Rural Stocks Turn Up, But Yonder 40 Lags Dow And S&P

Tyson Foods may pick up a failing Pilgrim's Pride, as commodity costs continue to roil the rural economy.


Bust of Bo Pilgrim outside Pittsburg, Texas.

All the major stock indexes rose last week, including the Yonder 40, 40 publicly traded companies chosen to represent the rural economy.

The Dow Industrials rose 4.75%. The Standard & Poor 500 went up 4.6%.

The Yonder 40 rose but 2.5%. The DY 40 is still doing better than the S&P 500 or the Dow since it began in July 2007. (See chart on the next page.)

Economic turmoil is coming home to some rural companies and communities — none so much as Pilgrim's Pride, the world's largest chicken company. Last week Pilgrim's Pride teetered near bankruptcy.

Pilgrim's is not a member of the Yonder 40, but its troubles are typical of what many firms are experiencing. (Tyson Foods, a member of the DY 40, is a potential Pilgrim's buyer.) Higher feed costs have raised the cost of business for all meat producers. Meanwhile, the economic slowdown has diminished the demand for chicken, as Americans have begun to eat fewer meals at restaurants. And stalled credit markets have made it difficult for Pilgrim's to finance its debts. Just two years ago, Lonnie "Bo" Pilgrim bought rival chicken producer Gold Kist Inc. for $1.1 billion.

Now the company, located in Pittsburg, in the far northeastern corner of Texas, is reporting losses.

Those who have driven through Pilgrim's hometown know the large bust of Bo Pilgrim that sits outside the company's headquarters — and the bronze sculpture of Pilgrim sitting on a bench, holding a Bible, with a chicken nearby that apparently was unaware of Bo's intentions. Pilgrim's employs about 50,000 people across the South and Southwest. Its shares are just over $3 now, down from $33 a year ago.

Tyson Foods rose nearly 5% last week, as did meat producer Hormel.

Most stocks on the Yonder 40 rose last week, although it was hard to see a pattern in the trading. Florida landowner Alico rose nearly 17% last week after falling the week before. Plum Creek Timber, a western landowner, fell 16%.

Retailers were weak, after reporting slow sales last week. The exception in this class was Family Dollar, which reported sales gains last week as shoppers went to the main street bargain store looking for deals in toughening economic times. Investor's Business Daily recommended Family Dollar last week.

Several companies in the Yonder 40 were in the news:

“¢ Fleetwood Enterprises has seen its stock drop to under 50 cents a share. The maker of recreational vehicles has been hit hard by both high gas prices and tight financing for RV buyers.

“¢ Bassett Furniture Industries suspended any decision on a previously announced special dividend. The company noted the "unprecedented turmoil in the financial markets, further erosion of home furnishings sales, and general uncertainty regarding the depths to which current economic conditions could worsen."

“¢ Peabody Energy Corp. posted an eleven-fold increase in third-quarter profits. The coal mining company also increased its outlook, citing higher coal production and price increases spurred by higher demand. Most of Peabody's production is in Illinois and the West. Coal companies in Appalachia report lower production in the latest quarter.

“¢ The Wall Street Journal predicted that food prices will continue to rise even though prices for grain and soybeans have fallen by about 50% from summer highs. "Food companies are typically quick to pass along higher commodity costs on the way up, slower to reduce prices on the way down," the Journal reported. "That could bring a continuing run of profits for packaged-food companies even as consumers add higher food prices to the pressures they face from falling housing values and shrinking credit."

This is how the entire Yonder 40 fared in the week ending October 17, 2007:

Yonder 40 Ticker Price October 17 Price Change 10/10 to 10/17 Percent Change 10/10 to 10/17
Alico Inc. ALCO 44.92 $6.46 16.8%
Andersons Inc. ANDE 31.27 $2.48 8.6%
Burlington Northern Santa Fe Corp. BNI 80.1 -$0.06 -0.1%
Berkshire Hathaway BRKB 3,976.00 $196.00 5.2%
Bassett Furniture BSET 5.89 -$0.63 -9.7%
Peabody Energy Corp. BTU 32.03 $3.38 11.8%
Cabela's Inc. CAB 9.36 -$0.01 -0.1%
ConAgra Foods Inc. CAG 18.17 $0.40 2.3%
Cato Corp. Cl A CTR 12.92 $0.19 1.5%
Deere & Co. DE 39.42 $1.30 3.4%
Dean Foods Co. DF 19.78 $0.01 0.1%
DIRECTV Group DTV 20.87 $1.28 6.5%
Family Dollar Stores Inc. FDO 24.66 $2.36 10.6%
Fleetwood Enterprises Inc. FLE 0.48 -$0.17 -26.2%
FairPoint Communications FRP 5.28 -$0.32 -5.7%
Frontier Communications FTR 8.53 $0.40 4.9%
Gaylord Entertainment Co. GET 19.87 -$0.94 -4.5%
Hormel Foods HRL 33.94 $1.64 5.1%
International Speedway Corp. ISCA 26.8 -$0.79 -2.9%
Lee Enterprises LEE 2.61 -$0.14 -5.1%
Mohawk Industries Inc. MHK 48.29 -$0.71 -1.4%
Monsanto Co. MON 80 $1.34 1.7%
Mine Safety Appliances Co. MSA 27.1 $1.10 4.2%
Southwest Bancorp OKSB 17.58 $0.36 2.1%
Plum Creek Timber REIT PCL 38.24 -$7.28 -16.0%
Penn Virginia Corp. PVA 33.52 $1.78 5.6%
Ralcorp Holdings RAH 65.77 $4.34 7.1%
Regions Financial Corp. RF 10.77 $1.63 17.8%
Sturm Ruger & Co. RGR 6.93 $0.44 6.8%
Smithfield Foods SFD 13.65 -$0.08 -0.6%
Skywest Inc. SKYW 13.41 -$0.34 -2.5%
Southern Co. SO 33.49 $1.08 3.3%
Stage Stores Inc. SSI 8.27 -$1.03 -11.1%
Tractor Supply Co. TSCO 34.67 -$3.64 -9.5%
Tyson Foods TSN 11.05 $0.51 4.8%
UST Inc. UST 66.8 $6.80 11.3%
Waddell & Reed Financial Inc. WDR 15.29 -$0.06 -0.4%
Walter Industries WLT 34.61 -$0.19 -0.5%
Wal-Mart Stores WMT 53.77 $2.82 5.5%
Cimarex Energy XEC $35.75 $3.09 9.5%