General Mills (NYSE:GIS) is about to release earnings. Ponder this Bear Case Scenario:
Grains, proteins, and edible oils have been a constant headwind as food inflation abounded. Cost pressure could reignite if unfavorable weather conditions resurface. GIS is as much a food commodity play as it is a marketing company.
Mark to market accounting to account for hedge costs is affecting quarterly earnings. General Mills is unique among its peers. This recognizes their standing as a commodities trader with financial risk. Management needs to develop an expertise in commodities management.
Decreases in food assistance AKA food stamps plus probable devaluations in Venezuela will create further headwinds.
George Gutowski writes from a caveat emptor perspective.