved eggs.

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Speaker 3: Right now is a rough time to be an egg lover,

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Speaker 3: as anyone who's been to the grocery store recently knows,

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Speaker 3: the price of eggs has been uncomfortably high. The most

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Speaker 3: recent data we have shows that consumer prices in March

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Speaker 3: hit a new record over six twenty a dozen, double

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Speaker 3: what eggs cost a year ago. Most people know, or

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Speaker 3: think they know, what's behind that high price, bird flu.

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Speaker 3: Since late last year, a new wave of avian influenza

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Speaker 3: has been tearing through American egg farms, killing off tons

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Speaker 3: of egg laying hence.

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Speaker 6: Fifty million of three hundred and twelve million, you know,

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Speaker 6: since the start of October. It's just an unprecedented supply

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Speaker 6: loss than those prices have been passed along to the consumer, But.

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Speaker 3: There may have been other dynamics pushing up the price

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Speaker 3: of eggs. The Department of Justice has opened a probe

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Speaker 3: to investigate potential price fixing by egg sellers and consumer

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Speaker 3: reactions also had an impact.

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Speaker 6: It created panic buying and hoarding, and the consumers are

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Speaker 6: maybe buying more eggs than they typically bought, which just

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Speaker 6: kind of fed into the show rang a little bit more.

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Speaker 3: But consumers have hit their price ceiling since February, They've

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Speaker 3: stopped buying as many eggs, and wholesale prices have started

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Speaker 3: to fall. Consumers just haven't felt that yet. The second

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Speaker 3: most important part of the bacon, egg and cheese, in

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Speaker 3: my opinion, is the bread. Bread has also outpaced inflation

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Speaker 3: since twenty nineteen. And to make bread, you need wheat.

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Speaker 4: If you're flying around the country in the winter and

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Speaker 4: you say something beautiful and green amidst all the brown

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Speaker 4: and gray, that's a wheak field.

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Speaker 3: That's Pat Clements, a second generation wheat grower and president

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Speaker 3: of the National Association of Wheat Growers. When America's beautiful,

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Speaker 3: green wheat fields are thriving, that doesn't always mean America's

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Speaker 3: wheat farmers are making more money. Walk me through how

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Speaker 3: you set prices.

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Speaker 4: The issue is we don't set them, we take them.

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Speaker 4: Market prices for wheat can vary pretty widely over the

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Speaker 4: course of a year, and.

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Speaker 3: From year to year, US wheat prices are heavily influenced

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Speaker 3: by two dominant global suppliers, Russia and Ukraine. When those

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Speaker 3: countries are cranking out wheat, the prices US farmers get

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Speaker 3: are lower When Russia and Ukraine's supplies strained, growers here

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Speaker 3: can make more so. Back in twenty twenty two, just

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Speaker 3: after Russia's ground invasion of Ukraine, prices shot up.

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Speaker 4: That was one of the last big run ups in

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Speaker 4: the price of wheat.

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Speaker 3: In January twenty twenty two, wheat was trading at about

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Speaker 3: seven to fifty a bushel. In March, after Russia's invasion,

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Speaker 3: it spiked, surpassing thirteen dollars a bushel, but it was

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Speaker 3: a short lived jump. Russia and Ukraine found ways to

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Speaker 3: keep supplies flowing, and that, combined with reduced demand in

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Speaker 3: the US, has driven down the prices wheat farmers are

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Speaker 3: getting for their product. A bushel of wheat is now

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Speaker 3: trading at around five forty.

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Speaker 4: In the meantime, our input costs have risen back oh

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Speaker 4: Watch day twenty five to fifty, depending on which particular

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Speaker 4: item you're talking about.

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Speaker 3: Pat says the costs of pesticides, fertilizers labor and equipment.

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Speaker 3: They're all up, and farmers fear that squeeze could get

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Speaker 3: even worse depending on how Trump's trade war goes.

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Speaker 2: That's the sort of million dollar question.

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Speaker 3: Michael Hertzer covers commodities for Bloomberg.

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Speaker 2: Prices could change pretty dramatically depending on how all these

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Speaker 2: tariff negotiations go.

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Speaker 3: Almost half of US wheat is exported. Mexico is our

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Speaker 3: biggest wheat buyer, and right now the country has escaped

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Speaker 3: the worst of Trump's tariffs. But if that changes, and

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Speaker 3: if Mexico retaliates, that could hit US wheat producers hard.

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Speaker 4: To interrupt the supply to a dependable nearby neighbor, you

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Speaker 4: just can't imagine anything worse for the industry.

