4 Food Stocks at Risk Thanks to Record Heat

As if food stocks didn't have enough problems already, global warming is now a headwind

Perhaps the concept of global warming “was created by and for the Chinese in order to make U.S. manufacturing non-competitive.” While we may think we are an advanced society, most of the world is still undiscovered. There’s groundbreaking research being conducted every day. So who knows? Maybe our President is correct.

4 Food Stocks at Risk Thanks to Record Heat

But no matter where you stand on the global warming, one thing is certain: It’s no longer an avoidable issue. Many people perceive climate change to be a serious problem, ultimately resulting in landmark deals like the Paris Agreement.

Even President Donald Trump appears to be softening his stance, thanks to pressure from his close advisers. Furthermore, publicly traded food stocks are at risk due to unusual climate dynamics.

According to a recent report from Bloomberg, record warm temperatures are spreading across the country. Ordinarily, that could be chalked up to an unusual season, which happens from time to time. However, in this case, fruit trees located in farms in the Midwest and Northeast are flowering too early. This may restrict maple syrup harvests. But the more critical concerns is “cold air in Canada and northern New England lingering not far from many orchards.”

That frosty air could come in and hit agricultural areas affected by the record temperatures. If that occurs, it will kill off the flowers that have already bloomed. Without the flowers, there is no way for the trees to bear their fruits. Since the danger zone of a “cold-air attack” lasts until mid-May, farmers and investors of food stocks are on edge.

An even more troubling thought is that these warmer conditions could be here to stay. Multiple states, particularly those in the eastern time zone, saw record-breaking temperatures for this time of year. That has the potential of impacting all food stocks at some point. Farming is a very unforgiving science. Get it wrong once and the pain rolls down the supply chain.

We can only wait and hope for the best. But for right now, here are four food stocks that may be at risk from rising temperatures.

Food Stocks to Sell: Whole Foods Market, Inc. (WFM)

Food Stocks to Sell: Whole Foods Market, Inc. (WFM)
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Source: Source: JYE Financial, unless otherwise indicated

Logically, they’re just as adamant about what they are not — no GMOs, no antibiotics, no artificial anything. You’re not going to find any “Frankenstein” food products here!

Unfortunately, WFM being a do-gooder isn’t always teddy bears and ice cream. If the supply chain of natural and organic products is negatively impacted, there’s not a whole lot they can do. Considering that they’re known for their healthy vegetables and fruits, the rising temperature issue has to be worrisome. In addition, raising prices — even on their more affluent consumer base — isn’t the best situation.

And investors are feeling pretty antsy. So far this year, WFM stock is down about 4.2%, which is pretty sad. Even worse, the highest it has ever been since its January opener is just under 3%. Again, this is a pedestrian performance for Whole Foods. Unless the company figures something out, it’s looking like a drab year.

With temperatures rising and fruit trees in danger, this is not the response WFM was hoping for.

Food Stocks to Sell: Williams-Sonoma, Inc. (WSM)

Food Stocks to Sell: Williams-Sonoma, Inc. (WSM)
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Source: Source: JYE Financial, unless otherwise indicated

When most people walk into WSM, they’re usually on the lookout for fine cookware and classy gifts. But Williams-Sonoma also has a number of fruit delicacies that could see a literal supply freeze.

Coupled with this concern is the fact that we’re steadily entering into profitable holidays for WSM. Easter and Passover overlap in the middle of next month. In the following May, of course, we have Mother’s Day. If the cold air from the north were to swing down in this month, that’d be a major crisis rippling through Williams-Sonoma and other food stocks.

Technically as well, WSM hasn’t provided much confidence for investors. Shares returned a loss of 14% in 2016. This year, Williams-Sonoma is up more than 3.5%. However, it’s going to need a lot more kinetic energy than that for buyers to hold on. Given the choppy nature of WSM over the last 15 months, I wouldn’t blame anyone for cutting their losses.

While Williams-Sonoma may cater to a wealthier clientele, you can’t pick a fight with Mother Nature.

Food Stocks to Sell: Jamba, Inc. (JMBA)

Food Stocks to Sell: Jamba, Inc. (JMBA)
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Source: Source: JYE Financial, unless otherwise indicated

In fact, I don’t know too many companies that would suffer more from a climate-change downturn than JMBA. Although it’s not technically part of the food stocks category, JMBA proudly integrates whole food ingredients. That is a big seller, especially when you’re marketing to health-conscious regions like Southern California. But when you’re faced with a supply freeze, an asset can quickly become a liability.

And to be honest, liability is more what investors think of JMBA stock than any other description. Year-to-date, shares are down 5%. It’s bad, but it’s not unusual compared to Jamba’s food stocks counterparts. What’s really upsetting, though, is that JMBA shows no sign of getting back to its winning ways. Since the spring of 2015, Jamba stock has been trapped inside a severely bearish trend channel.

I’m not seeing too many factors moving in JMBA’s favor, and certainly, the climate-change ordeal is an unwanted headache.

Food Stocks to Sell: Rocky Mountain Chocolate Factory, Inc.

Food Stocks to Sell: Rocky Mountain Chocolate Factory, Inc.
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Source: Source: JYE Financial, unless otherwise indicated

First of all, Rocky Mountain is a Canadian company, and what kind of sick animal doesn’t like Canadians? More importantly, RCMF is actually quite the hot ticker.

On a YTD basis, RCMF is up a hair over 10%. If you’ve been paying attention, the average YTD performance of the other three food stocks is an embarrassing drop of 1%. In all fairness, it hasn’t always been a pleasant journey for RCMF. Rocky Mountain certainly earned its name when it lost over 34% of market value between late-February of 2015 through mid-June of last year. But now, it’s on the road to recovery, or so it would seem.

If the dreaded cold air doesn’t drift over into our orchards and farms, I might be a buyer of RMCF. But as things stand right now, I’m not too sure. Rocky Mountain specializes in chocolate delicacies, many of which incorporate ingredients that would be negatively impacted by the warmer weather. And it’s that darn Canadian weather that’s hurting their (and our) supply chain.

Now that I think about it, I can see why some folks may not be too fond of Canada this year!

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/03/4-food-stocks-risk-record-heat-wfm-wsm-jmba-rmcf/.

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