Hedgeye CEO Keith McCullough is adding Pilgrim's Pride (PPC) to the short side of Investing Ideas. Below is a brief note.
With the US stock market ripping political bears a new one today (to all-time closing highs)... we are finally getting some immediate-term TRADE #overbought signals in some Consumer Staples Shorts (which are shorts in #Quad2) that are going to have to eat Inflation #Accelerating...
One of those names is Pilgrim's Pride. Here's what Consumables analysts Howard Penney and Daniel Biolsi wrote, introducing me to some bear meat:
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Feed costs to pressure protein producers (PPC) Farmers ended in 2020 with higher incomes than in 2019 due to the combination of a rally in prices during the harvest and direct payments included in the Coronavirus Food Assistance Program and Paycheck Protection Program. The USDA estimates that farm income in 2020 increased by 41% from 2019 and reached the highest income level since 2013. Farmers also received $24B or 107% more in direct government payments. Livestock farmers did not fare, and the reduction in herd sizes and the price drop during the plant shutdowns. The rebuilding of China’s domestic pig herd will lead to lower pork exports while the feed costs are increasing. U.S. livestock producers will face the highest feed cost inflation in more than a decade. |
Sell on green,
KM
