From Paul Mylchreest of Monument Securities [5] [5]
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.
[6]
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.
[7]
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?
[8]
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.
