Show BUSINESS end and the STOCK MARKET by BABSON'S REPORTS INC Copyright 1971 PROSPECTS FOR MEAT PACKERS In a stock market rebound such as we have experienced since late May 1970 investor interest tends to gravitate gravitate tate toward the more popular speculative specula tive and growth issues However depressed depressed de de- de pressed stocks in colorless and routinely routine routine- ly cyclical lines often participate in a general market recovery to a significant significant cant and rewarding extent even while by far the greatest attention may be focused upon the more widely followed follow follow- ed issues This is precisely what has happened with meat packing stocks as a group Throughout the long up up- trend in stock prices of the past ten and a half months this category has been in the forefront of the market advance with many issues now at or near cyclical highs Favor Favorable ble Operating Climate From early 1967 cattle prices tr trend trended na ed cd upward the advance culminating in hn spurt in the first half of 1969 The rise in hog prices did not take hold until near the close of 1968 but it until early in 1970 Due to the strength in cattle and hog prices herds of both farm animals were en n Subsequently when livestock prices turned down cyclically of cattle and hogs were stepped up This combination of low cattle and hog prices prices ces and a high volume of meat packing companies The favorable climate was even more pronounced last summer with the corn blight infestation sending prices of feed grains upward and prompting livestock raisers to boost to such a degree that cattle cat tie tle and hog prices were further de de- de pressed Some firmness in livestock quotes developed earlier this year but the climate still favors meat packing Consumption Pattern Over the past 20 years per capita consumption of meat products has risen risen rise ris ris- ris en spectacularly This is primarily a n reflection of the climb in per capita income and in income per family However How ever the entire increase has occurred in beef and poultry as indicated by the following statistics 1950 beef pork poultry 2 veal 80 lamb and mutton 40 1955 beef pork poultry veal 94 lamb and mutton 46 1960 beef pork 6 poultry 3 veal 61 lamb and mutton 48 1965 1905 beef pork poultry veal 52 lamb and mutton 37 1970 beef 1134 pork poultry veal val 33 lamb and mutton 34 The consumption pattern for the longer long er term can however change temporarily temporarily tempore in any g given gen en year This happened in 1970 when pork and poultry prices enjoyed a relatively attractive position and tenuous business and employment conditions plus rising living costs forced for ced eed consumers to economize even on foods A Look Ahead Over the months just ahead prospects for the meat packing industry remain favorable Improving economic conditions condi tons should bolster the underlying growth trend of beef consumption while pork and chicken use should post increases over last year From the operations op op- standpoint the meat packers can look forward to adequate supplies for most of the remainder of 1971 Depending on the 1971 crop outcome for feed grains and corn in particular livestock supplies could become less advantageous for the industry this summer It is s characteristic of cyclical stocks in terms of group action to embark em bark upon new or downtrends within the of industrial con Hence the Research Department Department Depart Depart- ment of Babson's Reports is currently recommending purchase of two stocks for representation in the highly volatile meat packing field It H is our opinion that both of these issues possess quite promising rebound potential and may maywell maywell maywell well be included in a well rounded portfolio portfolio port port- folio Iowa Beef Processors and United Brands the latter owns John Morrell |