Moving Today: Molycorp Trading, Food Inflation

Rare earth proxy Molycorp was halted righted after opening Monday for News Pending; it has resumed trading this morning. The lockup period for its IPO is now expiring; the company is offering a mandatory convertible preferred stock offering and an offering of common stock by some stockholders. They are also announcing an expansion plan to double the capacity of its California Mountain Pass facility.


Food inflation rears its head at McDonald's . MCD's company operated restaurant margins were up only slightly in Q4 compared to the same period a year ago. This may not sound bad, but MCD has seen notable margins improvements in the last several years. The problem is food inflation, which is now UP as a percentage of sales, after being DOWN for the last three quarters.

And it will increase in 2011: they tweaked food inflation estimates higher in the US (to up 2.0 to 2.5 percent from up 2 percent previously) and Europe (to up 3.5 to 4.5 percent from 3 percent).

This is not the only reason most restaurants are lower today: bad weather at the end of December clearly hurt some companies, but long-term the food inflation story is now coming to the fore.

Morgan Stanley, commenting on protein processors like Sanderson Farms and Smithfield Foods — which are huge consumers of grain — noted that "higher feed costs are an immediate and unequivocal reality." These protein processors are trading down today.

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