Diamond Foods and Kraft Foods Facing Volatile Commodity Market
February 17 2012 - 8:20AM
Marketwired
Food and Beverage stocks have underperformed the broader market in
2012 as volatile commodity prices crimp margins industry wide. The
PowerShares Dynamic Food & Beverage Portfolio (PBJ) is up
slightly more than 1 percent this year. A modest downturn in
commodity costs, and an uptick in M&A activity has raised
investor optimism in the industry in recent weeks, however. The
Paragon Report examines investing opportunities in the Processed
& Packaged Goods Industry and provides equity research on
Diamond Foods, Inc. (NASDAQ: DMND) and Kraft Foods, Inc. (NYSE:
KFT). Access to the full company reports can be found at:
www.paragonreport.com/DMND
www.paragonreport.com/KFT
Earlier this week Kellogg Co agreed to buy Pringles potato chips
from Procter & Gamble (P&G) for $2.7 billion in a cash deal
that makes the cereal company second only to PepsiCo Inc in the
global snack food market. P&G wanted to sell Pringles, the last
of its food businesses, to focus on its core household and consumer
goods products, The Associated Press reports. Kellogg was able to
swoop in to buy Pringles from P&G. after Diamond Foods Inc.'s
proposed $1.5 billion acquisition of the brand fell through. The
Diamond Foods deal became "no longer feasible," according to
P&G Chief Executive Bob McDonald, following the discovery of
improper accounting at Diamond that led the snacks company to
replace its chief executive and finance chief.
The Paragon Report provides investors with an excellent first
step in their due diligence by providing daily trading ideas, and
consolidating the public information available on them. For more
investment research on the Processed & Packaged Goods Industry
register with us free at www.paragonreport.com and get exclusive
access to our numerous stock reports and industry newsletters.
The Processed Food Industry has been negotiating volatile corn,
sugar and wheat prices for the better part of a year. Morgan
Stanley recently placed corn as its top bet in farm commodities,
foreseeing an average price of $6.60 a bushel in 2011-12, above the
$6.29 a bushel that futures have been pricing in. "Prices need to
move higher to justify the demand rationing currently implied by
the USDA balance sheet," Morgan Stanley Stated in the report.
Wheat prices, meanwhile, fell almost five per cent last week and
despite estimates world wheat stocks are at all-time highs. The
U.S. Department of Agriculture projected global wheat stocks would
reach 213.1 million tonnes by the close of 2011-12, an increase of
3.1 million tonnes from its projection the previous week.
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