Dollar strength helped pressure some commodities over the past week.  Over the longer-term, we are expecting grain and commodity prices to remain elevated as 60% of the contiguous United States is in moderate or worse drought.  Corn, wheat, soybean, and chicken prices remain up double digits versus a year ago.  Beef prices, while not as inflated as the aforementioned commodities, are expected to move higher next year on continuing supply concerns. 

Summary View

Wheat prices have been moving higher over the past week, driven by speculation that the U.S. government will reduce its estimate of global stockpiles in its World Agricultural Supply and Demand Estimates report, due out tomorrow at 08:30 AM.  France cutting its production outlook and Russia, the world’s third-largest wheat exporter, experiencing dry weather, has also impacted prices. 

Chicken prices remain at elevated levels with whole breast prices climbing 50 bps week-over-week.  Elevated corn prices continue to pressure margins of chicken processors, pressuring supply and supporting prices.  This is bearish for BWLD.

COMMODITY CHARTBOOK - egg sets wings

Beef prices were slightly higher on the week as economic concerns offset speculation that higher feed prices are set to drive meat prices higher in 2013.  Retail prices in the United States, for beef and pork, have remained stable but some industry players are commenting that rising costs will have to be passed on to consumers sooner rather than later.  If casual dining companies such as BLMN, TXRH, DRI and others are forced to increase prices it would negatively impact traffic in an industry that has been heavily dependent on traffic for footfall .  

COMMODITY CHARTBOOK - commod

Gasoline Prices

Gasoline prices have fluctuated on competing concerns around the economic outlook and possible import delays due to Hurricane Sandy.  Despite the less-than-feared impact of Sandy on national prices, we expect continuing tight supplies in NY and NJ to push prices higher and meaningfully impact consumer behavior, at least in the short term.

COMMODITY CHARTBOOK - gasoline

Correlation

COMMODITY CHARTBOOK - correl

Charts

COMMODITY CHARTBOOK - crb foodstuffs

 

COMMODITY CHARTBOOK - corn

 

COMMODITY CHARTBOOK - wheat

 

COMMODITY CHARTBOOK - soybeans

 

COMMODITY CHARTBOOK - rough ride

 

COMMODITY CHARTBOOK - live cattle

 

COMMODITY CHARTBOOK - chicken whole breast

 

COMMODITY CHARTBOOK - chicken broilers

 

COMMODITY CHARTBOOK - chicken wings

 

COMMODITY CHARTBOOK - coffee

 

COMMODITY CHARTBOOK - milk

 

COMMODITY CHARTBOOK - cheese

 

Howard Penney

Managing Director

Rory Green

Analyst