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Show nil ; FOOD CANNERS WORTH AN INVESTMENT LOOK For quite some time investment interest in the stocks of food-canning companies (including fruit and vegetable packing) has been lackluster. Indeed, virtually the entire spectrum of food processing stocks have underperformed the overall stock market for the past two years or so. Investors' disinterest in these issues was due to disappointing earnings results in some instances, but even more important has been anxiety over the potentially adverse implications of stubbornly high levels of inflation and interest rates. However, the Research Department of Babson's Reports contends that prospects at the present time are good for stocks of companies with representation in the food-packing business over the near-to-intermediate term. , FOOD PRICES HEADED HIGHER Overall, for many months prices of foods for home consumption have been in an upward trend. And the pace has quickened noticeably since June. The long spell of searing temperatures and drought conditions last summer took a harsh toll of prospects for 1980's harvests har-vests of food and feed grains and other crops, causing farm prices to climb. At the same time, the soaring quotes for feed grains reduced the potential output of red meat and poultry products. Also contributing to rising food costs were the continuing upmoves in prices of sugar and corn-based sweeteners and the smaller-than-expected agricultural production abroad which lifted foreign demand for U.S. farm products. Effects of these factors will keep domestic food prices in a firm-to-higher trend well into 1981 before we can expect to see any material easing tendencies. CHANGE IN CONSUMPTION PATTERNS AHEAD While beef supplies are expected to rule somewhat higher on a year-to-year comparison over the immediate future, they will range well below 1978 levels, as has been the case throughout most of 1980. However, substantially lower supplies of pork and poultry are in the offing for at least the first three quarters of 1981. As a result, food shoppers will encounter higher retail prices over much of the year ahead, even above those of the year now drawing to a close. Aggravating the price climate for food for home consumption will be increases in costs for transportation and marketing. We would not be surprised sur-prised to see retail food costs advance at least 10-12 percent in 1981. The toll could be even greater if the nation is victimized again by adverse weather in agricultural areas. Hence, consumers' preference in recent years for fresh fruits, vegetables, beef, poultry, and fishery products may well give way to greater emphasis upon canned and frozen food items in 1981. BETTER PROFITS OUTLOOK FOR FOOD CANNERS Although companies with canning operations will not be spared inflation's effects, there are compensating factors which should make for better earnings in 1981. The smaller pack (owing to an estimated 15 percent drop in the crop outturn of fruits and vegetables for commercial processing), plus a less burdensome carryover, will permit more orderly pricing and a lessening of pressures for costly advertising and price concessions associated with promotional campaigns needed to move bloated supplies of canned and frozen food products. In view of the more auspicious profits ' outlook, the Research Staff of Babson's Reports recommends retention of the stocks of companies having an important im-portant stake in food packing. Two issues in this category which Babson's currently favors are the common stocks of H.J. Heinz and Pillsbury. H.J. Heinz has a record of growth and expansion which extends over a century cen-tury and its large and varied product line is marketed worldwide. Pillsbury has acquired Green Giant Company (canned and frozen food products ) to go along with its milling and baking, as well as fast-food-outlets, activities in the consumer field. |