The year will be great for soyabean and corn crops, and so it’s time to pick up the best food companies, which would be getting advantage from this crop boom. During a CNBC program, Dennis Gartman of the Gartman Letter placed Kellogg Company (NYSE:K), General Mills, Inc. (NYSE:GIS) and Campbell Soup Company (NYSE:CPB), among his top picks, which are in a position to get the benefit from the increased production in soyabeans and corn.
Input Costs
Gartman’s focus on the food companies come in the backdrop of the report issued by the U.S. Department of Agriculture, according to which, the supplies of soyabean and corn have exceeded the expectations. Following the report, both Corn and Soyabean futures slipped to multi-month lows, where Corn Futures dropped to a five month low by 4%.
“It is going to be a huge corn crop. It’s going to be a huge soybean crop. It’s going to be a reasonably large wheat crop. If you are a company whose major input costs are grains, you’re going to have a great year,” Gartman said.
The theory is clear that the companies who are dependent on these crops would benefit from the increased supply.
Gartman added that Kellogg Company (NYSE:K), General Mills, Inc. (NYSE:GIS) and Campbell Soup Company (NYSE:CPB), will be witnessing a huge decline in their input costs and said that he thinks that this is going to be a very important long standing circumstance deflation in agricultural commodities.
Margin Improvement
Will robust crop supplies could prompt Kellogg Company (NYSE:K), General Mills, Inc. (NYSE:GIS) and Campbell Soup Company (NYSE:CPB) to roll back their prices? Gartman said that the companies would stick to the price hikes, explaining that the propensity to induce their prices are very less. He said that the prices are very sticky on the downside and very quick on the upside, just like in the gasoline business. However, Gartman concluded that with the prices maintained and lower input costs, these companies could see their margin grow over the period of one year.
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