Skip to main content

John Gress

Shares in food and beverage companies are under selling pressure on concerns they will have to pay higher grain costs, as investors take a skeptical view of assurances by the United Nations that surging wheat prices won't trigger a global food crisis.

Among brewers, decliners Friday included Molson Coors Brewing Co., Anheuser-Busch InBev SA, Diageo PLC and Carlsberg Group, which use a variety of grains in beer production. Food producers also saw their share prices fall, including Nestlé SA, Premier Foods PLC, General Mills Inc., Flowers Foods Inc., Sara Lee Corp. and Unilever PLC.

On Thursday, Russia announced it will ban grain exports from Aug. 15 to the end of this year, keeping supplies within the drought-stricken country. Wheat markets rallied on the announcement, and while prices slipped during a profit-taking session Friday, they have still climbed 63 per cent over the past eight weeks.

Besides the Russian ban, wheat production is being further crimped as Canadian output is forecast to decline in the 2010-11 crop year, after heavy rains ruined Prairie fields in June, leaving many acres unplanted.

The UN's Food and Agriculture Organization had sought to calm nerves on Wednesday. "Despite production problems in some leading exporting countries, the world wheat market remains far more balanced than at the time of the world food crisis in 2007-08, and fears of a new global food crisis are not justified at this point," the UN food agency said.

But Dennis Gartman, the widely followed publisher and author of the Gartman Letter investing newsletter, said the UN's message reminded him of the futile plea in the 1978 movie National Lampoon's Animal House, when actor Kevin Bacon shouted in vain to a panicking crowd: "Remain calm! All is well!"

Mr. Gartman said many investors aren't listening to the UN's attempt to dismiss the runup in wheat markets. "The crisis is coming and it is coming fast," he wrote.

Reduced wheat production in Russia, Kazakhstan and Ukraine "are tectonic in nature and multiyear in duration. This is not a one-off simple act of wheat skyrocketing," Mr. Gartman added.

In Canada, BMO Nesbitt Burns Inc. estimates that Prairie farmers could lose up to $3-billion due to fields that were drenched during heavy rains in June in Saskatchewan and Manitoba. BMO said farmers in affected regions have seen nearly one-fifth of their crops unplanted, on average.

Prairie farmers fortunate to have seeded most of their fields are welcoming the jump in wheat prices over the past two months, but those gains are being offset by lower production forecasts in total. The Canadian Wheat Board forecasts that wheat production in Western Canada will be 15.6 million tonnes for the 2010-11 crop year that began Aug. 1, down 17 per cent from 18.8 million tonnes in the previous crop year.

Wheat contracts for September delivery on the Chicago Board of Trade fell 60 cents (U.S.) to $7.25 a bushel on Friday, retreating one day after prices hit a two-year high.

Report an editorial error

Report a technical issue

Editorial code of conduct

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 6:40pm EDT.

SymbolName% changeLast
BUD-N
Anheuser-Busch Inbev S.A. ADR
-0.56%60.5
DEO-N
Diageo Plc ADR
+1.29%149.42
FLO-N
Flowers Foods
+1.89%23.72
GIS-N
General Mills
0%69.66
TAP-N
Molson Coors Brewing Company
0%67.34
UL-N
Unilever Plc ADR
-0.34%49.97

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe