(Food stocks hit by commodity inflation report updated with news that Hershey (HSY) raised wholesale prices to help offset rising input costs.)
NEW YORK (TheStreet) -- Consumer food stocks from Hershey (HSY) and Kraft Foods (KFT) to McDonald's (MCD) and Starbucks (SBUX) say that rising commodity costs are eating into their bottom lines.
Food inflation -- from corn and cocoa to sugar and wheat -- is an increasingly important global issue and unlikely to go away anytime soon. The United Nation's Food and Agriculture Organization (FAO) said its index of global food prices was at record highs, spiking 25% internationally in 2010, higher even than where the index was in 2007-8 during the last food price inflation crisis.
In March the United Nations' food body reported that world food prices rose 2.2% month-over-month in February to a record peak.
The UN also warned that volatility in the oil markets could send global food prices even higher.February's rise marked the eighth consecutive increase since June, and was the highest since the group began monitoring food prices more than 20 years ago. The quick rise in food inflation started around seven months ago, Nicholas Colas, ConvergEx Group's chief market strategist, told TheStreet recently, building off long-term trends like the growing middle class in China and India where demand for beef and vegetable-based proteins grew disproportionately to demand for grain-based diets. Converting soft commodities like corn and wheat into protein -- think cows and poultry -- is inefficient, costly and time-consuming. Rising food prices signal producers should produce more, Colas said, but "you can't just turn a switch." It takes time to plant the corn, it must be the right time of year, and it takes time for the crop to grow.
For food and beverage companies, that means many will have to pass higher costs onto already cash-strapped consumers -- and some, like Kellogg (K), Sara Lee (SLE) and Panera Bread (PNRA), already have.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV