When Food Prices Are Falling You Want to Be in the Middle, Man
NEW YORK (TheStreet) -- In any time of deflation it’s a company that can absorb cost decreases and maintain prices that comes out on top.
In other words, middlemen, distributors and processors of raw materials.
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This turns out to be as true in the food business as in any other. I noted Thursday that stock in grain processor Archer Daniels Midland
Since neither ADM nor INGR farm, they are not hurt by falling commodity prices. They also don’t sell at retail, enabling them to retain some pricing power and limit marketing costs. If ADM and INGR were in the oil patch they would be refiners. If they were in cars they’d be parts companies. If they were in technology they would be chip companies.
In a deflationary time the middle is the sweet spot. Jim Cramer, for instance, has been pounding the table for companies in the natural foods business, where a reputation for quality can overcome pricing pressure. But that’s not working in the retail end, where Whole Foods Market
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Here are some of the food industry’s other winners in 2014: