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LWAY yesterday moved with Whole Foods News http://finance.yahoo.com/news/Whole-Foods-net-income-more-apf-1905516285.html?x=0&.v=9
Lifeway Foods Reports Record 3rd Quarter 2009 Revenues and Earnings Results
- Q3 Revenues Up 37% - Q3 Gross Profit Increases 77%; Q3 2009 Gross Margins up to 41% from 31% in Q3 2008 - Q3 2009 Operating Income Increases 121% from same period in 2008 - Q3 2009 Pre-tax Income Increases 168% from same period in 2008
MORTON GROVE, Ill., Nov. 16 /PRNewswire-FirstCall/ -- Lifeway Foods, Inc., (NASDAQ:LWAY), makers of the nutritious, probiotic dairy beverage called kefir, announced today for the third quarter ended September 30, 2009, total consolidated group sales increased by $4,193,594, (approximately 37%) to $15,433,876 during the three month period ended September 30, 2009 from $11,240,282 during the same three month period in 2008. This increase is primarily attributable to increased sales and awareness of Lifeway's flagship line, Kefir, as well as ProBugs® Organic Kefir for kids. Additionally, Lifeway recorded revenues from its February 6, 2009 acquisition of Fresh Made Dairy. Included in the total group sales was approximately $2,190,000 of revenue related to this acquisition and recorded during the third quarter of 2009.
Cost of goods sold as a percentage of sales, excluding depreciation was approximately 58% during the third quarter 2009, compared to about 67% during the same period in 2008. The decrease was primarily attributable to the decreased cost of conventional milk, our largest raw material, and the cost of transportation and other petroleum based production supplies. Gross profit increased approximately 77% during the third quarter of 2009, when compared with the same period in 2008.
Operating expenses as a percentage of sales were approximately 20% during the third quarter 2009, compared to about 18% during the same period in 2008. This increase is primarily attributable to a 111% increase in amortization expense, a non cash expense, related to the February 6, 2009 acquisition of Fresh Made Dairy.
Total operating income increased by $1,772,193, (approximately 121%) to $3,239,432 during the third quarter 2009, from $1,467,239 during the same period in 2008.
Total income before taxes increased by $1,884,819 (approximately 168%) to $3,007,652 during the third quarter 2009, from $1,122,833 during the same period in 2008.
Provision for income taxes was $1,636,911, or a 54% tax rate, for the third quarter ended September 30, 2009, compared with a provision for income taxes of $267,917, or a 24% tax rate, for the same period in 2008.
Total net income was $1,370,741 or $.08 per share for the third quarter ended September 30, 2009, compared with $854,916 or $.05 per share in the same period in 2008. This represents a 60% increase in net income from the third quarter 2009 when compared to the same period in 2008.
Nine-Month Period Ended September 30, 2009
Total income before taxes increased by $4,440,498, (approximately 110%) to $8,474,370 during the nine-month period ended September 30, 2009, from $4,033,872 during the same period in 2008.
Provision for income taxes was $3,024,261, or a 36% tax rate, for the nine-month period ended September 30, 2009, compared with a provision for income taxes of $1,378,632, or a 34% tax rate, for the same period in 2008.
Total net income was $5,450,109, or $.32 per share for the nine-month period ended September 30, 2009, compared with $2,655,240, or $.16 per share in the same period in 2008. This represents a 105% increase in net income from the nine-month period ended September 30, 2009 when compared to the same period in 2008.
Net cash provided by operating activities was $5,504,144 during the nine months ended September 30, 2009, which is an increase of $1,872,155 when compared to the same period in 2008.
Edward Smolyansky, CFO commented, "We are extremely pleased at our record third quarter 2009 results. This was again the best quarter in our company's history from both the revenue side as well as the bottom line. Even though the cost of our conventional milk and other raw materials has increased during in the third quarter, our gross margins have remained strong and consistent."
Smolyansky added, "During the fourth quarter, weekly sales volumes continue at a record pace, and existing customers are consistently increasing their orders from previous weeks. Additionally, starting in late December, we will resume shipments to Costco in the Midwest, the first shipments since June 2009. Our cash flows remain very robust, and just this past couple of weeks, we paid down approximately $1.5 million in debt taken out to finance our February 6, 2009 acquisition as well as other current and long term liabilities."
Lifeway Foods, Inc.
Phone: 877.281.3874 Email: http://www.kefir.com/ and http://www.starfruitcafe.com/
Find Lifeway Foods, Inc. on Facebook: http://www.facebook.com/lifeway.kefir, Follow us on Twitter: http://twitter.com/lifeway_kefir and http://twitter.com/starfruitcafe Flickr: http://www.flickr.com/photos/lifeway_kefir/ YouTube: http://www.youtube.com/user/lifewaykefir
About Lifeway Foods
Lifeway Foods, Inc., recently named one of Fortune Small Business' Fastest Growing Companies for the 4th consecutive year, is America's leading supplier of the cultured dairy product known as Kefir, and America's sole supplier of Organic Kefir. Lifeway Kefir is a dairy beverage that contains 10 exclusive live and active probiotic cultures. While most regular yogurt contains only two or three of these "friendly" cultures, Lifeway Kefir products offer even more nutritional benefits. Lifeway produces 12 different flavors of its drinkable Kefir and Organic Kefir beverage, and recently introduced a series of innovative new products such as a children's line of Organic Kefir products called ProBugs (TM) with a no-spill pouch and kid-friendly flavors like Orange Creamy Crawler, Goo Berry Pie, and Sublime Slime Lime. In addition to its line of Kefir products, the company produces a variety of probiotic cheese products, and a line of products marketed in US Hispanic communities called La Fruta Drinkable Yogurt (yogurt drinks distinct from Kefir).
This news release contains forward-looking statements. Investors are cautioned that actual results may differ materially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, competitive pressures and other important factors detailed in the Company's reports filed with the Securities and Exchange Commission.
