Texas on-premise alcohol beverage tax receipts (STZ)
Texas reports its alcoholic beverages sales tax receipts on a monthly basis. In January, alcoholic beverage receipts increased by 11.1% YOY. That represents an acceleration from +10.1% in December. Receipts were 20.7% higher than in pre-pandemic January 2020. In Texas, bars have been mostly open with limited restrictions since October 2020. Texas is the second largest state for Constellation Brands.
Smaller herd (TSN)
The cattle herd totaled 89.3 million on January 1, the smallest in eight years. The U.S. herd size is 3% fewer than a year ago. 13.1% more beef cows were sent to slaughter last year with the drought, bringing the beef cow inventory down by 4.2%. Cattle and calves on feed for the slaughter market were 4% lower on January 1. Calves are estimated to be down 2%. A cow’s gestation period is similar to humans, so it will take a long time to build the herd size up again. A supply or demand response from higher prices seems likely if not this year then the next few years.
Indoor farming in the Middle East (APPH)
AeroFarms announced a JV with The Public Investment Fund (PIF) to establish a company in Saudi Arabia to build and operate indoor vertical farms in the Middle East. The first indoor farm is expected to be built in Saudi Arabia. The plans are to build the largest indoor vertical farm of its kind in the Middle East with annual production capacity of up to 1.1M kgs of crops. PIF is one of the largest sovereign wealth funds in the world. AeroFarms canceled its SPAC merger in October 2021 after investor interest in the sector waned. An indoor farm in Saudi Arabia, far from suitable growing conditions, backed by essentially the government with one of the longer investment horizons makes a lot more sense. Metrics like profit margins, returns, and cash flow that matter in the U.S. public markets are not nearly as important as food security, jobs, and the wow factor in Saudi Arabia.
