Agribusiness Investing: Not All Ag Names Participated in the Rally

Wednesday was an interesting day in the markets.  The Dow (NYSE:DIA), S&P 500 (NYSE:SPY), and commodities (NYSE:RJI) staged a rally in the face of a rather stable US Dollar (NYSE:UUP). Let’s examine the turn around in seen in major ag names, and the lagging seen in consumer food companies.

The Elements MLCX Grains Index (NYSE:GRU) jumped 4.5% on Wednesday.  Corn crops are expected to reach a 15 year low this summer, while farmers continue to face weather challenges and struggle to replenish inventories.  Corn for July delivery also hit the 30 cent price increase limit on the Chicago Board of  Trade.  Although supply worries are nothing new to corn corps, the 4.5% upswing was a sharp contrast to the flat returns seen in April for GRU.

Broad gains were seen across the entire agricultural sector.  The PowerShares DB Agricultural (NYSE:DBA) index, which was down slightly in April, popped 1.8% higher on Wednesday.  Market Vectors Agribusiness ETF (NYSE:MOO) also gained 1.6% on the day, and the Elements Rogers Intl Commodity Ag ETN (NYSE:RJA) closed 3% higher.

Although commodities themselves saw gains, these consumer food labels did not participate so much in the surge.  Kraft Foods (NYSE:KFT), which is still a major holding of Warren Buffett, only managed to gain .14% on Wednesday.  General Mills (NYSE:GIS) gained even less with .05%, and Kellogg Co (NYSE:K) saw a decrease of .21%.  Hershey (NYSE:HSY) investors seemed disappointed in the departure its CEO, as shares traded down 2.8%.  It was announced that Hershey’s CEO David West is leaving to run the San Francisco based food processor company, Del Monte Foods.

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Disclosure: No positions.

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