Long the Pantry

by Mr Juggles

Prices for certain foods are up big. On its last conference call, Costco — in response to a question on where they were seeing price inflation — cited blueberries (up 20%), cheese (mozzarella up 25%), chicken (up 12-15%), coffee (up 12-15%), and butter (up high single digits). These are excellent returns if you’re holding food inventory.

Recommendation: We advocate buying large quantities of cheese, coffee, and butter. Rent temporary storage if necessary. But the best way to play this is probably through live chickens. Own the inventory (chickens) for price appreciation while clipping the dividends (eggs) in the interim. It’s a no lose proposition.

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  1. Cincinnatus_C
    June 11th, 2007 | 12:50 pm

    I also recommend geographical tangerine arbitrage..based on my own experiences. A bag of tangerines will cost you about $4 in Chicago (w/a Jewel card of course), but they’re around $8 in the Food Emporiums here in NYC.

    Of course the street vendors mess the whole thing up, but maybe if you simultaneously long street tangerine vendors and invest the proceeds in TIPS?

  2. June 11th, 2007 | 8:16 pm

    Mr. Juggles,

    you are my inspiration for most things. I have posted a link to your website on mine. Let me know if this is acceptable.


  3. June 11th, 2007 | 8:22 pm

    you are my inspiration for most things. I have posted a link to your website on mine. Let me know if this is acceptable.

  4. Overfitted
    June 11th, 2007 | 9:08 pm

    Quite frankly, I’m still recovering from your long on spoiled blonds, which is down roughly 23-40% percent. I think the ideal exposure to the asset class targeted is demanding delivery – which is a handy way to buy groceries in bulk.

  5. Mr. Gupta
    June 11th, 2007 | 10:41 pm

    Sir Mr. Juggles,

    I fancy your recommendation, yet I am considering playing the angle with a derivatives transaction rather than taking a position in said underlying assets. However, before I execute my trade, I have two questions for you.

    1) Does the presence of the convenience yield for storing said assets make it more likely that the price of a futures contract would be greater than or less than an equivalent forward contract?

    2) Would the presence of the convenience yield necessarily create a condition of contango or backwardation in the futures markets?

    Thank you in advance,

    Mr. Gupta, CFA wannabe

  6. harvey
    June 12th, 2007 | 10:46 am

    I’m all for buying cheese futures. when the delivery date comes: if the market’s up, you profit. hooray for money. if not, you take physical delivery, and hooray for cheese! you win either way.

  7. bfellows
    June 12th, 2007 | 4:54 pm

    Would a foreign investor looking for domestic currency denominated contracts need to worry about interest rate parity? Oh wait… we don’t actually need to know that…

  8. June 19th, 2007 | 11:17 am

    Parsley prices are up 20% wholesale. Seriously. I mean spice prices are up significantly this quarter, but I didn’t realize there was such a large parsley demand.