Now that summer is officially here we can really start to look into the impacts of seasonal businesses. One of them that you may not have considered is the pork industry.
Pork providers see an increase in demand for ribs, chops, and sausages in the warmer months thanks to the increase in barbeques. The longer the summer months last, the more BBQs will impact demand.
But the supply of pork to the market is also affected by the rise in temperatures. In the summer months, the pigs eat less, just like humans. When you’re hot, sometimes you just don’t want to eat, even if you’re a pig. The pigs right now are actually 2% lighter than they were 8 weeks ago.
Economics 101 tells us that lower supply and higher demand leads to higher prices. Pork has actually just reached its 10-month high. This sounds great for suppliers of pork, but there’s more to it than that.
Profit margins for these companies had already reached extreme lows, thanks to increasing transportation costs and other strains. Smithfield Foods (SFD) has reported an 8% increase in costs.
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Last year, pork industry profits did not reach their high until late in the summer. Despite that, June (early summer) has historically been the best month for profitability. Pork producers are hoping this year will follow the pattern from 2011, and that sales have not already peaked.
Agricultural economist Erica Rosa-Sanko reported on situation in the pork industry claiming, “We’re potentially going to see the peak prices in the third quarter again this year”.
If she is right and demand for pork products increases later in the summer, now could be a good time to be long on pork suppliers. Do you think pork supplier stocks can rally?
Use the Compar-O-Matic to see how quarterly sales stack up among the largest pork producers in the country:
1. Smithfield Foods Inc. (SFD, Earnings, Analysts, Financials): Engages in the production and marketing of fresh meat and packaged meat products in the United States and internationally. Market cap at $2.97B, most recent closing price at $18.46.
2. Hormel Foods Corp. (HRL, Earnings, Analysts, Financials): Produces and markets various meat and food products in the United States and Internationally. Market cap at $7.78B, most recent closing price at $29.47.
3. Tyson Foods Inc. (TSN, Earnings, Analysts, Financials): Engages in the production, distribution, and marketing of chicken, beef, pork, and prepared food products, as well as related allied products worldwide. Market cap at $6.85B, most recent closing price at $18.73.
4. Sara Lee Corp. (SLE, Earnings, Analysts, Financials): Engages in the manufacture and marketing of a range of branded packaged meat, bakery, and beverage products worldwide. Market cap at $11.31B, most recent closing price at $19.06.
5. Seaboard Corp. (SEB, Earnings, Analysts, Financials): Operates as a diversified agribusiness and transportation company worldwide. Market cap at $2.47B, most recent closing price at $2042.0.
6. The Wendy’s Company (WEN, Earnings, Analysts, Financials): Operates as a quick-service hamburger company in the United States. Market cap at $1.74B, most recent closing price at $4.45. Wendy’s popular Baconator could be affected by the price of pork, or profits could be hurt if they do not raise prices.
7. McDonald’s Corp. (MCD, Earnings, Analysts, Financials): Operates general merchandise stores in the United States. Market cap at $38.71B, most recent closing price at $58.55.
8. Burger King Worldwide Inc. (BKW, Earnings, Analysts, Financials): Formerly Justice Delaware Holdco Inc., is a fast food hamburger chain. Operates as a foodservice retailer worldwide. Burger King recently introduced the Bacon Sundae which is subject to pork prices.
Written by Ryan Horch
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That doesn't seem to be the case around here – or I just don't notice it. australia pork seems to be always in demand no matter what time of the year it is.