(Unaudited) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 2009 2008 2009 2008 ---- ---- ---- ----
Sales $15,433,876 $11,240,282 $43,649,383 $33,885,912
Cost of goods sold 8,892,088 7,505,794 24,994,778 22,403,574 Depreciation expense 288,613 197,366 859,044 581,920 ------- ------- ------- -------
Total cost of goods sold 9,180,701 7,703,160 25,853,822 22,985,494 --------- --------- ---------- ----------
Gross profit 6,253,175 3,537,122 17,795,561 10,900,418
Selling Expenses 1,231,216 957,978 3,176,162 3,171,269 General and Administrative 1,613,828 1,032,043 5,173,724 3,109,506 Amortization expense 168,699 79,862 508,086 239,585 ------- ------ ------- -------
Total Operating Expenses 3,013,743 2,069,883 8,857,972 6,520,360
Income from operations 3,239,432 1,467,239 8,937,589 4,380,058
Other income (expense): Interest and dividend income 34,180 95,042 144,899 261,037 Rental Income 12,047 13,647 33,340 36,940 Interest expense ( 99,864) (71,928) (364,337) (226,851) Impairment of marketable securities --- (270,908) --- (270,908) Loss on Disposition of Equipment --- --- (2,825) Gain (loss) on sale of marketable securities, net (178,143) (110,259) (274,296) (146,404) -------- -------- -------- -------- Total other income (Expense) (231,780) (344,406) (463,219) (346,186) -------- -------- -------- --------
Income before provision for income taxes 3,007,652 1,122,833 8,474,370 4,033,872
Provision for income taxes 1,636,911 267,917 3,024,261 1,378,632 --------- ------- --------- ---------
Net income $1,370,741 $854,916 $5,450,109 $2,655,240 ========== ======== ========== ==========
Basic and diluted earnings per common share 0.08 0.05 0.32 0.16 ==== ==== ==== ====
Weighted average number of shares outstanding 16,798,623 16,730,650 16,799,134 16,867,890 ========== ========== ========== ==========
COMPREHENSIVE INCOME --------------------
Net income $1,370,741 $854,916 $5,450,109 $2,655,240
Other comprehensive income (loss), net of tax: Unrealized gains (losses) on marketable securities (net of tax benefits) 114,628 (480,045) 326,060 (895,641) Less reclassification adjustment for (gains) losses included in net income (net of taxes) 104,609 64,746 161,071 85,963 ------- ------ ------- ------
Comprehensive income $1,589,978 $439,617 $5,937,240 $1,845,562 ========== ======== ========== ==========
(Unaudited) Nine Months Ended September September December 30, 30, 31, --------- --------- -------- 2009 2008 2008 ---- ---- ----
Cash flows from operating activities: ------------------------------------- Net income $3,024,261 $2,655,240 $1,912,275 Adjustments to reconcile net income to net cash flows from operating activities, net of acquisition: Depreciation and amortization 1,367,130 821,505 1,092,995 (Gain)Loss on sale of marketable securities, net 274,296 146,404 733,647 Loss on disposition of assets 2,825 --- --- Impairment of marketable securities --- 270,908 958,879 Deferred income taxes 790,858 (125,221) (509,386) Treasury stock issued for compensation 113,476 65,809 96,968 Increase (decrease) in allowance for doubtful accounts --- (4,449) 70,551 (Increase) decrease in operating assets: Accounts receivable (2,000,033) (947,303) (626,754) Other receivables 2,599 14,193 2,797 Inventories (636,236) (700,540) 409,012 Refundable income taxes 252,272 240,880 (115,536) Prepaid expenses and other current assets 4,661 665 (1,973) Increase (decrease) in operating liabilities: Accounts payable (284,927) 766,988 665,942 Accrued expenses 167,114 118,650 44,243 Accrued income taxes --- 308,260 --- ------ ------- ------ Net cash provided by operating activities 3,078,296 3,631,989 4,733,660
Cash flows from investing activities: ------------------------------------- Purchases of marketable securities (6,050,202) (4,864,873) (5,782,452) Sale of marketable securities 6,792,962 4,659,350 5,323,423 Increase in margin --- 428,951 --- Purchases of property and equipment (1,020,776) (1,892,472) (2,157,315) Acquisition of Fresh Made, net of cash acquired (3,442,546) --- --- ---------- ------ ------ Net cash used in investing activities (3,720,562) (1,669,044) (2,616,344)
Cash flows from financing activities: ------------------------------------- Proceeds of note payable 1,753,504 --- --- Purchases of treasury stock, net (905,607) (1,139,987) (1,239,488) Repayment of notes payable (2,104,340) (887,977) (1,196,465) ---------- -------- ---------- Net cash provided (used) in financing activities (1,256,443) (2,027,964) (2,435,953) ---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (1,898,709) (65,019) (318,637)
Cash and cash equivalents at the beginning of the period 277,248 595,885 595,885 ------- ------- -------
Cash and cash equivalents at the end of the period $(1,621,461) $530,866 $277,248 =========== ======== ========
DATASOURCE: Lifeway Foods, Inc.
CONTACT: Lifeway Foods, 1-877-281-3874,
Web Site: http://www.kefir.com/
http://www.starfruitcafe.com/
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This news caused the fall in price yesterday. I do not believe Lifeway has made the types of aggressive claims which gave rise to these lawsuits. Furthermore, Lifeway is a naturally made product with a long history of health benefits. I think we have a good buying opportunity here.
Bill
http://www.adweek.com/aw/content_display/news/client/e3ic2b8ab3a7e77c226f245d6b3a05f385d
Law Firm That Won Dannon Settlement Targets Yoplait
$35 mil. Dannon deal is believed to be the largest ever to settle a food-related complaint
Sept 18, 2009
Noreen O'Leary
NEW YORK Coughlin, Stoia, Geller, Rudman & Robbins, the law firm that today secured a $35 million settlement from Dannon over claims of allegedly misleading ads is pursuing a similar case against a new target: General Mills and its Yoplait Yo-Plus yogurt.
Earlier today, Dannon said it would create a $35 million fund to reimburse consumers as part of an agreement to settle a class-action lawsuit concerning allegedly misleading ads for its Activia and DanActive yogurt products. Dannon also said it would make changes in the way it markets and labels these products, which are handled by New York's Young & Rubicam, a unit of WPP Group. Actress Jamie Lee Curtis has frequently appeared in ads for Activia.
The agreement, subject to approval by the U.S. District Court for the Northern District of Ohio, is thought to be the largest settlement ever over charges of false advertising for food products.
A rep for the company said Dannon "decided to settle the lawsuit to avoid the uncertainty and expense of further litigation and denies any wrongdoing."
On March 17, CSGR&R filed a class action suit in a Southern Florida District Court citing Yo-Plus' claims that its trademarked "exclusive" Optibalance bacteria cultures regulate digestive health in a way other yogurts do not.
Similar to language in the suit against Dannon, the complaint against YoP-Plus alleges, "General Mills has no support for these claims, even though it states that it does, going so far as to claim it has clinical proof. General Mills' representations are false, misleading and reasonably likely to deceive the public."
The suit further asserts, "General Mills' own studies fail to support this advertising message, and a number of them flatly contradict General Mills' claims. In fact, General Mills has never tested Yo-Plus for its ability to deliver the unique health benefits claimed in its advertising campaign."
A rep for General Mills, which began to market Yo-Plus in August 2007, said: "As a standing practice, we don't comment on pending litigation."
Download the Yo-Plus complaint HERE.
Tim Blood, a partner with CSGR&R, the San Diego law firm that had previously won more than $7 billion for Enron shareholders, said Dannon's settlement puts marketers on notice about making misleading and unsupported claims.
"Marketers had better beware of what they say in their marketing and they better back up their claims before they say those things to the public," he said. "The days of fast and loose ad claims should be coming to an end soon. They've become much more rampant in recent years and while we're happy to partner with government agencies in fighting them, this [Dannon] settlement underscores the importance of private litigation in these situations."
CSGR&R said the claims by both Dannon and General Mills are used to justify premium pricing of products.
Michael Neuwirth, senior director of public relations for Dannon, said the company "decided to settle the lawsuit to avoid the uncertainty and expense of further litigation and denies any wrongdoing."
The case was scheduled to go to trial in mid March; in April, Adweek confirmed the two sides had begun settlement talks.
In its first year, Activia sales soared to over $130 million, more than three times Dannon's original forecasts. The launch not only created a new powerhouse franchise for the world's largest yogurt company in the U.S., it helped drive one of the hottest new functional food categories: those containing probiotic ingredients.
In describing the changes to Activia and DanActive labels and ads as a result of the settlement, Dannnon's Neuwirth said, "The essence of the claims remain unchanged."
He explained that "enhancements" to product labels would now include the actual name of the bacteria strain used in the yogurts as well as the faux-Latinate monikers for the cultures in each product: Bifidus Regularis for Activia and L. casei Immunitas for DanActive. For DanActive, Dannon will also remove the word "immunity" from packaging and ads but will continue to claim that the product supports the body's immune function.
Neuwirth said Dannon would continue to use actress spokesperson Jamie Lee Curtis for Activia, about which CSGR&R's Blood offers caution.
"I hope any responsible spokesperson investigates the advertising claims they make because they are hired for their credibility and that's what they play off and that's what makes them believable," he said.
Download the complete Dannon Stipulation of Settlement HERE.
Food for thought.
Can Good Bacteria Really Fight the Flu?
Probiotics May Fight Against Common Cold, Flu
By RADHA CHITALE
ABC News Medical Unit
July 27, 2009
Cold and flu sufferers, there may be a way to head off those irritating symptoms before they cause you to miss work or school.
Promising new study finds probiotics to be a secret weapon against the flu. New evidence suggests that probiotics -- good bacteria that can aid immune function -- can have a preventive effect for cold and flu viruses.
In a study sponsored by Danisco, a Danish nutritional supplement company that makes probiotics products, researchers found that a six-month course of probiotics was a safe and effective way to ward off flu symptoms and reduce their duration in 3- to 5-year-olds. http://abcnews.go.com/Health/ColdandFluNews/Story?id=8167051&page=1
"There was definitely a need to show a prophylactic benefit of probiotic consumption, especially in children," said Gregory Leyer, the former head of research and development at Danisco's Madison, Wis., offices and the author of the study, published today in the journal Pediatrics.
But infectious disease experts caution that there are several things to consider when looking at the study's results, chief among them being that the study was sponsored by a company that manufactures probiotic products as well as the study being conducted on children in China rather than in North America.
Nearly 250 kids were treated twice daily for six months. One group of children received a single strain of the probiotic called Lactobacillus acidophilus, one group received a combination of the L acidophilus and Bifidobacterium probiotics, and a third group received a placebo.
Compared to the placebo group, the single and combination probiotics had reduced fever incidence by 53 percent and 72.7 percent, respectively, decreased coughing by 41.4 percent and 62.1 percent, and reduced runny noses by 28.2 percent and 58.5 percent. The groups also used less antibiotics, and missed fewer days of school or childcare because of the flu.
Friendly Bacteria Help the Immune System
"About 60 to 80 percent of our immune cells are associated with gut [cells]. Hitting the immune system through the gut makes sense," Leyer said. "I'm assuming that's how this product works. That kid's immune system is in a better state to fight off infections or reduce the symptoms quicker."
Previous studies on the effects of probiotics on immune health have been mixed, with some patients showing no response to probiotics and others showing little to moderate response.
"It is a surprising result and one that is hard to reconcile with traditional medical wisdom," said Dr. Julie Gerberding, former director of the federal Centers for Disease Control and Prevention in Atlanta. "I would take them as 'interesting but still very preliminary.'"
Dr. Kathi Kemper of Wake Forest University Baptist Medical Center in Winston-Salem, N.C., says there is still more to learn about dose, kind of bacteria and duration of probiotic treatment. "Most practitioners will feel more confident when these results are replicated in trials sponsored by government or other parties without a potential conflict of interest," she said.
Other doctors say the function of the bacteria in the body makes using probiotics for viral infections seem an intuitive choice, especially for those who wish to try a non-drug approach.
The Probiotics Trend Is Just Starting in the U.S.
"Introducing friendly bacteria into the digestive system improves how we absorb vitamins, nutrients and co-factors, so overall, immunity is boosted," said Dr. Tasneem Bhatia, medical director of the Atlanta Center for Holistic and Integrative Medicine.
But study author Leyer said that the reason previous studies may not have shown dramatic effects from probiotic use was because they measured biomarkers such as the activity of immune cells compared to the clinical outcome measurements such as incidence, duration and absenteeism from school that he measured.
While European and Asian countries have been incorporating probiotics into foods and products for treatment regimes for many years, the practice has just begun to gain awareness in the United States, most notably with the introduction of various probiotic yogurts that tout health benefits. "As information about this study gets out,that subset of parents who are very much into natural things will take heart from this," said Dr. William Schaffner, chairman of Preventive Medicine at Vanderbilt Medical Center in Nashville, Tenn. "[The regime] requires sustained supplementation. You have to stick with the program and it's twice a day. But I think there are some families who would do it and there would be few adverse effects."
Future Studies Should Be Done in the U.S.
In addition, Schaffner said that probiotics or any other kind of supplement that purports to prevent cold and flu should not be used as a substitute for flu vaccines. Rather, they should be seen as an additional program.
Bhatia of the Atlanta Center for Holistic and Integrative Medicine said she would like to see more rigorous, large-scale studies that confirm Leyer's results done in the United States, but that the caveats did not discount the results and recommendations of the study.
Patients Want to Know More About Probiotics
"There is a push by patients and by consumers to learn more about preventive or wellness approach to medicine," she said. "Poor gut health makes you more likely to catch a virus or have a chronic illness."
Not a good day to be short this stock!
Lifeway Foods Reports Record 2nd Quarter 2009 Revenues and EarningsBY PR Newswire
— 4:38 PM ET 08/13/2009
MORTON GROVE, Ill., Aug. 13 /PRNewswire-FirstCall/ -- Lifeway Foods, Inc. (LWAY
Loading...
),, makers of the nutritious, probiotic dairy beverage called kefir, announced today for the second quarter ended June 30, 2009, total sales increased 26% to approximately $14,481,000 from $11,523,000 during the same period a year ago. This increase is primarily attributable to increased sales and awareness of Lifeway's flagship line, Kefir, as well as ProBugs(TM) Organic Kefir for kids. Additionally, these results include revenues from its February 6, 2009 acquisition of Fresh Made Dairy. Included in the total group sales was $2,152,730 of revenue related to this acquisition and recorded from the period of February 7, 2009 to March 31, 2009.
Cost of goods sold as a percentage of sales was approximately 58% during the second quarter 2009, compared to about 65% during the same period in 2008. The decrease was primarily attributable to the decreased cost of conventional milk, our largest raw material, and the cost of transportation and other petroleum based production supplies. Gross profit increased approximately 59% during the second quarter of 2009, when compared with the same period in 2008.
Operating expenses as a percentage of sales were approximately 21% during the second quarter 2009, compared to about 20% during the same period in 2008. This increase is primarily attributable to the increase in professional fees related to the February 6, 2009 acquisition of Fresh Made Dairy and a 111% in amortization expense, a non cash expense, also related to the Fresh Made acquisition. Many of the acquisition related professional fees are non recurring expenses.
Total operating income increased by $1,608,486, (approximately 104%) to $3,154,647 during the second quarter 2009, from $1,546,161 during the same period in 2008.
Total net income was $2,531,905 or $.15 per share for the second quarter ended June 30, 2009, compared with $911,718 or $.05 per share in the same period in 2008. This represents a 178% increase in net income from the second quarter 2009 when compared to the same period in 2008. Net cash provided by operating activities was $1,695,393 during the three months ended March 31, 2009, which is an increase of $770,525 when compared to the same period in 2008.
Net cash provided by operating activities was $3,390,715 during the six months ended June 30, 2009, which is an increase of $762,708 when compared to the same period in 2008.
Edward Smolyansky, CFO commented, "We are extremely pleased at our record second quarter 2009 results. From top to bottom this was our best quarter in our company's history. We were aided by low raw material costs and low conventional milk prices, which remained at second quarter lows during July and August."
Smolyansky added, "In addition to lower input costs, the acquisition in February 2009 of Fresh Made Dairy also added to our record quarter. We continue to generate very strong cash flows from this acquisition, and we are aggressively paying down our debt and strengthening our balance sheet. During the first seven months of 2009, we have paid down approximately $3 million in debt taken out to finance the acquisition as well as other current and long term liabilities."
There Kefir is a great product. I decided to read the label that I have been drinking for several months and noticed it says the stock symbol on it....lol that why wrote this
as recession deepens - so does milk surplus...
http://www.nytimes.com/2009/01/02/business/02dairy.html?_r=3&ref=business
As Recession Deepens, So Does Milk Surplus
Peter DaSilva for The New York Times
Arthur Machado, a dairy farmer in Fresno, Calif., has to keep feeding his herd of more than 300 cows. He plans to sell them and take up a more stable commodity.
By ANDREW MARTIN
Published: January 1, 2009
FOWLER, Calif. — The long economic boom, fueled by easy credit that allowed people to spend money they did not have, led to a huge oversupply of cars, houses and shopping malls, as recent months have made clear. Now, add one more item to the list: an oversupply of cows.
Millions of pounds of government-owned milk powder stored in a warehouse in Fowler, Calif.
And it turns out that shutting down the milk supply is not as easy as closing an automobile assembly line.
As a breakneck expansion in the global dairy industry turns to bust, Roger Van Groningen must deal with the consequences. In a warehouse that his company runs here, 8 to 20 trucks pull up every day to unload milk powder. Bags of the stuff — surplus that nobody will buy, at least not at a price the dairy industry regards as acceptable — are unloaded and stacked into towering rows that nearly fill the warehouse.
Mr. Van Groningen’s company does not own the surplus milk powder, but merely stores it for the new owners: the taxpayers of the United States. To date, the government has agreed to buy about $91 million worth of milk powder.
“The thing is, they are going to produce it because they have to milk the cows,” Mr. Van Groningen said. “It’s like a river. It keeps coming.” In addition, dairy farmers are all too aware that, unlike industrial machinery, cows cannot be turned off and stored until economic conditions improve; they must be fed and cared for, at continuing expense.
The bags of milk powder represent a startling reversal of fortune for the dairy industry, which flourished in recent years in part because of a growing appetite for milk, cheese, ice cream and pizza in places like Mexico, Egypt and Indonesia. Many of those countries were benefiting from a global economic boom led by free-spending consumers in the United States.
As American dairy farmers increased their shipments of powdered milk, cheese and other dairy ingredients to foreign markets, their incomes rose. And the demand surge helped drive up the price of milk for American families. The national average for whole milk peaked at $3.89 a gallon in July, up from an average of $3.20 a gallon in 2006.
But now, demand for dairy products is stalling amid a global economic slowdown and credit crisis, even as supplies have increased. The result is a glut of milk — and its assorted byproducts, like milk powder, butter and whey proteins — that has led to a precipitous drop in prices.
The price of powdered skim milk, used in infant formula, dairy products and processed foods, has fallen to roughly 80 cents a pound today from about $2.20 in mid-2007. Other dairy products have declined as well. Whole milk at grocers has not declined as rapidly as wholesale powdered milk, but it has dropped to $3.67 a gallon, down nearly 6 percent from the peak.
While consumers are undoubtedly pleased by the lower prices, dairy farmers are struggling.
“Everything was going great,” said Joaquin Contente, a farmer in Hanford, Calif. “The product was moving. Then this financial crisis came along and shoot, the whole thing came to a halt.”
Logic might suggest that dairy farmers would simply sell some of their cows to a hamburger plant to cut the milk supply and raise prices. Indeed, the dairy industry has a cooperative effort under way to cull the herd.
But farmers are reluctant to do that if they expect a demand recovery, since rebuilding a herd can take years. The culling program is relatively small, and at least so far, most farmers are holding onto their cows.
“People don’t want to panic,” said Brian W. Gould, an agricultural economist at the University of Wisconsin, adding that farmers were receiving $20 for 100 pounds of raw milk just a few months ago. The price is expected to drop to about $14 for 100 pounds of raw milk in coming months. “It is unclear as to whether this will be a short-term or long-term market correction. It all depends on how long it takes the U.S. economy to recover,” he said.
Other agricultural sectors are also struggling with a slowdown in demand from foreign buyers because of the global recession and an increase in the value of the dollar, which has made American exports more expensive abroad. The Agriculture Department is expecting steep declines in exports of corn, wheat, soybeans and pork.
But while the government has price-support programs for about two dozen agricultural products, so far milk powder is the only commodity that has sunk low enough to start the flow of government dollars. Some expect that taxpayers will soon be buying blocks of cheese, too, given the plunging price.
Government price supports provide a price floor for agricultural products as a way of keeping farmers afloat during hard times and ensuring an adequate food supply.
The Agriculture Department has committed to buying 111.6 million pounds of milk powder at 80 cents a pound, for roughly $91 million, which includes some handling fees. Before October, the last time the government bought milk powder was in June 2006, and it was eventually used in government nutrition programs, given away as animal feed or sold on the open market, said Steve Gill, director of commodity operations for the department.
He said the agency has not decided what to do with the cache of milk powder in California.
Some critics of farm subsidies argue that price support programs are antiquated and allow farmers to continue producing even when the economics make no sense, as taxpayers will always buy up the excess production.
“They don’t want to downsize or respond to the market signal. They want to keep producing,” said Kenneth Cook, president of the Environmental Working Group, a Washington research organization that has long been critical of the government’s farm policy. “Once you get in a jam like this, it becomes our collective problem.”
The government purchases come after what the department calls a “euphoric period of record prices and booming exports” for the American dairy industry. Since 2003, dairy exports have increased from $1 billion a year to about $4 billion this year, with exports of powdered milk increasing sixfold during that period. Milk powder is an attractive product to export because it does not require refrigeration, has a long shelf life and can be used to make numerous beverages and foods.
Much of the increase was caused by increased demand in developing countries, where a growing middle class replaced starch in their diets with protein sources like meat and dairy products. Some Asian countries had little history of eating dairy products but were introduced to milk and mild cheeses by government nutrition programs or by restaurant chains like McDonald’s and Pizza Hut.
In China, for instance, per-person dairy consumption nearly doubled in just five years, to 63 pounds in 2007 from 33 pounds in 2002 (though it remains far below the per-capita consumption in the United States of about 580 pounds), according to the U.S. Dairy Export Council. The growth translates into the need for nearly 40 billion pounds more milk each year, roughly equal to California’s annual milk production.
In addition to the increased demand, exports from the American dairy industry benefited from a relatively weak dollar and tight global supplies. For instance, droughts reduced milk production in New Zealand and Australia, two major dairy exporters, allowing American suppliers to fill the gaps.
American dairy shipments soared to places like Algeria, Bangladesh, Indonesia and the Philippines. The biggest market, however, was Mexico, where imports from America increased to $853 million in 2007 from $258 million in 2003, according to the Agriculture Department.
But now, global demand has stagnated amid high prices and economic uncertainty just as the dollar has strengthened and milk production in New Zealand and, to a lesser extent, Australia, has bounced back. The continuing scandal involving melamine contamination of dairy products in China is expected to further diminish demand.
“In some of these countries where dairy hasn’t been a big part of their diet, this is where we are seeing people pull back,” said Deborah Perkins, managing director of the food and agribusiness research group at Rabobank International.
Several dairy exporters say they remain bullish on their long-term prospects, given the barely tapped markets in the developing world. Until then, dairy farmers say, they are braced for a period of low milk prices even as feed and other costs remain relatively high.
Arthur Machado, who milks cows on the outskirts of Fresno, said he sold more than half his herd in 2006, the last time prices collapsed. Now, with prices plummeting again, he said he is trying to sell the remainder of his herd to another dairy farmer.
“The business isn’t what it was in the ’70s, when I started,” he said. “There are not enough peaks to offset the valleys anymore.”
Once the herd is sold, Mr. Machado said, he plans to focus on less volatile commodities, like almonds and grapes. But it is not so easy to get out of the dairy business. Just as with automobiles and homes, there is simply too much inventory on the dairy cow market.
“Right now, there are no buyers,” he said. “When it’s on the upswing, we’ll sell. Until then, we’ll struggle through.”
I've been keeping any eye on this too, and I'm quite surprised at how well it's held up so far.
I consider their products to be somewhat luxury items, and I don't expect them to hold up well during a prolonged economic downturn.
waiting for this to drop...
in 5 area so can buy - but it is holding up stubbornly. Milk and fuel price reductions should help bottom line, along with recently raised prices. Just need sales to keep up - which they should.
Need that panic selling event to happen here like in all my other stocks - although it may never come.
Busy guy that Dr. Morenstein who directed the Kefir study... he is also the principal investigator for a Gerber sponsored Potential of Priobiotics in Yogurt (SIPPY) study which is scheduled to run until August
http://clinicaltrials.gov/ct2/show/NCT00492583?term=NCT00492583&rank=1
it started a couple of months...
back when the kefir got noticeably thinner - and then last night when poured my regular kefir it was nearly as thin as water. Shook it violently and it got a little thicker - but still pretty thin. Remember the old days when it poured out like goop - and used to think they could stand to make it thinner - but they may have gone too far.
Kefir Clinical Study is Completed. Bill
http://clinicaltrials.gov/ct2/show/NCT00481507?term=kefir&rank=1
Aiming, >>> "extensive history of violations of the Federal Food, Drug and Cosmetic Act dating back to at least 2004." <<<
Maybe I've been around biotech too long, but it's not a good sign for a company to get on the wrong side of the FDA. This only reinforces the impression I got from listening to the recent conf call -- that Lifeway's young management team is 'winging it' to some extent.
Oh well, at least milk prices have stabilized for now.
I'd stay away from the cream cheese though.
:^)
thought it was a pretty good quarter...
and milk prices are decreasing. cautiously optimistic is the catch phrase on this one. still a big time user here - addicted to kefir.
FDA complaint closes 2 Lifeway lines
By Mike Hughlett | Tribune reporter May 16, 2008
Citing a lack of compliance with food safety laws, the Food and Drug Administration on Thursday announced the shutdown of the cream cheese and seafood operations of Morton Grove-based Lifeway Foods Inc.
In a complaint filed with Justice Department, the FDA alleges Lifeway inadequately labeled cream cheese products, including not disclosing major food allergens; produced seafood-based cream cheese without an adequate safety plan; and failed to document that it had monitored certain sanitation conditions.
In the wake of a consent decree between the FDA and top company executives, cream cheese and seafood production was halted at plants in Skokie and Philadelphia, the FDA said.
But Edward Smolyansky, Lifeway's chief financial officer, said the company hasn't produced cream cheese at its Skokie plant for some time. And while cream cheese production is shut down in Philadelphia, that plant is producing other items, he said.
Publicly traded Lifeway is a leading producer of a drinkable yogurt called kefir. Smolyansky said cream cheese accounts for 0.5 percent to 1 percent of the company' sales, which totaled $38.7 million in 2007.
Smolyansky said problems cited by the FDA have been corrected, and the company is waiting for approval to restart cream cheese and seafood operations.
In a news release, the FDA said its action follows Lifeway's "extensive history of violations of the Federal Food, Drug and Cosmetic Act dating back to at least 2004." Smolyansky said the agency was referring only to its cream cheese operations.
"This stems from years of negotiation between the FDA and ourselves," he said. "That's it, and we move on."
http://www.chicagotribune.com/business/chi-fri-lifeway-may16,0,7901208.story
NEWS... Lifeway Foods Clarifies Recent FDA Enforcement for Pennsylvania Facility
- All of Lifeway's Production Facilities Remain Operational
MORTON GROVE, Ill., May 16 /PRNewswire-FirstCall/ -- Lifeway Foods, Inc., (NASDAQ:LWAY), makers of the nutritious, probiotic dairy beverage called kefir, announced today all of its production facilities remain open and fully operational. The only product line temporary affected is the cream cheese spreads which are produced only in Pennsylvania by LFI Enterprises, Inc., a wholly owned subsidiary of Lifeway. LFI provides several functions beyond cream cheese production. Lifeway Foods had total first quarter sales of $11,122,000, an increase of 23% from the same period a year ago.
Julie Smolyansky, CEO commented, "The Consent Decree has absolutely no impact or affect upon Lifeway's products or production facilities. We vigorously disagree with the allegations of the complaint. These same products have been produced for over 15 years for a very small and select group of customers in the Philadelphia area without one consumer complaint, and while we of course respect the government's position, we do not agree with their unfounded assertions. We know that we are and have been compliant as to any alleged violation asserted in the complaint. We would never place our customers at risk."
Edward Smolyansky, CFO commented, "Lifeway and LFI filed an answer to the complaint denying all material allegations. Lifeway will continue to produce and ship all of its products including its kefir, farmer's cheese, and spreadable cheese products without any interruption. As our most recent quarterly report filed on May 15, 2008 exhibits, our core product lines continue to grow at a tremendous pace, and we have never been more confident about the future of our business as a whole."
This could be a good short right now...
I'll study it later.
Well, $.05 did beat estimates...
but leaves LWAY a long way to a reasonable PE.
The question is, what part of the 23% sales increase came from the price increases? Q2 could be impressively beyond the current $.06 estimate.
NEWS... Lifeway Foods Reports Record 1st Quarter 2008 Results
MORTON GROVE, Ill., May 15 /PRNewswire-FirstCall/ -- Lifeway Foods, Inc., (NASDAQ:LWAY), makers of the nutritious, probiotic dairy beverage called kefir, announced today for the first quarter ended March 31, 2008, total sales increased 23% to approximately $11,122,000 from $9,022,000 during the same period a year ago. This increase in sales was driven by another strong sales increase of Lifeway's flagship kefir line, Lifeway's ProBugs(TM) Organic Kefir for Kids, and Lifeway's "Helios Organic" brand kefir.
First quarter 2008 gross profit decreased 2% to $3,490,731 from $3,572,419 during the same period a year ago. The cost of milk, Lifeway's largest raw material cost component was on the average 30% higher in the first quarter 2008, when compared with the first quarter 2007. Pre tax income was $1,446,551 in the first quarter 2008, compared to $1,781,105 in the first quarter 2007. Net income was $888,605 in the first quarter 2008, compared to $1,135,331 in the first quarter 2007.
Edward Smolyansky, CFO commented, "We are extremely pleased at our first quarter 2008 results. Sales were again very strong, and we really started to see the benefits of decreasing milk cost, which began in March. These decreases have since continued in April, and even more so in May, and we hope that this trend continues throughout the year. As far as revenues go, in April we had a couple of weeks where we surpassed the $1 million dollar a week threshold, and that is certainly an exciting event for a company such as ours." Smolyansky added, "In addition to the continued strength of our core drinkable dairy business, our 'Kefir Boutique' retail store concept, Starfruit(TM), opened it's doors April 15, and even though the weather has yet to fully cooperate in Chicago, the early results have surpassed our expectations, and we are now looking for a few more high profile sites in and around Chicago."
Julie Smolyansky, CEO commented, "You really have to be living under a rock to not know of the pressures that have faced dairy companies such as ourselves in the past year. The second half of 2007 was one of the most challenging periods in our company's brief history, and when we look at our first quarter 2008 results versus the second half of 2007, the difference is like day and night. We hope that we have navigated through the rough environment of record high milk costs, and have gotten back to period of relative calm."
Earnings should easily beat estimate of 3 cents. I am looking for 6 cents. Earnings should post today. It sure has been quiet around here.
Bill
NBC5 News Video w/brief shots of Starfruit store
Ms. Smolyanski is also featured in this mixed bag report on probiotics in general, done by a Chicago station.
http://video.nbc5.com/player/?id=245782
Interesting Q1 CC with Dean Foods
in which they confirm the low price elasticity in the milk-stuff segment - hope the "kids" are listening. As I had written earlier, they also believe that the commodity price "thing" is an industry changing event, with global demand outstripping supply for a long, long time.
http://tinyurl.com/3kennt
That said, if LWAY can focus on their core brands, even if they simply maintain margins, revenue growth from price increases (which will be ubiquitous in the food industry) could well maintain the curve.
New Taglich report - $13.75 target
Despite the incestuousness, some interesting comments regarding the dairy outlook and Taglich is generally reasonable (51 p/e fwd) in projections.
http://www.taglichbrothers.com/equityuniverse/companies/lifewayfoods/lifewayfoods-04142008.pdf
Fizzy, gfp? I thot you had some medical awareness... fizzy dairy products - perhaps you're on to something. Yuk.
To settle that spazy GI, what you need is a
In2it, Someone else mentioned the potential for shelf life problems a while back. I live on the East Coast, so maybe the longer transport time was a factor (?) My GI reaction was severe enough that I never tried kefir again. I had the pomegranite flavor, which I think was new at the time (about a year ago). It seemed a little 'fizzy' or something, but not having had kefir before, I figured that was normal. Perhaps it was too close to the expiration date.
GfP, agree that the CC felt like an exercise by a sophomore marketing class... but, having attended early Google meetings, clearly lack of sophistication is not an infallible indicator.
Analyzing Lifeway's potential involves considering the many complexities we are facing. For example, as belief of a global food shortage grows, markets of all sorts may respond calamitously. We can also factor that recession and inflation are back in the public lexicon (and the pres. campaigns will hammer the issues).
So, at a minimum, the LWAY story seems to revolve around demographics... my guess is that neither "R" nor "I" will impact much on the "LWAY". My hope is that the "kids" here understand kefir price elasticity... point is that its possible that margins can be improved even if revenues hold.
As to your GI response... as we know, variable individual responses are the bane of research - perhaps you're just not a probiotic kinda guy... or perhaps causality confirmation requires an expanded sample size beyond 1?
Do you truly believe your multiple bacteria / shelf life hypothesis?
clear price support at these...
levels in a very tough market. Earned a penny in 4th Q and trading at very high PE. Shorts seem scared to pile on even though it's a prime candidate. If price holds up over coming weeks - likely has some deep pocket support - otherwise hedge funds should be hammering. seen similar sitiuations where a small companies price shows a refusal to drop in spite of questionable fundies - and then larger company interests become known.
But, I don't figure anything - just thoughts.
OldPro, How do you figure (buyout)? Thanks.
In2it, In addition to the sky high valuation, I'm not convinced that milk prices will be coming down that much over the longer term. And if milk prices stay high, earnings aren't going to recover very quickly. Stock valuations like this require rapid earnings growth.
Also, listening to the recent conf call, I wasn't that impressed with the two principals running the company. They sounded like two high school kids. Julie does sound like she has some marketing ideas/talent, but the overall impression is that there isn't a seasoned management in place. So I'm still on the fence with this one. Also, I tried the product once, but it messed up my GI tract for several days. I'm not lactose intolerant, so I don't now what happened. They put in so many different bacteria strains in the product, I think there might be some shelf life problems.
Cramer & LWAY Kefir..
What'd he say? "....sour"?
