Staple Commodity Prices Hitting New Highs
Prices for corn, soybeans, and wheat have risen to their highest levels in eight years. Prices for a single bushel of corn increased by 8.6% in April and over 11% in May, with soybeans and wheat mirroring similar price increases. Strong consumer demand and supply-chain bottlenecks are the main drivers of these commodity price increases. With global food prices rising in May at their fastest monthly rate in more than a decade, major companies are being forced to raise their prices to curb diminishing profits as material and production costs continue to rise.1
Farmers Are Benefitting from the Utilization and Implementation of 5G Technology
With recent advances in 5G technology and a growing need for more food and agriculture production, farmers are turning to drones, robots, and other autonomous products to enhance the overall farming process. Farmers using 5G can get data on their crops and soil through sensors only recently made available with this new technology. Cellular network providers like T-Mobile are working with local governments and farmers to test and further develop these capabilities. 5G technology will help farmers benefit from more efficient, reliable, and less costly harvests, ultimately making the food processing supply chain cheaper.2
Benson Hill Going Public Via $2 Billion SPAC Merger
Benson Hill Inc. is going public through a merger with a special-purpose acquisition company that values the company at $2 billion. Benson Hill Inc. is a plant-growing technology company dedicated to developing breeds of crops like soybeans and yellow peas with higher protein contents, faster maturities, and improved flavor. This push toward more sustainable and beneficial plant technology creations is part of a growing initiative to feed the world’s growing population and accelerate the fight against climate change.3
Meatpacking Industry Faces Stricter Oversight in Washington
The U.S. Department of Agriculture is developing new rules and regulations that would impact large meatpacking and processing companies like Tyson Foods Inc. and JBS USA. To make the industry more equitable, lawmakers are targeting how these larger companies compensate smaller farmers. The proposed legislation would establish regional price floors and require beef processing companies to buy more cattle on open markets. The new regulations would also make issuing disputes easier for smaller farmers in business with large meatpackers.
In this very concentrated market, smaller farms hope to improve the fairness of competition and hopefully higher profits in the future once these regulations and rules are implemented. 4
Drought in California’s Farm Country Causing Price Surges
As temperatures continue to rise since the beginning of summer, some states, particularly those in the West, have fared worse than others. Heatwaves are starting to hit California, causing droughts that are crippling the state’s water supplies; farmers are bearing the brunt of the damage. Amidst supply chain shortages universally, many farmers are having to remove their plants or refrain from planting any new ones because of the lack of water. The drought may cause an increase in price for certain products like rice, tomatoes, wheat, and almonds, among many other agricultural commodities.5
Sanderson Farms Explores Sale
Sanderson Farms, the third largest U.S. chicken producer by processing capacity, is exploring a sale with Continental Grain after rejecting an unsolicited takeover approach from Durational Capital management in October of 2020. Chicken products and their prices have increased dramatically over the past year due to a lack of supply and increasing demand, allowing the company to post recent performances that have exceeded analysts’ expectations. Sanderson is looking to capitalize on its sale in the turbulent food-producing market and will most likely be acquired by another major meatpacking or farming company.6
Farmers and Climate Change: Possibilities Versus Practicability
Climate change is at the forefront of problems to be addressed by the Biden administration, and farmers are a pathway that the administration is heavily considering. Incentivizing carbon offsets through farmers has been discussed. This strategy may be successful, but feasibility is becoming more of an issue because of unattractive credits and difficulties in paying farmers to change their practices. The complexity of dealing with how to change these practices while also fairly compensating farmers will be the biggest challenge, ultimately determining if this will be put into practice now or in the future.7
Biden Administration to Combat Supply Chain Shortages
Following supply chain bottlenecking across the United States this past year, which heavily impacted the agricultural industry, the Biden administration has promised to combat these problems through the Build Back Better Initiative. Around $4 billion is being budgeted to help strengthen the United States’ food system by creating more competition, better supply chain solutions, new market opportunities, and providing solutions to combat the climate crisis. Consumers and farmers will benefit greatly from this move and help provide increased food security across the nation.8
Largest Transactions Closed
- Nuts Business of The Kraft Heinz Company
- Hormel Foods Corporation
- SEACOR Holdings Inc.
- AIP, LLC
- Olde Thompson Inc.
- Olam Holdings B.V
- Aspire Bakeries
- Lindsay Goldberg LLC
- Smart & Final Stores, Inc.
- Bodega Latina Corporation
- Eire Born Spirits LLC
- Proximo Spirits, Inc.
- Luxco, Inc.
- MGP Ingredients, Inc.
- CJ Foods America Corp.
- CJ Cheiljedang Corporation
- Lily's Sweets, LLC
- The Hershey Company
- Bluma Wellness Inc.
- Cresco Labs Inc.
Source S&P Capital IQ as of 7/6/2021 and PCE Proprietary Data
This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.
EBIT - Earnings Before Interest and Taxes