Corn Prices May Give McDonald’s Indigestion

Posted on | April 27, 2007 | Comments Off on Corn Prices May Give McDonald’s Indigestion

A recent Wall Street Journal article made a direct connection between corn prices and McDonald’s pricing and profitability. And well they should. As outlined in this week’s Health Politics, a visit to fast food outlets in the U.S. and around the world means that you’ll be eating corn (from which the beef, the bun and the condiments are derived) and washing it down with more corn (in the form of high-fructose corn syrup, the sweeteners in both Coke and Pepsi).

Projections are that McDonald’s won’t see the pinch from high corn prices for another quarter since it advance purchases large quantities of materials. But analyst Steven Kron from Goldman Sachs says, “As we move through the year, and those contracts start to get renewed” their costs will move higher. As the WSJ put it, “That could ultimately give the food chain a bad case of indigestion.”