How To Play Food Producers’ Rising Profits With ETFs

Major food and beverage producers have been releasing earnings and early forecasts signal positive results. Have food and beverage exchange traded funds (ETFs) benefited, though?

General Mills (GIS) and ConAgra (CAG) both reported higher-than-expected quarterly profits, thanks to falling commodity prices. Del Monte Foods (DLM) reported a fiscal first-quarter profit and raised its target for the year, Kellogg (K) announced that its full-year earnings should be at the high end of its goal.

It’s taking less money now for food companies to buy what is needed to make cereals, frozen vegetables and other products. Jeremy Hobson for MarketPlace reports that this is why food companies appear to be doing better than anticipated, especially in this market climate.

In addition to falling commodity prices, there are two other factors at play in the higher earnings of these companies:

• More consumers are cooking at home and are seeking out the products of traditional name brands to put food on the table.
• When commodity prices were high, this was passed onto the consumer, and now that commodity markets are no longer inflated, the price has remained the same, hence the profit margin, which equals healthier earnings.

• PowerShares Dynamic Food & Beverage (PBJ): up 6.9% year-to-date; General Mills, 5.5%; Kraft, 5.1%

• Consumer Staples Select Sector SPDR (XLP): up 7.4% year-to-date; General Mills, 2.2%; ConAgra Foods, 1.1%; Kraft, 4%

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