Kellogg and Sara Lee Squeezed by Higher Grain Prices

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Drought Drives Wheat, Corn Prices

• Summary: Persistent drought conditions in the Great Plains are driving up the price of wheat, corn and other agricultural commodities. The Agriculture Department estimtes that the US wheat harvest will fall to 1.806 billion bushels from 2.106 billion last year, and the corn harvest fall 3.3 % to 10.74 billion bushels. It expects the average price of wheat to rise 17% to $4 per bushel and the price of corn to rise 24% to $2.45 per bushel. Demand from the ethanol industry is pushing up corn prices. As a result of rising agricultural prices, food prices are expected to rise 3-3.5% this year versus 2.5% last year.
• Comment on related stocks/ETFs: The article mentions two companies that are being squeezed by the higher prices: Kellogg Co (K) and Sara Lee Corp (SLE). But the impact could be widespread, and could further contribute to rising gasoline prices as higher corn prices raise the price of ethanol and thus gasoline.