This Day On The Street
Continue to site
ADVERTISEMENT
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

Falling Grain Prices Shift Landscape for Restaurants, Processors

NEW YORK (TheStreet) -- One big trend has flown under most investors' radar this summer: lower grain prices.

Ever since the growing season started, futures prices on corn, wheat and soybeans have been headed in the same direction –- down.

If these were stocks we’d call it a bear market. Corn for November delivery was at $5.00/bushel, and is now at $3.69. Wheat that was over $7.00 is now below $5.50. Soybeans that were over $15.00 are now fighting to hold $12.50. Grains are "attempting a bottom," in the words of one analyst, but still achieving "lower lows" in the words of another.

Read MoreJohn Browne: Europe Has Energy Options to Loosen Putin's Grip

Combine that with international tension, like Russia refusing food imports, and the same bear market is hitting meat. Lean hogs for October delivery are down 20% in just the last month. Cattle for October were at $1.60/pound and are now at $1.47.

There are two sides to every story and food is no exception. Low futures prices mean cereal makers like Kelloggs (K - Get Report) can lock-in profits. But that also means the product is under pricing pressure and the stock is down this summer. The same story is playing out among other food processors -- Kraft (KRFT - Get Report) is down and so is Mondelez (MDLZ - Get Report). Tyson Foods (TSN - Get Report), which won the battle to buy out Hilshire Farms earlier this year, has also seen its stock fall.

How about restaurants? We issued a report on 10 top restaurant chains at the start of the year. Most are down, including McDonalds (MCD - Get Report) and Yum Brands (YUM - Get Report), with the notable exception of Chipotle (CMG - Get Report), where the California drought is actually raising vegetable prices, causing price hikes that its customers seem to be swallowing.

Something similar is happening among the grocers. Most are down for the year, but a good corporate performance can still win out. Here the winner is Kroger (KR - Get Report), which has held through the summer most of the 27% gain it got earlier this year. Supervalu (SVU - Get Report) is also up substantially this year, although it’s still under $10 per share.

The same thing is happening among the bakers – Dunkin Brands (DNKN - Get Report), Panera Bread (PNRA - Get Report) and Krispy Kreme (KKD - Get Report) are all coming down. The only star is Starbucks (SBUX - Get Report), which has risen over 9% in the last three months but is basically flat for the year.

The biggest losers are, of course, farmers, who are looking to store more grain on their land in hopes of higher prices later. Here technology is helping -- if you go by a farm and see long plastic tubes, some as long as a football field, that may be a farmer trying to hold on to their crop. 

So who wins? If you are betting on lower inflation you may have a good bet. And it seems that any investments that win in a low-inflation environment -- meaning any company with really great cost controls -- should be worth your money.

Read MoreBoeing, Airbus Get Nods at China Southern, Chinese Built C919 Gets a Maybe

At the time of publication the author owned shares in SBUX.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
CMG $626.44 -1.09%
DNKN $52.82 -0.60%
K $63.68 -0.44%
MCD $98.99 -0.29%
MDLZ $40.17 -0.35%

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs