Rising Costs Becoming an 'Epidemic' in Food Industry

Last Updated Aug 4, 2008 7:16 PM EDT

Rising costs have become an "industrywide epidemic" in the food business, according to Eric Fox, a hedge-fund manager, writing at Investopedia.com.

receiptA bit of an overstatement, that. There are still food companies doing well, or at least relatively well. As Barron's noted last week, "it is all about who's succeeding in passing along higher commodities costs." For example, it cited Kraft, which recently posted decent results.

Fox does have a point, though in saying that the trend "is expected to continue as rising commodity and food costs work their way into the supply chain, forcing consumers to pay more." Consumers at every level have their breaking point.

He points to the recent problems at a number of companies: Tyson Foods, Maple Leaf Foods, Pilgrim's Pride, and Smithfield Foods. The common thread here, unmentioned by Fox, is that they are all meat or poultry producers, which are particularly vulnerable to rising grain costs.

But he noted an interesting anomaly, which highlights the difference between this recession (or slowdown, or whatever it is) and earlier ones. Usually, beef and pork suffer the most, while, as I've noted previously, chicken tends to do well. But at Tyson, Fox writes, the "beef, pork and prepared foods segments were all profitable in the quarter, while the chicken division showed a $44 million operating loss."

  • Dan Mitchell

    Dan Mitchell has spent the past 20 years writing and editing for newspapers, magazines, and Web publications. Currently, he writes the What's Online column for the Saturday business section of the New York Times. He has also written for the Chicago Tribune, the Minneapolis Star-Tribune, National Public Radio, Business 2.0, and Wired.