Grain Companies' Profits Soar As Global Food Crisis Mounts

By DAVID KESMODEL, LAUREN ETTER and AARON O. PATRICK

April 30, 2008; Page A1

Reviewed by: Ohio State StinksMitchell AndersonRobert B

Logan Colyer Casey Conley

Food Fight

Rapidly rising food prices– Current food inflation in US is 5%– Record profits in agriculture industry

Used to improve efficiency and productivity of farmers– Food crisis

Worst in 3 decades– Sparking riots– Hoarding food– Creating havoc in commodities market

Crisis Causes

Increased demand in developing countries Rising fuel costs Increased conversion to biofuels Low stockpiles in existing storage facilities

– Bad weather– Increased consumption

The Food Chain

Companies hurting from higher food and grain prices:– Tyson Foods Inc.– Pilgrim’s Pride Corp.

Companies gaining:– Monsanto Co.– Deere & Co.– Mosaic Co.– Bunge Ltd.

Food vs. Fuel

ADM’s CEO Patricia Woertz directs the increased food prices to gasoline prices.– Higher gasoline prices cause the cost of

transporting food to increase– Not caused by the use of crops for biofuels

Rising food-ingredients– Kraft Foods Inc.– General Mills Inc.

Effects on Agriculture

Passing on the Costs

Higher food prices results in higher consumer prices

Consumer product companies’ situations– Unilever not fairing well

Elastic products– Nestle and Danone fairing well

Inexpensive products (Nestle) Inelastic products (Danone)

Repercussions on Companies