Energy Research, Nukes to Propel Rural Economy

Gun sales are hot now, but global warming is turning billions in research and construction toward rural power projects.

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Gun and ammo makers continue to sell their products at record-breaking rates. Waiting time for delivery of Sturm Ruger’s AR-15 assault rifle is running six months.

Ruger reported a $136.3 million backlog. Smith & Wesson reported a 45% increase in handgun sales this year over 2008 and the number of instant background checks in May increased more than 15% over a year ago after even larger gains in preceeding months.

If gun-making is the hottest sector of the rural economy, the biggest dollars moving into the rural economy come with energy research and production. In June alone, the federal government has announced nearly $20 billion in loans and grants for projects aimed at reducing greenhouse gasses in the production of electricity.

Guns and power production are the two bright spots in the rural economy. If there is an economic recovery afoot, it’s hard to see it moving among most of the companies that do much of their business in rural America. The Yonder 40 — 40 companies chosen to reflect the rural economy — is down slightly since the beginning of June. 

Still, the Yonder 40 continues to outpace the other major indices. Since the beginning of 2009, the 40 is up over 10 percent. The Dow Industrials are down nearly 3 percent and Standard & Poor’s 500 is up 2 percent.

The surge in gun sales began after Barack Obama won the presidency. Fears that the Democratic President will push gun control laws has not only increased gun sales, Obama’s election has also spurred membership in the National Rifle Association. NRA membership is up 30% since the election and last month’s NRA convention attracted 65,000 attendees.

Sturm Ruger stock is up over 7 percent since the beginning of June after doubling since February.

The long-term prospects for economic expansion in rural America, however, comes with climate change and the need to curb global warming gasses. 

The Obama administration decided to push ahead with FutureGen, the experimental “clean coal” electric generating plant that could be built near Mattoon, Illinois. The Bush administration had essentially killed FutureGen 18 months earlier.

Daily Yonder
The 40 companies making up the Yonder 40 are doing better than the other major stock indices.

FutureGen is meant to figure out how to capture and store carbon emissions from a coal-fired power plant. Obama’s Department of Energy has decided to spend $1 billion of the federal stimulus package to help restart the moribund project, which is expected to cost at least $1.5 billion. Private companies, including the DY40’s Peabody Energy, will pay the rest of the cost of the project.

FutureGen has become a priority for Obama (and energy Secretary Steven Chu) because of its potential to help clean up coal power plants in China. “Not only does this research have the potential to reduce harmful greenhouse gas emissions in the U.S., but it also could eventually result in lower emissions around the world,” Chu said.

Besides FutureGen, there will need to be extensive work refitting existing coal-fired plants if the world wants to stem the growth in greenhouse gases, according to a new report from the Massachusetts Institute of Technology. MIT figures the U.S. will need to spend $1 billion a year in research and development to develop true “clean coal” plants.

Energy Secretary Chu also decided to distribute $18.5 billion to four companies in an effort to revive nuclear power production in the U.S. Southern Co., a member of the Yonder 40, will share in that money.

The money will be used as loan guarantees for a new generation of nuclear power plants. The money will allow the four companies to start building reactors by 2011. Southern will build its plant in Burke County, Georgia. Other plants are slated to be constructed in Calvert County, Maryland, Fairfield County, South Carolina, and Matagorda County, Texas. (See map for location of the plants.)

Secretary Chu has made nuclear power a priority for his agency, having concluded that nuclear energy has the potential to significantly reduce the growth in greenhouse gasses.

Between FutureGen, clean coal research and nuclear plant construction, rural America will see a huge investment over the next decades.

There was other news coming from Yonder 40 companies recently:

• Federal investigators are still looking for the cause of an explosion at a ConAgra Foods plant in Garner, North Carolina, that killed three workers and injured another 38. The plant produced Slim Jim meat snacks.

• Dean Foods, the nation’s largest dairy processor, bought European soy foods producer Alpro for $455 million. Dean makes Silk, the soy beverage.

• DirectTV and DISH Network have asked Congress to require broadcasters to help them beam television signals to 30 largely rural markets that don’t now have  complete satellite coverage. There are 210 television markets in the country; 30 don’t have access to all four major networks.

Congress is now drafting legislation that would reauthorize a law giving satellite providers their national licenses. Virginia’s Rick Boucher, chair of the House Energy and Commerce Telecommunications Subcommittee, has talked about requiring satellite companies to extend service to all parts of the country. The satellite companies say that would cost $30 million and contend the networks should share in the cost.

• Meanwhile, DirectTV (a member of the Yonder 40) says it will offer targeted advertising beginning in 2011. “We know exactly where a viewer is located, and to advertisers who want to avoid waste, that makes all the difference,” said a DirectTV spokesman.

• Smithfield Foods reported a fourth quarter loss and said it will continue cutting the size of its hog supply. The company said it would cull its sow herd by 3% after cutting it by 10% in the last fiscal year.

The company said the entire industry would have to reduce production by 10% in order to raise prices above the cost of production. The Wall Street Journal reported that “unprofitable prices are draining so much equity across the Farm Belt that lenders are pressuring farmers to cull their herds.”

The hog glut was caused in part by a decision by China to exclude U.S. port after the H1N1 virus appeared in Mexico. 

Below are the forty stocks in the DY 40, their current price per share and how they have fared since June 1.

Daily Yonder

 

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