Cramer makes an entertaining if not compelling case for WBD... got balls?
Today PE only 64... but forward PE = 24
Come on, GFP, give a break here...
Check out Cramer using Lifeway Kefir bottles as a prop to push WBD.
Bill
http://www.cnbc.com/id/24013641/site/14081545/
>>> Why food prices will go through the roof in coming months
F. William Engdahl
Online Journal
April 5, 2008
A deadly fungus, known as Ug99, which kills wheat, has likely spread to Pakistan from Africa, according to reports. If true, that threatens the vital Asian Bread Basket including the Punjab region.
The spread of the deadly virus, stem rust, against which an effective fungicide does not exist, comes as world grain stocks reach the lowest in four decades and government subsidized bio-ethanol production, especially in the USA, Brazil and EU are taking land out of food production at alarming rates. The deadly fungus is being used by Monsanto and the US Government to spread patented GMO seeds.
Stem rust is the worst of three rusts that afflict wheat plants. The fungus grows primarily in the stems, plugging the vascular system so carbohydrates can’t get from the leaves to the grain, which shrivels. Ug99 is a race of stem rust that blocks the vascular tissues in cereal grains including wheat, oats and barley. Unlike other rusts that may reduce crop yields, Ug99-infected plants may suffer up to 100 percent loss.
In the 1950s, the last major outbreak destroyed 40 percent of the spring wheat crop in North America. At that time governments started a major effort to breed resistant wheat plants, led by Norman Borlaug of the Rockefeller Foundation. That was the misnamed Green Revolution. The result today is far fewer varieties of wheat that might resist such a new fungus outbreak.
The first strains of Ug99 were detected in 1999 in Uganda. It spread to Kenya by 2001, to Ethiopia by 2003 and to Yemen when the cyclone Gonu spread its spores in 2007. Now the deadly fungus has been found in Iran and according to British scientists may already be as far as Pakistan.
Pakistan and India account for 20 percent of the annual world wheat production. It is possible as the fungus spreads that large movements could take place almost overnight if certain wind conditions prevail at the right time. In 2007, a three-day wind event recorded by Mexico’s CIMMYT (International Maize and Wheat Improvement Center), had strong wind currents moving from Yemen, where Ug99 is present, across Pakistan and India, going all the way to China. CIMMYT estimates that from two-thirds to three-quarters of the wheat now planted in India and Pakistan are highly susceptible to this new strain of stem rust. One billion people live in this region and they are highly dependent on wheat for their food supply.
These are all areas where the agricultural infrastructure to contain such problems is either extremely weak or non-existent. It threatens to spread into other wheat producing regions of Asia and eventually the entire world if not checked.
FAO world grain forecast
The 2007 World Agriculture Forecast of the United Nations’ Food and Agriculture Organization (FAO) in Rome projects an alarming trend in world food supply even in the absence of any devastation from Ug99. The report states, “Countries in the non-OECD region are expected to continue to experience a much stronger increase in consumption of agricultural products than countries in the OECD area. This trend is driven by population and, above all, income growth — underpinned by rural migration to higher income urban areas . . . OECD countries as a group are projected to lose production and export shares in many commodities . . . Growth in the use of agricultural commodities as feedstock to a rapidly increasing biofuel industry is one of the main drivers in the outlook and one of the reasons for international commodity prices to attain a significantly higher plateau over the outlook period than has been reported in the previous reports.”
The FAO warns that the explosive growth in acreage used to grow fuels and not food in the past three years is dramatically changing the outlook for food supply globally and forcing food prices sharply higher for all foods, from cereals to sugar to meat and dairy products. The use of cereals, sugar, oilseeds and vegetable oils to satisfy the needs of a rapidly increasing biofuel industry, is one of the main drivers, most especially the large volumes of maize in the US, wheat and rapeseed in the EU and sugar in Brazil for ethanol and bio-diesel production. This is already causing dramatically higher crop prices, higher feed costs and sharply higher prices for livestock products.
Ironically, the current bio-ethanol industry is being driven by US government subsidies and a scientifically false argument in the EU and USA that bio-ethanol is less harmful to the environment than petroleum fuels and can reduce C02 emissions. The arguments have been demonstrated in every respect to be false. The huge expansion of global acreage now planted to produce biofuels is creating ecological problems and demanding use of far heavier pesticide spraying while use of biofuels in autos releases even deadlier emissions than imagined. The political effect, however, has been a catastrophic shift down in world grain stocks at the same time the EU and USA have enacted policies which drastically cut traditional emergency grain reserves. In short, it is a scenario preprogrammed for catastrophe, one which has been clear to policymakers in the EU and USA for several years. That can only suggest that such a dramatic crisis in global food supply is intentional.
A plan to spread GMO?
One of the consequences of the spread of Ug99 is a campaign by Monsanto Corporation and other major producers of genetically manipulated plant seeds to promote wholesale introduction of GMO wheat varieties said to be resistant to the Ug99 fungus. Biologists at Monsanto and at the various GMO laboratories around the world are working to patent such strains.
Norman Borlaug, the former Rockefeller Foundation head of the Green Revolution, is active in funding the research to develop a fungus resistant variety against Ug99, working with his former center in Mexico, the CIMMYT and ICARDA in Kenya, where the pathogen is now endemic. So far, about 90 percent of the 12,000 lines tested are susceptible to Ug99. That includes all the major wheat cultivars of the Middle East and west Asia. At least 80 percent of the 200 varieties sent from the United States can’t cope with infection. The situation is even more dire for Egypt, Iran, and other countries in immediate peril.
Even if a new resistant variety were ready to be released today, it would take two or three years’ seed increase in order to have just enough wheat seed for 20 percent of the acres planted to wheat in the world.
Work is also being done by the USDA’s Agricultural Research Service (ARS), the same agency which co-developed Monsanto’s Terminator seed technology. In my book, Seeds of Destruction, I document the insidious role of Borlaug and the Rockefeller Foundation in promoting the misnamed Green Revolution, as well as patents on food seeds to ultimately control food supplies as a potential political lever. The spreading alarm over the Ug99 fungus is being used by Monsanto and other GMO agribusiness companies to demand that the current ban on GMO wheat be lifted to allow spread of GMO patented wheat seeds on the argument they are Ug99 stem rust resistant. <<<
Think ahead, gfp....
Albeit, the CC belies management's maturity, the fact is they have gotten this far... and the new products, by large, are interesting, inexpensive twists on the basic theme - what your gradener doesn't have organic kefir with carnitas?
IF COGs remain at/near current levels, one must be thinking the kind of margins & net before the surge (milk surge, I mean).
right now I think I missed...
this move and am pretty disappointed about that. Stock has been a powerhouse compared to what I thought would happen with the bad earnings in 4th Q.
Pretty good analysis on the Yahoo Board...
Lillian, you'll have to explain what "not a great organic topline grower" means.
They said Helios only grew 5% for the qtr & Lifeway Kefir growing 30% - or am I confusing financial terms with organic growing practices {:>)?
