Mr. Brian Stevenson

GLG News by Mr. Brian Stevenson, Principal

Extremely Volatile Commodity Markets Have Changed the Way even Fine Companies are Managed

September 23, 2008

Analysis of:General Mills quarterly profit declines 3.6% | www.marketwatch.com

The basic Agricultural Commodity Markets will remain Volatile as long as the U.S. uses Corn for Fuel and the world continues to experience an emerging middle class in developing countries. Hedging can be a two edged Sword. Companies should manage to margins not markets. It is the Brands that Matter.

U.S. Corn Acres needed, but Yield is most important!!

April 10, 2008

Analysis of:Corn Acres Adjustments | online.wsj.com

1.  Prospective corn planted acres by USDA are at 86 million2.  If realized, expected harvested acres are 79 million3.  Usage of Corn continues to rise with Ethanol production plus emerging middle class diet improvement in South/East Asia4. In the end, Yields will be the most important factor for this year's crop5.  Expect extremely volatile commodity markets this year.6.  The markets may be forced to find a price at which corn usage is actually rationed.

Brazilian Sugar Ethanol May be a Big Player in U.S. Ethanol Supply Soon

April 10, 2008

Analysis of:Biofuel startup slow going as slow as molasses | www.chron.com

1.  Corn is used in 97 pct of Ethanol Production in the U.S.2   Corn Prices are at record high levels at around $6.00 per bushel3.  Expected Planted acres are below what may be needed to provide corn for all uses during the next year.4.  Sugar Ethanol is much cheaper to produce than is Corn Ethanol5.  Brazil has surplus Sugar and surplus Ethanol capacity6.  Ethanol Import tariffs may be in question with a new administration7.  Imported Ethanol may help solve some of the Food verses Fuel debate.

Dean Foods Company gets hit by Commodity Price increases. Food verses Fuel, the Dean stockholders suffer.

June 12, 2007

Analysis of:Dean Foods Cuts Profit Forcast; Stock Slumps | news.moneycentral.msn.com

1.  Consumer Product Goods companies are at risk for commodity price increases even if they are not directly involved in the basic commodity businesses. 2.  In this case, Milk is the Produced article which is "manufactured" by cows eating basic commodity ingredients. 3.  Companies like this need to devise hedging strategies to protect shareholders from the risk of basic commodity price increases 4.  Just as importantly, pricing at the retail level is hard to get.  The consolidation of food retailers will only continue.  These massive buying agencies are not going to allow pricing easily.

Food Verses Fuel, how does it affect Company Valuations

February 23, 2007

Analysis of:Food versus fuel: is a happy ending possible? | www.bakeryandsnacks.com

1.  The demand curve for Grains in the world is shifting to the right.  How much we do not know.  The market has not found a place where usage is rationed.

2.  Many CPG food companies will suffer in the short term while Big Box Retailers hold the line on price increases.

3.  We as consumers can count on food "inflation" in the next year and as long as the market has to search for a rationing price level.

The New CEO is not the only News at IBC

February 1, 2007

Analysis of:I.B.C. names Jung, former PepsiCo exec, as new c.e.o. | www.bakingbusiness.com

 

• IBC asks the court to extend the DIP
• MOR for 4 weeks ending Dec 16 is reported
• Jung gets real incentives to turn the company around

Expect Margin Squeeze for users of Corn for Food and Ethanol- Likely Negative Earnings Impact

January 17, 2007

Analysis of:Corn rallies to contract high as USDA cuts crop outlook | custom.marketwatch.com

 

• Corn Prices now top $4.00 per bushel, Ten year average is $2.10 to $2.30.
• Year ago prices were $2.25 to $2.50 per bushel.
• Pricing at the Big Box Retailers is hard for CPG companies to get.
• The best margins in the Ag Industry are still in Ethanol however even some of those companies will begin to feel the pinch.
• Firms that feed corn to animals will likely be most threatened.
• Corn prices affect other commodity prices like wheat and soybeans.

