Summary
Lets look at some solid facts: Corn, wheat, and soybeans........consider them the building blocks of food costs. Ethanol exports will keep corn prices well supported for the next few years. Globally, the growing affluence of developing countries and a weakening dollar are driving demand for animal feed. 2007-2008 corn exports are projected to be a record high 2.45 billion bushels. Corn prices in 2006 were $2.59 a bushel and 2008 future prices are currently $4.81. Beef feedlot placements were are up 12% just since last November. Soybean -oil futures, which were 28 cents in January . closed at a 34 year high of more than 50 cents on Jan. 4, and forward contracts for 2008 are averaging nearly 52 cents.
Analysis
In summation, hefty grain prices will keep egg, dairy, and protein cost high for 2008.
With the competition of the restaurant industry, high gas prices, less than average consumer confidence, only the strong will survive.
In my next analysis, I will explain what many companies need to do now, and what some companies are already doing.
Best,
Terry Alger
