Fewer Rural Stocks, People Losing Ground

The recession has been horrible. But, relatively speaking, rural people and businesses seem to have fared better than have those in the cities.

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Nobody was untouched by the recession that began in December 2007, but fewer rural Americas report losing ground during the economic downtown than those living in either the suburbs or the cities.

The Pew Research Center released the results of a survey last week titled “Two Recessions, Two Americas.” The Pew pollsters asked people about their economic well-being during the recession. Had they missed a house or rent payment? Spent time unemployed? Had their paychecks shrunk? 

Pew found that America fell into two distinct groups — one that had multiple financial setbacks since December 2007 and another that reported they had held their own.

The chart on this page shows that rural Americans were less likely to report that they had lost ground during the recession than those living in the cities or the suburbs.

The same can be said of rural stocks. Since the beginning of the recession, the Daily Yonder 40 — 40 publicly traded stocks chosen to reflect the rural economy — have outpaced all the major stock indexes.

In 2010, the DY 40 index of rural stocks has risen 12.1%. The Dow Industrials are up 4.1% and the Standard & Poor’s 500 has risen just 3%.

Daily Yonder
Compared to the Dow Industrials or the S&P 500, the Daily Yonder 40 index of rural stocks is doing quite well in 2010.

Is rural America’s relatively better position according to the Pew poll a consequence, in part, of stronger rural businesses? We don’t know, but rural communities do have lower unemployment than the cities and results from the Daily Yonder 40 show strong business trends across a number of sectors.

This is not to say that rural America was unscathed during the downturn. According to Pew’s survey, 52% of rural Americans say they’ve lost ground during this recession. That’s lower than the tally for the cities, but a huge number of rural residents have been hurt.

The effects of tighter family budgets certainly show up in the Yonder 40. An increasing number of people are going to dollar stores and that is reflected in the stock price of Family Dollar, which has risen nearly 56% this year.

“Dollar stores have shown the biggest gain in shopper visits over the last year out of all the retailers that sell basic consumer goods, according to market research data,” Stephanie Clifford reported recently in the New York Times. 

There has been a boom in budget-priced goods. Manufacturers are bundling items such as toilet paper and garbage bags in sizes that can sell for a dollar. And instead of going to Wal-Mart to find bargains, Americans are heading to stores such as Family Dollar.

Dollar stores are “stealing heavy shoppers” from Wal-Mart, according to one research firm. Visits to dollar stores increased 2.6% from June 2009 to June 2010 while during the same period visits to big box stores such as Wal-Mart declined 7%.

Dollar stores are no longer just the shopping centers for low income Americans. Upper income people are going to Family Dollar in search of bargains.

Rural areas are also growing more attractive as places to “outsource” work done in cities. Instead of moving call centers in India, reports Al Lewis for MarketWatch, some firms are opening low-wage centers in rural towns. 

“They (call center businesses) were actually seeking out rural locations,” explained Judson Edwards, who went Alabama’s Troy University as an undergrad, and is now dean of its business school. “They didn’t want to be too close to the larger cities, which is very different than what we teach our students about site locations.”

“People don’t give folks in rural communities enough credit for the work ethic that they have,” said an executive with a company opening call centers in rural places. “We’ve been able to hire some extremely intelligent people who are really dedicated to their jobs.”

Good business in dollar stores and the spread of low-wage, low-skill call centers is not exactly great news. The better economic picture would have people making enough money to shop at higher price shops. 

Still, there are a number of rural firms that are doing quite well. RailAmerica, a short haul rail company, reports that its traffic in August was up 3.6% over August 2009. The biggest gains were in metallic ores and metals and chemicals. (RailAmerica’s increased freight has not yet shown up in the company’s stock price, however; the company’s stock is down 17% this year.)

Coal shipments at RailAmerica were down 4.6% from a year before. Coal stock prices have been mixed in 2010.

The price for basic foods has remained high. That has cut into profits at food companies that have been trying to cut prices to satisfy cost-conscious customers. 

Meanwhile, corn prices moved over $5 a bushel as the outlook for the 2010 harvest was tempered.

The regional banks took a licking early in the recession. But in 2010, their stock prices have rebounded from depressing lows. Regions Financial is up 31% for the year and Southwest Bancorp is up 85%.

President Barack Obama’s proposal to spend $50 billion on road building and other infrastructure recently pushed up the stock price of Astec Industries, a road materials provider.

Twenty-six of the DY 40 increased their stock price so far in 2010. Southwest Bancorp and Family Dollar led the way. They were followed by Andersons (an ag chemical company) and Gaylord Entertainment, which has overcome flooding in its Grand Old Opry properties in Nashville earlier this year.

The losers among the DY 40 in 2010 include milk producer Dean Foods and seed and ag chemical giant Monsanto, which is the subject of an antitrust investigation by the federal government and several states.

The full list of the Daily Yonder 40 and how these companies have fared so far this year is below:[img:dy40newSept.gif]

 

 

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