CHICAGO, March 23, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Kraft Foods Co. (NYSE: KFT), J.M. Smucker Co. (NYSE: SJM), Starbucks Corp. (Nasdaq: SBUX), McDonald's Corp. (NYSE: MCD) and Yum! Brands (NYSE: YUM).
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=4579
Here are highlights from Tuesday's Analyst Blog:
Soaring Food Prices: Worse to Come
Over the past few months, consumers in America are witnessing higher prices for their daily food items. The concern is that this inflationary situation may only get worse in the days to come.
The Department of Labor Statistics stated that the producer price index soared by 1.6% in February 2011, following a 0.8% increase in January this year. However, economists expected the producer price index to grow marginally by 0.7 %.
The Producer Price Index (PPI) measures average changes in prices received by domestic producers for their output. It provides information on price developments from producer and is capable of providing future picture of inflation, since these prices in some cases tend to be passed on to consumers.
The US Department of Agriculture expects the average price of food in 2011 to be 4% higher than the previous year. According to some private forecasters, the month of December could see prices increase by as much as 6% over December 2010.
Food prices surged 3.9% in February this year, primarily attributable to the strong winter in some of the highly fertile Southern states, such as Florida and Texas .
February was a difficult month even at the wholesale level, recording the highest price increase in 36 years. Vegetables (both fresh and dry), meat and dairy prices drove the 3.9% increase.
Many of the companies, grocery chains and restaurants have increased their prices. Over the past week, companies such as Kraft Foods Co. (NYSE: KFT) and J.M. Smucker Co. (NYSE: SJM) have increased prices for their packed coffees that are sold at grocery stores. Starbucks Corp. (Nasdaq: SBUX) also joined its competitors by increasing prices for its bagged coffee.
Moreover, food companies are not the only ones affected. The restaurant industry has also been hard-hit. In 2010, many restaurant chains such as Uno Chicago Grill Pizza, Charlie Brown's Steakhouse to name a few, went bankrupt and economists do not expect the situation to improve in 2011.
Even the giants of the restaurant industry, such as McDonald's Corp. (NYSE: MCD) and Yum! Brands (NYSE: YUM) are affected by the soaring prices. However, since these companies are financially stronger, they are able to absorb costs while transferring the impact to consumers through price increases.
Globally, prices of all major raw materials, such as corn, wheat, soybeans, coffee and other commodities have been increasing significantly over the past year. Since these commodities are the raw materials in almost all food and beverages, they have had a direct impact on food prices. Added to this, after the tragic earthquake and tsunami in Japan, corn prices of corn have escalated.
The revival in the consumer traffic just before Thanksgiving raised hopes of a recovery, but given the difficult market, it looks like the recessionary trends are far from over. Furthermore, with more expensive food, people will have less disposable income (which is ideally used for casual spending which in turn helps the economy grow and create jobs).
Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5514.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5516
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment
Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4580.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/ZacksResearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Web Content Editor
SOURCE Zacks Investment Research, Inc.