Cabela’s Leads Rural Stocks as Farm Bill Teeters

Higher food prices find winners and losers among rural companies. Meanwhile, President Bush holds out veto threat on farm bill supported by Democrats.


The Yonder 40, the stock index for rural America, rose nearly one percent last week and continues to lead all the other major stock market measures over the last ten months. The 40 stocks picked to reflect the rural economy are down by 1.5 percent since July 1, 2007. The Standard and Poor 500 is off by six percent.

The Yonder 40 was led by the outdoor and hunting supplier Cabela's. The Sidney, Nebraska, retailer said that revenues rose 16 percent in the first quarter of the year (to $535.5 million) and that net income jumped 39 percent. The company's stock rose 16 percent last week.

While Cabela's bounced back from previous losses, the rural economy is still being roiled by changes in the prices for energy and food.

The Yonder 40 has both won and lost from a tremendous increase in the prices paid for food and fuel. "At a time when parts of the world are facing food riots, Big Agriculture is dealing with a different sort of challenge: huge profits," The Wall Street Journal reported last week. Monsanto (which makes seeds and heribicides) and Deere (tractors, combines, sprayers) have both benefited from the runup in ag prices.

Those members of the Yonder 40 that buy grains for their business, such as meat producers Tyson and Smithfield Foods, have found it hard to pass the higher prices along to consumers. Last week, the Wall Street Journal reported that food producers (such as Kraft and Kellogg) have hired firms to lobby against subsidies for corn-based ethanol. So have Tyson Foods and Coca Cola, and the Grocery Manufacturers Association has spoken up against the diversion of corn to produce fuel. These first contend that the diversion of corn from food to ethanol production is contributing to the runup in prices for all grains.

Meanwhile, the Bush Administration is still opposing the farm bill compromise being worked out in Congress, according to Washington Post reporter Dan Morgan. "Emboldened by soaring food prices and record farm profits," Morgan wrote Saturday, "(Bush) has pressed Congress to cut farm subsidies sharply and has made clear that he will veto the popular bill if lawmakers do not meet his demands."

Morgan said the top priorities for Bush include "tightening limits on federal farm payments to wealthy individuals; closing a loophole that allows farmers to sell crops above the support price and still collect a subsidy; modifying a plan that would guarantee U.S. sugar growers 85 percent of the domestic sugar market through government purchases of excess imported sugar; and adjusting U.S. farm policy to bring it into compliance with international trade treaties."

Morgan said House Speaker Nancy Pelosi, Democrat of California, supports the farm bill as part of her effort to "reestablish Democratic ties to rural America."

The farm bill is expected to emerge from a House/Senate conference committee next week.

Here is how the entire Yonder 40 stock index fared the week ending May 2, 2008:

Yonder 40 Ticker Price April 25 Price Change 4/12 to 4/19 Percent Change 4/12 to 4/19
Alico Inc. ALCO $38.92 -$1.07 -2.7%
Andersons Inc. ANDE $45.99 $0.36 0.8%
Burlington Northern Santa Fe Corp. BNI $104.24 $4.49 4.5%
Berkshire Hathaway BRKB $4,448.00 $218.00 5.2%
Bassett Furniture BSET $12.16 $0.30 2.5%
Peabody Energy Corp. BTU $62.40 -$1.61 -2.5%
Cabela's Inc. CAB $15.03 $2.03 15.6%
ConAgra Foods Inc. CAG $23.51 $0.60 2.6%
Cato Corp. Cl A CTR $17.10 $1.41 9.0%
Citizens Communications CZN $11.30 $0.69 6.5%
Deere & Co. DE $85.24 -$4.76 -5.3%
Dean Foods Co. DF $23.55 $1.30 5.8%
DIRECTV Group DTV $25.83 $0.58 2.3%
Family Dollar Stores Inc. FDO $22.08 $0.43 2.0%
Fleetwood Enterprises Inc. FLE $3.49 -$0.25 -6.7%
FairPoint Communications FRP $9.49 $0.17 1.8%
Gaylord Entertainment Co. GET $31.36 $1.32 4.4%
Hormel Foods HRL $39.97 $0.40 1.0%
International Speedway Corp. ISCA $42.10 $0.02 0.0%
Lee Enterprises LEE $7.90 $0.60 8.2%
Mohawk Industries Inc. MHK $78.35 $1.40 1.8%
Monsanto Co. MON $115.22 -$10.26 -8.2%
Mine Safety Appliances Co. MSA $39.50 $1.08 2.8%
Southwest Bancorp OKSB $17.50 $0.19 1.1%
Plum Creek Timber REIT PCL $41.65 -$1.00 -2.3%
Penn Virginia Corp. PVA $49.35 -$2.40 -4.6%
Ralcorp Holdings RAH $60.53 $0.23 0.4%
Regions Financial Corp. RF $23.47 $1.25 5.6%
Sturm Ruger & Co. RGR $7.65 -$1.02 -11.8%
Smithfield Foods SFD $29.57 $1.09 3.8%
Skywest Inc. SKYW $19.50 $2.25 13.0%
Southern Co. SO $37.11 $0.01 0.0%
Stage Stores Inc. SSI $15.46 -$0.05 -0.3%
Tractor Supply Co. TSCO $35.83 -$0.13 -0.4%
Tyson Foods TSN $17.80 -$0.35 -1.9%
UST Inc. UST $51.47 -$2.37 -4.4%
Waddell & Reed Financial Inc. WDR $36.03 $1.64 4.8%
Walter Industries WLT $72.95 $1.69 2.4%
Wal-Mart Stores WMT $57.50 -$0.15 -0.3%
Cimarex Energy XEC $62.06 -$1.55 -2.4%