Looks like they both were suggesting the possibility of a $52M 2009, organic or conventional, that's growth of 34%.
Even though the 55+ P/E is big compared to the industry avg of 41, generally I have found a PE close to growth rate to be value investor acceptable. So,stay with me on this...
If LWAY hits $52M next year AND returns to the forecast earlier 18% pretax net, this should provide somewhere near $.35 / shr or a forward P/E of just about 30.
So an industry matching 40 P/E gives us a possible $14... not a slam dunk, but the chances for some additional premium for Starfruit & ProBugs & the other new "stuff" seem to make at least less expensive that you suggest.
Whadya think?
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_L/threadview?m=te&bn=10983&tid=10629&mid=10629&tof=6&frt=2#10629
PE is 59.41
And that includes the .07 cent and .08 cent quarters from H1-07.
If Q1-08 and Q2-08 are say .03 cents and .05 cents, the PE will be 92.58
Even if 2008 earnings by quarter are .03, .05, .07, .09, the PE is still 46.29.
So no matter how you slice it, this thing still isn't cheap.
this stock is convincing me...
that we are in a new bull market. When buyers are once again looking at future potential versus past performance - it's bull and buy time. will give it another week to see if it holds up - but right now showing great strength and making me want to go full bore into the market again.
really showing surprising strength...
good for it. Hit 11.19 intraday - impressive for a company that just earned $.01
>>> Analyst Predicts Corn Rationing in 2008
March 31, 2008
NEW YORK — A BB&T Capital Markets analyst said Monday corn rationing may be necessary this year, following a U.S. Department of Agriculture report predicting farmers would plant far fewer acres of corn in 2008.
According to the March Prospective Plantings Report, farmers intend to plant about 86 million acres of corn this year, down 8 percent from 2007, when the amount of corn planted was the highest since World War II.
Analyst Heather L. Jones said in a note to investors if the USDA estimate proves accurate, the year may produce just 200 million bushels of corn. That, she said, wouldn't be enough to meet demand, given current export and feed demand trends and higher ethanol demand. Both ethanol and animal feed are made with corn.
"That is an untenable inventory demand, in our opinion," she said. "Consequently, we believe demand must be rationed or there needs to be a big supply response from other growing regions of the world."
The plantings report caused nervousness among meat producers and food makers who spent last year struggling to offset higher corn costs. Even though acreage was high, demand for ethanol and need overseas pushed prices to record levels.
Jones said she expects corn prices to rise even more, especially if unfavorable weather damages any of the crop.
The report delivered some promising news for meat producers, who also use soybeans to make feed. Farmers estimated they will plant 74.8 million acres of soybeans, up 18 percent from 2007.
But that might not bring much relief, Jones said, since corn is still the primary feed ingredient.
Shares of Tyson Foods Inc., one of the world's largest meat companies, fell 12 cents to $16.01 in afternoon trading, while shares of pork producer Smithfield Foods Inc. dropped 39 cents to $25.57.
Chicken producer Pilgrim's Pride Corp. shares dipped 19 cents to $20.28. Earlier in the day, the stock reached a new four-year low of $20.08. <<<
Higher and higher food prices just beginning?
>>> Food crisis being felt around world
Market Chaos, Riots
Peter Goodspeed, National Post
Published: Tuesday, April 01, 2008
David Silverman, Getty Images
Sharply rising prices have triggered food riots in recent weeks in Mexico, Morocco, Senegal, Uzbekistan, Guinea, Mauritania and Yemen, and aid agencies around the world worry they may be unable to feed the poorest of the poor.
In the Philippines, officials are raiding warehouses in Manila looking for unscrupulous traders hoarding rice, while in South Korea, panicked housewives recently stripped grocery-store shelves of food when the cost of ramen, an instant noodle made from wheat, suddenly rose.
The shadow of "a new hunger" that has made food too expensive for millions is the result of a sudden and dramatic surge in food prices around the world.
Rising prices for all the world's crucial cereal crops and growing fears of scarcity are careening through international markets, creating turmoil.
Last Thursday, as world rice prices soared by as much as 30% in one day, Egypt decided to suspend rice exports for six months to meet domestic demand and to try to limit price increases.
That was bad news for its main rice customers -- Turkey, Lebanon, Syria and Jordan.
Egypt's move was matched by Vietnam, the world's second-largest rice exporter after Thailand, which cut exports by 25% and ordered officials not to sign any more export contracts this year.
India and Cambodia also rushed to curb their exports in order to have enough supplies to feed their own people.
With crude oil soaring above US$100 a barrel, higher fuel prices have driven up the cost of production and increased transportation costs for all foods.
Pests in Southeast Asia, a 10-year drought in Australia and a 45-day cold snap in China have combined to aggravate the situation.
At the same time, millions of people in China and India have suddenly become relatively wealthy and are changing their eating habits, consuming more meat and chicken, which places a huge demand on cereal stocks.
In China, per-capita meat consumption has increased 150% since the 1980s. But producing more meat requires more feed to raise more animals.
"You simply feed less people on maize [corn] via cattle than you do in maize direct," said John Powell, the UN World Food Program's (WFP) deputy director of external programs in Rome.
Also influencing the food crisis is the move in North America and Europe to biofuel in an effort to ease global warming and reduce reliance on imported energy.
A surge in demand for biofuel has resulted in a sharp decline in agricultural land planted for food crops. About 16% of U.S. agricultural land formerly planted with soybeans and wheat is now growing corn for biofuel.
"For the first time in history, there is a clear link between the price of fuel and the price of food," Mr. Powell said.
"If there were a miraculous 20% increase in the quantity of food production, we would not know what would go toward increased food consumption and what would go to biofuels.
"Where it would go is where the prices are best."
Rice is a staple food for half the world's population. But the sudden surge in prices and restrictions on exports come at a time when stockpiles of rice are at their lowest level in decades.
At the moment, world rice inventories are said to stand at a mere 72 million metric tonnes -- about 17% of what the world consumes annually.
The low stockpiles create a market in which any supply disruption will result in radical price swings.
They also complicate delivering foreign aid to those most in need.
The WPF, which feeds 73 million of the world's most destitute each year, says its costs have increased 55% since June. Unless it gets US$500-million in emergency funding, it may soon have to reduce feeding programs.
Experts predict world food markets will be locked into an inflationary spiral for at least four years, but some say the crisis could linger for a decade or more.
"There is pretty much a sense that what we are seeing is a step change or a structural change and not a peak to be followed by a trough," Mr. Powell said.
"In other words, we are into an era of high food prices. It's not just volatility, it's a step increase." <<<
sure as heck wouldn't...
buy here and would sell if had - regardless of how many irons they got in the fire. I believe will eventually buy back in - but that was a very bad quarter from an EPS standpoint and share price is not reflecting it yet - will likely catch up.
I fear this one....
Thinking unless they do something big... back down to average type PE ratio of about 20.... or less.
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