Commodities Today: BP Expands In Russia And Activists Continue Targeting Food Companies

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Includes: BP, CAG, FCX, KHC, PEP, RDS.A, RDS.B
by: Matthew Smith

Summary

Commodity prices are marginally lower this morning, as traders worry about Europe.

BP entered a deal to add more exposure to Russia.

Jana Partners announced that it had a 7.2% stake in CAG and is interested in changes.

With platinum being the exception to the rule this morning, all of the commodities we track closely are lower. Oil continues to tread water around the $60/barrel level in WTI Crude pricing while natural gas continues its volatile moves. RBOB Gasoline continues to show strength, and holds up quite well on days that oil comes under pressure now that we are entering the peak driving season here in the United States. This could be something to watch over the next few months as it does provide one with some interesting options for hedging risk and minimizing the impact of oil's price swings on one's portfolio.

Chart of the Day:

Copper finally has broken through the support it had in the $2.60/pound level and now it must either come back above that level or find support somewhere south. This is the reason we had put off purchasing Freeport-McMoRan (NYSE:FCX) shares; the fear that copper would continue lower and oil and gold prices would follow when the Fed begins to raise interest rates.

Source: CNBC

Commodity prices are as follows (at time of submission):

  • Gold: $1,201.90/ounce, down by $0.10/ounce
  • Silver: $16.13/ounce, down by $0.023/ounce
  • Oil: $59.57/barrel, down by $0.88/barrel
  • RBOB Gas: $2.0787/gallon, down by $0.0314/gallon
  • Natural Gas: $2.757/MMbtu, down by $0.02/MMbtu
  • Copper: $2.572/pound, down by $0.034/pound
  • Platinum: $1,086.80/ounce, up by $4.00/ounce

BP Adds More Exposure To Russia

In a rather interesting move, BP (NYSE:BP) has entered into a deal with Russia's Rosneft to purchase a 20% stake in Taas-Yuriakh Neftegazodobycha LLC, a subsidiary which owns a producing oil field, for $750 million. The deal also allows for BP to participate in exploration in other parts of Siberia, and should those efforts prove successful, BP and Rosneft would form a joint venture with Rosneft owning a 51%.

For those wondering how BP and Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) can continue to invest in Russia amid the sanctions, it is because of what the sanctions pertain to. The sanctions limit the technology and services that companies can transfer to Russia as well as limiting Russia's options in international debt markets. Russia is still allowed to sell its assets and European companies can still purchase those assets, which is how deals such as these are being completed without trouble.

Jana Announces Stake In ConAgra

Jana Partners' latest target is ConAgra Foods (NYSE:CAG), the packaged foods giant which has had to take multiple writedowns related to its acquisition of private label foods company Ralcorp three years ago. Jana has amassed a 7.2% stake and is urging the company to streamline operations to cut costs and find ways to boost margins. The activist hedge fund also wants three directors to be nominated to ConAgra's board, which include two industry veterans with experience at General Mills and Nestle.

ConAgra is a name which has been quite disappointing in recent years with their performance, which is the reason we have avoided it while at the same time being bullish names like Kraft Foods (KRFT) and Pepsico (NYSE:PEP). Hopefully, for ConAgra's sake, Jana can provide suggestions which help management right the ship as has happened at other companies in the industry.

It would not be surprising at all to see Jana push ConAgra to adopt some of the techniques employed by 3G Capital Partners for food and beverage companies in their portfolio.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: BP, KRFT & PEP have previously been recommended.