From Paul Mylchreest of Monument Securities
Coffee was up another 12% yesterday! After introducing myself to ADM’s Sugar trading team, I thought I’d better introduce myself to our Coffee team pronto, who were equally friendly I have to say. Feedback - besides the dry weather in Brazil, there are also unsubstantiated rumours of a trading house getting in to trouble – which might not be surprising given the scale of the recent move. Here is the Coffee chart since the beginning of 2013.
Not sure if ADM trades Lean Hogs (must be out of Chicago if we do), but did you see them fly (!) during the last couple of days? Terrible.
We highlighted the CRB/BLS Spot Foodstuffs Index last week. It’s continuing to rise but still remains lower year-on-year at this point.
The question is whether this is the start of a broadly-based period of food price inflation?
So what about the Food Retailing stocks?
I was watching the S&P 500 Food & Staples Retailing sector yesterday. It rose 1.3% versus a 0.7% fall in the S&P 500.
After all their travails from intense competition and over-investment, maybe some food price inflation is just what the UK Food Retailers need...if they can pass it on in the current environment!
If we look back to a more “normal” period for these stocks, e.g. from 1996-2007, the Food Retailers did do well during periods of rapidly escalating food prices – although often with a lag.