Ralcorp Deal Is First M&A Nibble for Food ETF

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Includes: CAG, EATX
by: Tom Lydon

A new exchange traded fund (ETF) that invests in food companies could see action Wednesday following ConAgra's (NYSE:CAG) $4.9 billion cash offer for Ralcorp (RAH).

Global X Food ETF (EATX) was launched on May 2 and holds both stocks. Ralcorp sells Post cereals, while ConAgra's brands include Chef Boyardee and Slim Jim.

The tracking index is designed to reflect the performance of the food industry. It is comprised of selected companies globally that are primarily engaged in the agriproduct or livestock operations or in the manufacture, sale or distribution of food products, agriproducts and products related to the development of new food technologies.

The trend in rising food prices is not easing, and food inflation remains a reality for both international and domestic markets.

"We are starting to see how food companies stand to benefit as the population in emerging economies continues to increase their purchasing power," Global X Funds said in a press release.

Rising food prices mean that, overall, shop price inflation rose to 2.5% in April from 2.4% in March, according to Nikhil Kumar for The Independent. In annual terms, food inflation increased to 4.7%, against 4% in March, as sugar and wheat prices are rising. [Hedge High Food Prices With Ag ETFs.]

EATX is an international food play, and Global X notes that 8 out of 10 people in the world are living in emerging economies. China, Switzerland and the U.S. are the top-represented countries.

Tisha Guerrero contributed to this article.