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Speaker 3: From the ground in Kentucky, Pat says farmers are nervous

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Speaker 3: that the trade wars could drive business away.

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Speaker 4: When you interrupt these small markets, someone is waiting to

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Speaker 4: take our place, perhaps some South American country we'll ship

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Speaker 4: into Mexico. Perhaps it'll be Russia, Perhaps you know, can

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Speaker 4: come from anywhere in the world.

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Speaker 3: Tariffs could also drive up other costs of doing business,

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Speaker 3: not just for wheat farmers, but all the way up

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Speaker 3: the bread supply chain. That's on top of costs that

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Speaker 3: have already been rising and driving up the cost of bread,

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Speaker 3: labor costs, packaging, transportation, marketing.

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Speaker 4: A loaf of bread that costs four dollars and a half.

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Speaker 4: The farmer's share of that it's fourteen cents. Our part

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Speaker 4: isn't moving the need.

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Speaker 3: So we've covered eggs and bread. What about cheese? For

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Speaker 3: that we had to call one of our experts.

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Speaker 1: We typically watch Class three milk futures. That's like the

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Speaker 1: class of milk that typically goes into cheese.

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Speaker 3: That's Bloomberg's I lean up. Hang again. She follows the

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Speaker 3: cheese market, and she says prices have been relatively stable

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Speaker 3: in recent years. That's despite a cheese craze that started

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Speaker 3: during the pandemic, and.

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Speaker 1: That trend has just sort of accelerated, and it's really

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Speaker 1: been a boon to the broader US dairy industry, just

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Speaker 1: because fluid milk is no longer as popular as it

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Speaker 1: once was at its peak, and so now what the

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Speaker 1: dairy industry likes to say is that people are eating

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Speaker 1: their milk instead of drinking it.

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Speaker 3: Since the increased demand for cheese has been offset by

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Speaker 3: increased production, the cost of this domestic dairy product has

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Speaker 3: remained relatively low. But we also get some of our

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Speaker 3: fanciest cheeses from the European Union.

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Speaker 1: They make a lot of the high grade specialty cheeses

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Speaker 1: that everyone loves.

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Speaker 3: I'm not sure most of us order breakfast sandwiches with

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Speaker 3: imported French bree, but if you are, watch out. The

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Speaker 3: European Union is subject to the US as ten percent

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Speaker 3: tariff on imports. A more traditional pick might be American

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Speaker 3: cheese produced right here in the US, but the US

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Speaker 3: also exports a lot of cheese products. More than half

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Speaker 3: of US dairy exports go to Mexico, Canada, and China.

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Speaker 3: Canada has already put retaliatory tariffs of twenty five percent

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Speaker 3: on American cheese, butter, and dairy spreads, while China's levied

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Speaker 3: one hundred and twenty five percent duties on all US imports,

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Speaker 3: which would include dairy products. What if Mexico were to follow.

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Speaker 1: Mexico is by far the biggest buyer of American dairy products,

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Speaker 1: and so there is concern there that if Mexico were

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Speaker 1: to retaliate by putting tariffs on US cheese, then that

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Speaker 1: would take away a market for US farmers.

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Speaker 3: Overall, though, Aileena sees domestic cheese prices staying pretty calm

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Speaker 3: amid broader tariff turbulence. So we've tackled eggs, bread, and cheese.

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Speaker 3: But what's going on with the last two pieces of

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Speaker 3: this breakfast puzzle bacon and coffee? That's coming up. We've

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Speaker 3: been digging into why a classic American breakfast combo, the bacon,

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Speaker 3: egg and cheese sandwich plus a cup of coffee, is

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Speaker 3: getting more expensive in the US, and how those prices

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Speaker 3: could fluctuate further under Trump's trade war. We've covered the bun,

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Speaker 3: the e, and the c. Now let's bring home the bacon.

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Speaker 3: Bloomberg Commodities reporter Michael Hertzer told me that understanding bacon

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Speaker 3: prices actually starts with beef.

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Speaker 2: The US beef cattle herd is the lowest since the

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Speaker 2: nineteen fifties, so beef is in pretty tight supply, and

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Speaker 2: one of bacon's keys to popularity has ben. It's always

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Speaker 2: been something of alternative to beef.

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Speaker 3: In the past few decades, bacon has been heavily marketed

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Speaker 3: by restaurants and food companies who wanted to sub in

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Speaker 3: pork because beef was so pricey, and all that exposure

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Speaker 3: has helped bacon evolve from strictly a breakfast side to

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Speaker 3: something you see on salads, on burgers, any meal of

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Speaker 3: the day. All this drives up demand, but.