Commodity Prices and Reduced Pricing Power takes its toll

October 31, 2006

Analysis of:Coke Enterprises profit hit by costs; lags view | today.reuters.com

• High Fructose Corn Syrup Prices go higher as its input Corn competes with Ethanol Production
• The demand for Corn by Ethanol producers has shifted the Demand Curve out for Carbohydrate commodities like Corn
• Corn planted Acres are at risk for next year as Wheat prices encourage farmers to plant wheat in fringe areas of Corn country.
• Price volatility is expected to continue and perhaps increase into next year as yields get pressure to supply enough corn for all uses next year.
• Margins for HFCS production will remain firm as those streams continue to compete with corn streams going into ethanol.

Volatile Commodity Prices and Reduced Pricing Power takes its toll

October 27, 2006

Analysis of:Lance shares fall on lower Q3 earnings, cut in outlook | today.reuters.com

• Ag Commodity Prices are volatile to the up side
• The Demand curve for Ag Commodities is shifting on account of the production of Biofuels
• Pricing at the retail level is difficult to get
• Pricing many times comes with lower unit volume
• Margins get squeezed at the Manufacturing Level
• Even fine Brand Name stocks get hurt

Added Comments for Above Article

October 23, 2006

Analysis of:Deutche Bank Cuts Tyson to "Hold" | today.reuters.com

Corn is a major input for making Meat.

Corn Prices last year at this time were between $2.10 and $2.25 per bushel.

Current prices are well over $3.00 per bushel.

Folks in the U.S. Domestic Grain Business estimate that Tyson Uses about 250 million bushels of Corn per year.

Commodity Prices and Reduced Pricing Power takes its toll

October 20, 2006

Analysis of:Deutche Bank Cuts Tyson to "Hold" | today.reuters.com

• Commodity price increases increase Cost of Goods Sold
• Even good brand names find it difficult to get pricing at Big Box Retailers
• These two facts will lead to Margin Squeeze for Producing firms
• Animals are very inefficient converters of Grain Carbohydrates into Protein
• Carbohydrate use (corn) for Ethanol has shifted the demand curve for Carbohydrate usage. This will keep prices firm

Commodity Prices, Risk Management Critical to CPG Companies

October 20, 2006

Analysis of:Austrailian Wheat Crop Could Hit all time Low | www.ap-foodtechnology.com

• Australian wheat crop devastated by drought
• U.S. Bread wheat Crop also hurt by drought
• The world will use more wheat than it grows this year reducing stocks
• Prices made 10 year highs and are expected to remain volatile
• This will likely have a strong affect on earnings of companies that use wheat

Food Fight, Corn For fuel or for Meat

October 17, 2006

Analysis of:McDonald's 3rd-quarter outlook beats estimates | today.reuters.com

• Beef takes about 8 pounds of feed to make one pound of beef
• Corn is the largest component of Cattle feed
• Ethanol is the best economic use of Corn today
• Packing Company margins have been squeezed to the point of shutting down capacity
• Can McDonald’s and the like keep their cheap pricing in face of likely increases in beef and other meat products?

Food verses Fuel, Who will win?? Rice is a Carbohydrate

October 17, 2006

Analysis of:Rice May Climb 100 Percent by 2008 | www.restaurantnewsresource.com

1. World Carbohydrate (Ag Commodities) prices will likely remain firm in the next few years as the demand curve for carbohydrates shifts account of Ethanol production.

2. Rice acres in East Asia are at risk to urban and transportation growth

3. Companies that use basic Ag Commodities are at risk of making their numbers in the next few years as their input costs increase and stay high compared to the last few years.

Ag Commodities, Food Verses Fuel- Margin Implications for CPG Compnaies

October 16, 2006

Analysis of:CBOT- Ag Complex Sees Record Volume, Corn leads | today.reuters.com

• Some Ag Commodities are now part of the Energy Complex shifting the Demand Curve for Ag Commodities.
• Volatility has dramatically increased for Ag Commodities
• Can CPG companies compete against Energy users for Commodity Inputs?
• Limited pricing flexibility makes CPG companies vulnerable

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