The Rural Economy: Lands Sales Slow, Wine and Smokeless Tobacco Boom

yonder 40Stocks recover this past week, and the Yonder 40 (except for a gunmaker) does well. But land sales are slowing and the ethanol boom is faltering.



yonder 40

Three out of four of the stocks in the Yonder 40 rose last week, but that didn’t help Sturm Ruger. The Southport, Conn., gunmaker reported a third quarter loss this week — and the stock lost more than a third of its value, the largest drop of any Yonder 40 stock since the index of rural-based companies began in July.

Overall, the Yonder 40 was up a little bit more than two percent for the week, in line with the other major stock indexes. The 40, a compilation of publicly traded companies that reflect the rural economy, is still down two percent from the time it began on July 1.

There’s news aplenty about companies in the 40 — Did you know that the family that owns the Colorado Rockies baseball team made the money used to buy the ballclub by selling a meatpacking operation to ConAgra? — but the most interesting story is about Plum Creek Timber, a timber and land-holding company. Our friends at NewWest carried a fascinating story about Plum Creek last week by Jessie McQuillan. Here are some excerpts:

“Although Plum Creek owns more than eight million acres across 18 states, Montana is a major part of the company’s business, which includes ownership of 1.2 million acres throughout western Montana. The company employs more than 1,400 workers, including eight full-time wildlife biologists and hydrologists and operates nine manufacturing facilities in the state. And Jerry Sorensen, director of Plum Creek’s land asset management, said Plum Creek plans to maintain its long-term involvement in three existing market segments here: timber and natural resources; real estate; and manufacturing.

"The price of rural land, Sorensen said, is appreciating twice as fast as timber land is, and it’s now three to 10 times more valuable than timber lands. “We expect the demographics for interest in rural land to continue,” he said. “We expect a strong market to continue in conservation, and we’re going to work hard to be successful in all of our business segments.”

"Over the next 10 to 15 years, Plum Creek expects to develop 20,000 to 40,000 acres of its Montana holdings, Sorensen said, and will work both independently and with developer partners to do so. Selling land to other developers is the third way Plum Creek lands will be developed, and Sorensen said about 35,000 of its acres have been sold over the last seven years in the state. “The market we’re trying to capture are folks who want to live in the country and enjoy the outdoors but want more subdivision-type amenities,” he said.”

Live by real estate, however, and die by real estate. Just this week, Plum Creek announced some sales would be delayed until the next quarter. Other timber companies are reporting delays in what were hoped to be profitable real estate transactions.

There was other news that affected companies in the Yonder 40:

• Tractor Supply, the Brentwood, TN, retailer of farm and ranch supplies, announced slightly lower earnings in the third quarter on higher costs.

• Dick and Charlie Monfort, the owners of the World Series-playing Colorado Rockies, descendents of the men who founded a meatpacking plant in Greeley, Colo, that was sold to ConAgra Foods in 1987. Good season, Rockies!

• Ethanol has gone from rage to glut. Several new plants have been put on hold or scrapped altogether as an oversupply of the fuel has depressed prices. This has raised questions about fuel and corn-related stocks. Experts don’t see a decline in corn planting next year, but also don’t think there will be much of an increase — which affects companies like Deere.

• DirectTV Group, provider of dish television systems, could be bought by AT&T.

• The economy must be tough because UST Inc. reported a hefty rise in third quarter profits. UST citied a “robust volume growth in moist smokeless tobacco and wine” for its profits and the company raised its 2007 earnings forecast.


Here are the full results for the Yonder 40, October 22-26, 2007:

Companies Ticker Price October 26 Price Change for Week Percent Change for Week
Alico Inc. ALCO 48.85 $2.58 5.58%
Andersons Inc. ANDE 49.97 $1.05 2.15%
Burlington Northern Santa Fe Corp. BNI 85.65 $3.17 3.84%
Berkshire Hathaway BRKB 4,233.00 -$10.00 -0.24%
Bassett Furniture BSET 10.55 $0.03 0.29%
Peabody Energy Corp. BTU 57.93 $7.35 14.53%
Cabela's Inc. CAB 20.17 $0.51 2.59%
ConAgra Foods Inc. CAG 23.82 -$0.28 -1.16%
Cato Corp. Cl A CTR 20 $2.14 11.98%
Citizens Communications CZN 13.11 -$0.09 -0.68%
Deere & Co. DE 145.44 $0.30 0.21%
Dean Foods Co. DF 26.56 $0.33 1.26%
DIRECTV Group DTV 25.7 $0.24 0.94%
Family Dollar Stores Inc. FDO 25.34 $0.78 3.18%
Fleetwood Enterprises Inc. FLE 9.48 $0.55 6.16%
FairPoint Communications FRP 18.61 $0.28 1.53%
Gaylord Entertainment Co. GET 53.54 $1.17 2.23%
Hormel Foods HRL 36.79 -$0.03 -0.08%
International Speedway Corp. ISCA 44.62 -$1.10 -2.41%
Lee Enterprises LEE 15.78 $1.03 6.98%
Mohawk Industries Inc. MHK 86.1 $4.34 5.31%
Monsanto Co. MON 94.28 $6.05 6.86%
Mine Safety Appliances Co. MSA 45.52 $0.81 1.81%
Southwest Bancorp OKSB 19.51 $1.24 6.79%
Plum Creek Timber REIT PCL 43.38 $2.98 7.38%
Penn Virginia Corp. PVA 46.11 $2.61 6.00%
Ralcorp Holdings RAH 56.21 $1.22 2.22%
Regions Financial Corp. RF 27.02 $0.62 2.35%
Sturm Ruger & Co. RGR 10.58 -$6.28 -37.25%
Smithfield Foods SFD 28.5 -$0.65 -2.23%
Skywest Inc. SKYW 27.16 $1.25 4.82%
Southern Co. SO 36.2 $0.80 2.26%
Stage Stores Inc. SSI 18.31 $0.75 4.27%
Tractor Supply Co. TSCO 41.9 -$2.75 -6.16%
Tyson Foods TSN 15.8 -$1.07 -6.34%
UST Inc. UST 53.18 $1.44 2.78%
Waddell & Reed Financial Inc. WDR 32.21 $4.88 17.86%
Walter Industries WLT 30.51 $2.43 8.65%
Wal-Mart Stores WMT 44.64 -$0.34 -0.76%
Cimarex Energy XEC 39.27 $1.31 3.45%