This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Companies Getting Rich on Slim Jims, Spam

BOSTON (TheStreet) -- Slim Jims, Spam and chicken burritos may not get any cheaper in the checkout aisle, but the companies that make them are about to reap big profits as the price of corn -- a main ingredient in the products and in feed -- falls.

Corn commodities were trading at record levels a few weeks ago amid reports of low supplies and an outlook for more of the same. That led to talk of a knock-on effect with higher prices for everything from soft drinks to steak, and thinner profits for food and beverage companies.

But that got turned around Friday, surprising commodities experts, when the U.S. Department of Agriculture reported higher inventories and much more corn being grown in the heartland than had been expected. What's more, the government gave a more optimistic outlook on the pricing of feed grains.

"It was unusual, truly a surprise to people," said Sal Gilbertie, chief investment officer of the Teucrium Corn Fund (CORN).

And that sets up some big profit opportunities at companies because lower corn prices will result in wider profit margins. And we're not talking chicken feed. As a direct result of the government's report, Goldman Sachs analysts slashed their forecast for corn and wheat prices by 26%.

"Anybody that uses corn is going to have some benefit as the price of their raw materials has declined significantly," said Gilbertie, whose exchange traded fund invests only in corn commodities products. Industries using corn feed as a food stock to raise animals "will have some significant and immediate benefits" since their highest cost is the price of corn.

That could mean everything from cereal makers to meatpackers.

Meatpackers, in particular, aren't squealing about the news. In a report on a big meatpacker that predates the USDA's announcement, Morningstar analyst Jeremy Cohen wrote that "the rapid increase in ethanol production caused grain prices to spike to levels well above normal, and with animal feed constituting 60% to 65% of the total cost of raising hogs and corn constituting roughly 85% of a pig's diet, elevated corn prices" weigh heavily on meat producers' profits.

From an investment perspective, the best bets are probably on the shares of companies that had already been raising their prices to customers in anticipation of what they thought would be much higher corn costs later this year.

Farm-products stocks as a group rose 5% in the week ending July 1, as tracked by Morningstar, turning around what had been, until then, a losing year. They are up 4.8% on the year as of last Friday. The S&P 500 Index was up 5.7% in the same week and is up 7.6% this year.

Corn prices may get another break if Congress decides that it will end its ethanol production tax subsidy program that takes millions of acres of corn production away from food products solely for the production of ethanol as a fuel additive. But, for now, it appears that's a whole 'nother can of corn.

Here are seven companies that should reap increasing profits this year directly as a result of the government's more optimistic prediction of a bumper crop in corn this year:

1 of 5

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,901.93 -83.68 -0.49%
S&P 500 1,964.25 -8.58 -0.43%
NASDAQ 4,397.3150 -21.7190 -0.49%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs