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The financial turbulance stirring the nation's markets worked over the Yonder 40 last week, as the companies that do much of their business in rural America have found themselves battered and, in some cases, aided by tight credit markets and fluctuating prices.
The 40 companies that make up the Yonder's stock market index of rurally based firms dropped by an average of 5.6% last week, dropping more than the Dow 30 (down 2.2%) or the S&P 500 (off 3.4%). For the year, the Yonder 40 is still outpacing the other major stock indexes. (See chart above.)
(The full Yonder 40 is listed below.)
The variation among the 40 stocks was stark last week, however. The newspaper industry has been battered for the last year, but last week newspaper stocks staged a small rebound. That move helped bring back Lee Enterprises, a publisher of small town newspapers. Lee rose almost 12% last week.
Meat producers, on the other hand, had a terrible week. The chicken, pork and beef producers have been hurt by high feed prices and thin profit margins. Now the credit crisis on Wall Street has added to the sector's woes.
Texas chicken producer Pilgrim's Pride warned this past week that it will report a "significant" loss this quarter and could end up in default with its lenders. Pilgrim's estimates its grain costs in fiscal 2008 were $900 million over the previous year. The company also locked in corn prices at $8 a bushel, only to see prices fall to under $5 a bushel.
With Pilgrim's announcing possible default, other meat producing companies are coming in for scrutiny, according to the Dow Jones Newswire:
How lenders deal with Pilgrim's could be a harbinger for other big meat companies, such as Tyson Foods Inc. and Smithfield Foods Inc. Historically, agricultural lenders have tended to be lenient because they are familiar with the cyclical and sometimes volatile nature of the business, which can be heavily affected by weather and other factors. "The question is, in this crazy credit market, will the lenders give them a pass?" said Eric Katzman, a food industry analyst at Deutsche Bank.
A market worried about credit punished both Tyson and Smithfield Food, two members of the Yonder 40. Tyson dropped 11% last week; Smithfield Foods fell nearly 18%.
Other farm related firms fared no better last week. Andersons, which produces ethanol and fertilizer, fell over 9%. Deere dropped nearly 13%.
Investors, meanwhile, took a liking to land. Alico, a central Florida company that controls 135,000 acres, has risen 22% since the first of September. And investors have been attracted to a new kind of "growth" company — timber firms.
Andrew Edwards of Dow Jones Newswire reported that "timberland has become viewed as a safe haven and an inflation hedege — driving ever more investors, large and small, to sink their money into stands of pine, maple and fir." For example, Plum Creek Timber, the nation's largest landowner, doubled its money recently on land it bought in 2001. Plum Creek stock has risen about 5% since the first of this month.
Investors, however, lost their interest in coal stocks. Peabody Energy dropped 15% last week. Cimarex Energy fell 6%. Walter Industries fell 24%. The Energy Information Administration said last Friday that U.S. coal production fell by 700,000 tons (three percent) for the week ending September 20. The news was enough to continue a tumble in coal stocks that has been going on for months.
In other news affecting Yonder 40 stocks:
“¢ Altria Group (maker of Malboro cigarettes) has announced that it will purchase UST Inc., the nation's largest smokeless tobacco company and a Yonder 40 member, for $10.3 billion.
“¢ Fleetwood Enterprises, the manufactured housing and recreational vehicle company, lost nearly 29% of its value last week on credit fears. Standard & Poor's Ratings Service cut its credit rating on Fleetwood, which has been hard hit by lowered demand for its products.
“¢ ConAgra Foods has seen its stock decline by 18% this year as it has been hurt by high commodity prices. But the company announced this week that it sees a moderation of prices in the next year which will help the company's profits.
“¢ Gaylord Entertainment (owner of the Grand Ole Opry and several resort hotels) lost nearly 12% this past week as the hotel industry in general took a thumping. J.P. Morgan cut ratings on the hotel industry, citing expected declines in per room revenue over the next year of up to 6%. This is how the entire Yonder 40 fared in the week ending September 26, 2008:
|Yonder 40||Ticker||Price September 26||Price Change 9/19 to 9/26||Percent Change 9/19 to 9/26|
|Burlington Northern Santa Fe Corp.||BNI||98.34||$2.37||2.4%|
|Peabody Energy Corp.||BTU||48.63||$8.66||15.1%|
|ConAgra Foods Inc.||CAG||19.73||$0.00||0.0%|
|Cato Corp. Cl A||CTR||17.99||$0.16||0.9%|
|Deere & Co.||DE||55.33||$8.05||12.7%|
|Dean Foods Co.||DF||23.6||$0.28||1.2%|
|Family Dollar Stores Inc.||FDO||26.95||$0.98||3.5%|
|Fleetwood Enterprises Inc.||FLE||1.32||$0.53||28.6%|
|Gaylord Entertainment Co.||GET||30.45||$4.05||11.7%|
|International Speedway Corp.||ISCA||39.75||$1.66||4.0%|
|Mohawk Industries Inc.||MHK||69.9||$4.44||6.0%|
|Mine Safety Appliances Co.||MSA||39.68||$0.18||0.5%|
|Plum Creek Timber REIT||PCL||50.78||$1.76||3.3%|
|Penn Virginia Corp.||PVA||58.2||$1.21||2.1%|
|Regions Financial Corp.||RF||14||$5.80||29.3%|
|Sturm Ruger & Co.||RGR||7||$0.06||0.9%|
|Stage Stores Inc.||SSI||14.61||$0.05||0.3%|
|Tractor Supply Co.||TSCO||45.49||$0.47||1.0%|
|Waddell & Reed Financial Inc.||WDR||24.42||$4.58||15.8%|
|Wal Mart Stores||WMT||60.71||$1.01||1.7%|