Food Prices Spike: Ten Stocks With Exposure to Volatile Food Prices

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As the number of people alive in the world has skyrocketed, so have food prices. The more mouths there are to feed, the greater the demand for grains, meats, dairy products, etc. Similarly, as citizens of developing nations become richer, so do their tastes. The Chinese, for example, have increasingly craved meat ever since their standard of living began rising.

“An important characteristic of the increasing levels of incomes and expenditures is a changing food consumption pattern, and in particular, an increasing consumption of meat.

While, according to FAO statistics, in 1985 meat consumption in China was approximately 20 kg per person per year, by 2000 it had increased to 50 kg per person per year, and for the next decades further increases in per capita meat consumption are projected,” according to the  Centre for World Food Studies  at the Vrije Universiteit Amsterdam.

In addition, two trends have helped to inflate food prices. First is the growth of the  ethanol fuel industry,  which now uses around 40% of US corn production, up from around 7% a decade ago (the US produces almost 40% of the global corn supply).

The other is increasing meat demand: more beef means more cows which means more cow feed (which includes corn). More cows also means more grazing land – land that might have been used as farmland instead. 

The UN’s  Food and Agriculture Organization  (FAO) publishes a monthly  food price index. June 2011 figures show that food prices are 39% higher than in June 2010, led by a spike in sugar prices. The index hit an all-time high in February.

Food price volatility and prices will continue to be a hot issue in the future.

“French President Nicolas Sarkozy has blamed speculators for driving up food prices and made commodity regulation a priority for the country’s presidency in 2011 of the Group of 20 countries,” reports  Rudy Ruitenberg of Reuters.

Interested in trading this information? To help you start your own research, here is a list of ten large companies that have exposure to food prices.

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List sorted by market cap.

1. Unilever plc (UL): Major Diversified Food industry with a market cap of $97.63B. Its product categories include savory, dressings & spread and ice cream & beverages. This includes soups, bouillons, sauces, snacks, mayonnaise, salad dressings, margarines and spreads, cooking products, ice cream and beverages include the sales of ice cream, tea-based beverages, weight management products, and nutritionally enhanced staples sold in developing markets.

2. Kraft Foods Inc. (KFT): Major Diversified Food industry with a market cap of $63.02B. It manufactures and markets packaged food products, including biscuits, confectionery, beverages, cheese, convenient meals and various packaged grocery products. Brands include Oreo, Nabisco and LU biscuits; Milka and Cadbury chocolates; Trident gum; Jacobs and Maxwell House coffees; Philadelphia cream cheeses; Kraft cheeses, dinners and dressings, and Oscar Mayer meats.

3. Potash Corp. of Saskatchewan, Inc. (POT): Agricultural Chemicals industry with a market cap of $48.82B. It is an integrated fertilizer and related industrial and feed products company. It owns and operates five potash mines (used in fertilizer) in Saskatchewan and one in New Brunswick. Its business includes the manufacture and sale of solid and liquid phosphate fertilizers; animal feed supplements and industrial acid, which is used in food products and industrial processes.

4. Monsanto Co. (MON): Agricultural Chemicals industry with a market cap of $39.99B. It is a provider of agricultural products for farmers. It produces seed brands, including DEKALB, Asgrow, Deltapine, Seminis and De Ruiter, and it develops biotechnology traits that assist farmers in controlling insects and weeds. It also provides other seed companies with genetic material and biotechnology traits for their seed brands. It is a leader in agricultural genomics (ie, Genetically Modified Organisms or GMOs).

5. Deere & Company (DE): Farm & Construction Machinery industry with a market cap of $35.5B. It manufactures and distributes a line of farm and turf equipment and related service parts including large, medium and utility tractors; loaders; combines, cotton and sugarcane harvesters and related front-end equipment and sugarcane loaders; tillage, seeding and application equipment. Its owns and operates the popular John Deere brand of machinery.

6. Syngenta AG (SYT): Agricultural Chemicals industry with a market cap of $32.17B. It is an agribusiness operating in the crop protection and seeds businesses, including herbicides; insecticides; fungicides; seed treatments to control weeds, insects and diseases in crops; seeds for field crops, including corn, oilseeds, cereals and sugar beet; vegetable and flower seeds; and pot and bedding plants.

7. Mosaic Co. (MOS): Specialty Chemicals industry with a market cap of $30.47B. It is a producer and marketer of concentrated phosphate and potash crop nutrients for the global agriculture industry. It produces phosphate-based animal feed ingredients in the United States, sells phosphate-based crop nutrients and animal feed ingredients throughout North America and internationally, and produces and sells potash throughout North America and internationally, principally as fertilizer.

8. Archer Daniels Midland Company (ADM): Farm Products industry with a market cap of $19.61B. It is principally engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products. It is a processor of oilseeds, corn, wheat, cocoa, and other agricultural commodities and is a manufacturer of vegetable oil and protein meal, corn sweeteners, flour, biodiesel, ethanol, and other food and feed ingredients. It also has a grain elevator and transportation network to procure, store, clean, and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats, and barley, as well as processed agricultural commodities.

9. Agrium Inc. (AGU): Agricultural Chemicals industry with a market cap of $13.84B. It is a global producer and marketer of agricultural products. It sells crop nutrients, crop protection products, seed and services directly to growers, produces, markets and distributes three primary groups of nutrients, which includes nitrogen, potash and phosphate for agricultural and industrial customers worldwide, and produces and markets controlled-release crop nutrients and micronutrients in the broad-based agriculture, specialty agriculture, professional turf, horticulture, and consumer lawn and garden markets worldwide.

10. CF Industries Holdings, Inc. (CF): Agricultural Chemicals industry with a market cap of $10.22B. It is a manufacturer and distributor of nitrogen and phosphate fertilizer products. Its principal products in the nitrogen segment are ammonia, urea, urea ammonium nitrate solution, ammonium nitrate, diesel exhaust fluid and aqua ammonia. Its principal products in the phosphate segment are diammonium phosphate and monoammonium phosphate.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks


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