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Speaker 2: Supply bacon is cut from the pork belly and there's

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Speaker 2: a sort of a finite amount of it. Each pig

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Speaker 2: only has one belly in Because it's so popular, bacon

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Speaker 2: has a sort of built in demand base, so.

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Speaker 3: US consumers have spent decades driving up the cost of

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Speaker 3: bacon by buying more. Today it costs almost seven dollars

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Speaker 3: a pound, but Trump's policies could change that.

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Speaker 2: A lot of the folks working inside the meat plants

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Speaker 2: are immigrants, and any sort of deportation efforts could have

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Speaker 2: a tangible impact on just the number of workers that

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Speaker 2: are available or the number of workers that are willing

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Speaker 2: to show up if they're in fear of being taken away.

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Speaker 3: And once again, tariffs could upend everything.

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Speaker 2: Mexico is the top buyer of US pork, and them

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Speaker 2: not having a tariff will allow US pork to continue

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Speaker 2: to go to Mexico. If that changes, theoretically, pork could

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Speaker 2: become cheaper in the US if Mexico is buying less.

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Speaker 3: In the short term. Pork prices could drop if the

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Speaker 3: supply of pork exceeds the demand, but Michael thinks farmers

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Speaker 3: would adapt raise fewer pigs, bringing the price back up

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Speaker 3: in the medium term. So we're down to the last

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Speaker 3: ingredient in our breakfast. Order something to wash it all down.

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Speaker 3: I'll go Burista's Choice coffee.

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Speaker 5: These increases over the last six months have been monumental,

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Speaker 5: and they've been fast.

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Speaker 3: That's Peter Longo, the owner of Porto Rico Importing Company,

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Speaker 3: a coffee shop and roaster in New York's Greenwich Village.

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Speaker 3: The store has been around since nineteen oh seven, and

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Speaker 3: Peter took it over from his parents in the seventies.

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Speaker 3: And how much was a cup of coffee at that time?

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Speaker 5: Oh man, a cup of coffee? What's a dime? Maybe?

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Speaker 3: Yeah, coffee hasn't cost a dime in deck gates. But

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Speaker 3: in the past year coffee prices have truly been on

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Speaker 3: a tear. Today a pound of beans costs Peter about

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Speaker 3: four dollars. That's nearly double what he was paying last year.

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Speaker 5: Things that are causing price increase is scarcity, fears of

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Speaker 5: weather changing, of the temperature. Global warming has affected farming

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Speaker 5: a lot.

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Speaker 3: A drought in Brazil damaged bean supply in the world's

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Speaker 3: top producing country.

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Speaker 5: But I think the speculative investment has boosted the price

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Speaker 5: of coffee and made it more volatile.

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Speaker 3: Speculative investment, in other words, economic forces beyond supply and demand.

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Speaker 3: To understand how markets influence coffee prices, we had to

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Speaker 3: call back Eileena Pang, the agriculture reporter we heard from earlier.

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Speaker 3: She told me there are two groups of people who

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Speaker 3: get involve in coffee markets. There are commercial traders.

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Speaker 1: People who have a steak in the market, so like

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Speaker 1: you're a coffee roaster, you're a coffee producer, you are

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Speaker 1: a coffee trading house. And then there are speculative traders,

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Speaker 1: like the hedge funds, and their goal is not to

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Speaker 1: take delivery of beans. Instead, they want to play the

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Speaker 1: coffee market kind of like the stock market, buying futures

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Speaker 1: at a certain price, hoping that they'll be able to

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Speaker 1: sell them for more than they bought. The thing is

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Speaker 1: that right now, the roasters, the coffee houses, the people

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Speaker 1: who do want to actually buy coffee and actually take

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Speaker 1: delivery of it, they've been cautious, trying to buy just

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Speaker 1: what they absolutely need and nothing more, hoping prices will

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Speaker 1: come down. The traders aren't willing to keep a bunch

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Speaker 1: of coffee on hand unless they know they have a

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Speaker 1: roaster to sell it to, and companies like Starbucks and

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Speaker 1: big roasters, who would normally buy a lot in advance,

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Speaker 1: are kind of reluctant to do that.

