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The Hershey Company Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: February 18, 2011 08:20AM
The Hershey Company (HSY) filed Annual Report for the period ended 2010-12-31.
Highlight of Business Operations:
During 2010, the average cocoa futures contract prices increased compared with 2009, and traded in a range between $1.26 and $1.53 per pound, based on the IntercontinentalExchange futures contract. Cocoa futures prices during 2010 traded at prices that were near 30-year highs. The sustained high cocoa futures prices reflected concern over long-term growth capabilities in the Ivory Coast and continued interest in commodities as an investment by various hedge funds. The table below shows annual average cocoa prices, and the highest and lowest monthly averages for each of the calendar years indicated. The prices are the monthly averages of the quotations at noon of the three active futures trading contracts closest to maturity on the IntercontinentalExchange.
During 2010, prices for dairy products started the year slightly above $.14 per pound and increased to approximately $.18 per pound on a class II fluid milk basis. Prices are stronger in the face of strong demand for dairy products and tight supply of butterfat. Our costs for certain dairy products may not necessarily reflect market price fluctuations because of our forward purchasing practices.
The price of sugar is subject to price supports under U.S. farm legislation. This legislation establishes import quotas and duties to support the price of sugar. As a result, sugar prices paid by users in the U.S. are currently substantially higher than prices on the world sugar market. In 2010, sugar supplies in the U.S. were negatively impacted by government import restrictions, strong demand and high world market prices. As a result, refined sugar prices increased significantly, trading in a range from $.48 to $.66 per pound. Our costs for sugar will not necessarily reflect market price fluctuations primarily because of our forward purchasing and hedging practices.
Peanut prices in the U.S. began the year around $.46 per pound and increased late in the year to $.56 per pound due to the subpar yield for the current years crop. Almond prices began the year at $1.95 per pound and increased to $2.40 per pound during the year driven by strong demand. Our costs for peanuts and almonds will not necessarily reflect market price fluctuations because of our forward purchasing practices.
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