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Speaker 3: And since there are fewer buyers in the market right now,

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Speaker 3: any activity can make prices fluctuate wildly. Tariffs are making

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Speaker 3: the coffee market even more volatile. Last week, the US

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Speaker 3: hit the world's second biggest grower, Vietnam, with levies of

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Speaker 3: forty six percent. This week, Trump announced who his pausing

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Speaker 3: that tariff at least for ninety days, but his universal

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Speaker 3: ten percent tariff still applies.

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Speaker 1: Importers are already trying to get clauses into their contracts

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Speaker 1: so that those costs get passed on to coffee roasters,

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Speaker 1: and eventually there is a sense that that would make

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Speaker 1: it to the consumer level.

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Speaker 3: Traders are now expecting bean prices to get even higher,

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Speaker 3: so high that consumers might eventually start buying less coffee,

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Speaker 3: which could force prices down. All this weighs on coffee

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Speaker 3: sellers like Peter, who's now selling a pound of beans

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Speaker 3: for sixteen to ninety nine, up a whole dollar since September.

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Speaker 5: There's only a finite point to which you can raise

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Speaker 5: your prices before to fix your sales.

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Speaker 3: After all these conversations about all these different commodities, you

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Speaker 3: might be noticing some trends we did. Bacon, cheese, and

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Speaker 3: bread prices are either stable or slightly elevated, but coffee

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Speaker 3: and eggs prices are up a lot. Those two ingredients

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Speaker 3: have been driving a lot of the increases in Bloomberg's bacon, egg,

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Speaker 3: and cheese index, and even though market and wholesale prices

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Speaker 3: were expected to decline for those commodities, the relief hasn't

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Speaker 3: hit consumers, and now tariffs have created a whole new

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Speaker 3: level of uncertainty about where these prices are headed next.

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Speaker 1: The bacon, egg, and cheese index we have is a

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Speaker 1: little bit backwards looking.

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Speaker 3: Remember the index is based on data from the Bureau

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Speaker 3: of Labor Statistics. It's not a snapshot of where prices

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Speaker 3: are today or tomorrow, but where they were last month.

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Speaker 3: That's the way US inflation data works too, and why

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Speaker 3: it can sometimes feel like the fed's latest CPI figures

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Speaker 3: don't perfectly reflect Americans' experiences of the economy, and inflation

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Speaker 3: is sticky. That's something Jerome Powell, the Chair of the

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Speaker 3: Federal Reserve, acknowledged at February's FED meeting.

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Speaker 2: The grocery bill is about past inflation.

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Speaker 3: Really, consumers are still hurting.

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Speaker 4: And they're not wrong to be unhappy that prices went

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Speaker 4: up quite a bit and they're paying a lot for

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Speaker 4: those things and commodities.

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Speaker 3: Reporter Michael Hertzer says that's because if commodity prices can

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Speaker 3: be highly reactive, the prices consumers pay are.

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Speaker 2: Not from the star level. It's hard to raise prices,

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Speaker 2: you know. If you get an opportunity when everyone is

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Speaker 2: talking about inflation and you raise prices, you don't really

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Speaker 2: want to give that back. So for the consumer, you

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Speaker 2: just got to, I guess, clip the coupons and try

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Speaker 2: to find savings.

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Speaker 3: Or you can get creative, like Peter Longo the coffee roaster.

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Speaker 5: My go to breakfast sandwich is the egg McMuffin. But

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Speaker 5: I noticed it got very, very expensive, and I was

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Speaker 5: just talking with the girl behind the counter and she said,

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Speaker 5: you gotta buy the sausage McMuffin and throw the sausage

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Speaker 5: away because they had one of those deals, so you

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Speaker 5: could get two sausage mcmuffins for two bucks.

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Speaker 3: I guess there's always a deal to be found somewhere.

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Speaker 3: This is The Big Take from Bloomberg News. I'm Sarah Holder.

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Speaker 3: This episode was produced by Julia Press. It was edited

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Speaker 3: by Tracy Samuelson, Millie Munci, and Isis al Naida. It

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Speaker 3: was fact checked by Audre Natapia and mixed and sound

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Speaker 3: designed by Alex Sugia. Our senior producer is Naomi Shadan.

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Speaker 3: Our senior editor is Elizabeth Ponso. Our deputy executive producer

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Speaker 3: is Julia Weaver. Our executive producer is Nicole Beamsterboorg Sage

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Speaker 3: Bauman is Bloomberg's head of Podcasts. If you liked this episode,

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Speaker 3: make sure to subscribe and review The Big Take wherever

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Speaker 3: you listen to podcasts. It helps people find the show.

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Speaker 3: Thanks for listening. We'll be back next week.