The Yonder 40 basket of rural stocks continues to lead all indexes as food and energy companies profit from higher commodity prices.">
Wall of SPAM
SPAM sales soar. Commodity prices rise, making ag stocks a good buy, according to the Wall Street Journal. The EPA releases its list of biggest producers.
And the Yonder 40 — the basket of 40 stocks picked to represent the rural economy — continues to best the other major stock indexes.
The one trend we see in the economy is that things that are grown or mined in rural America continue to gain value. For instance, US retail food prices in 2007 rose 4 percent — the largest gain in 17 years. And the US Department of Agriculture expects a similar jump in food prices in '08.
This has led WSJ writer James Stewart to recommend that "Agriculture Stocks Belong In Long-Term Portfolios." Stewart looks at fuel prices going up — and food prices, too. "There isn't much consumers can do about it, short of going on a crash diet," Stewart writes. "But you can ease the pain by sharing in some of the profits that are flowing into the agricultural sector."
Steward recommends Monsanto and Deere, both members of the Yonder 40.
As for farmers….well, Stewart writes:
"They aren't living lavishly on their newfound wealth. They're plowing profits back into machinery, seed and land, and saving for the proverbial rainy day. Still, there's reason to believe the current boom will persist. In its earnings release, Deere noted that 'farm conditions throughout the world remain quite positive.' High grain prices, low stockpiles, and government encouragement of biofuel development have spurred investment in the tractors, combines and other heavy equipment that Deere makes."
Food producers aren't the only ones benefiting from the surge in commodity prices. Two energy companies that are members of the Yonder 40 reported higher fourth quarter earnings. Walter Industries said fourth quarter earnings rose to $40 million, from $35.9 million the year before. And Cimarex reported a fourth quarter net income that was nearly double that from the year before. Revenues increased 48% over a year ago, according to the Denver-based energy company.
Higher food prices are paid by shoppers, eventually, which may explain an upsurge in the sales of SPAM, Hormel's canned meat product and American food icon. Hormel, a Yonder 40 member, reported a 17 percent jump in first-quarter 2008 earnings. SPAM sales were up 15 percent from a year ago.
According to the Wall Street Journal, one analyst was asked on the company’s conference call "if consumers might be trading down to Hormel’s grocery products from restaurants or other food categories." The Hormel official answered, "I think there could be some of that going on “¦ It was a good quarter for Hormel chili and SPAM, and there could be some element of consumers seeing the value propositions in the items."
Meanwhile, the US Environmental Protection Agency released its list of the US facilities that did the most polluting in 2006. Not surprisingly, most were in rural communities. Here's are the top polluters:
“¢ The Red Dog Mine in northwestern Alaska was the runaway winner as biggest polluter of toxic chemicals. Red Dog is the world's largest source of zinc and produced 615 million pounds of toxic material in 2006. Red Dog is a joint venture of Teck Cominco, a Vancouver-based metals company, and Nana Regional Corp., a Native American-owned development company.
“¢ A Kennecott copper mine in Copperton, Utah, ranks second.
“¢ Number three on the list is Phelps Dodge's copper mine in Claypool, Arizona.
“¢ The Twin Creeks gold mine in Golconda, Nevada, ranks fourth. It's owned by Newmont Mining.
“¢ Finally, the biggest polluter in the utility business was the Southern Co. coal-burning power plant in Cartersville, Georgia.
It was a good week for the Yonder 40. The index of rural stocks rose nearly a point. The 40 has done better than the S&P 500, the Dow Industrials or the NASDAQ since the 40 began July 1, 2007.
Below is a complete listing of the 40 and how these stocks fared in the week of February 17-22, 2008:
|Companies||Ticker||Price February 22||Price Change 2/15 to 2/22||Percent Change 2/15 to 2/22|
|Burlington Northern Santa Fe Corp.||BNI||88.18||-$0.93||-1.0%|
|Peabody Energy Corp.||BTU||58.24||$2.61||4.7%|
|ConAgra Foods Inc.||CAG||22.13||$0.41||1.9%|
|Cato Corp. Cl A||CTR||16.11||-$0.04||-0.2%|
|Deere & Co.||DE||87.17||$2.17||2.6%|
|Dean Foods Co.||DF||24.43||-$0.32||-1.3%|
|Family Dollar Stores Inc.||FDO||20.04||$0.27||1.4%|
|Fleetwood Enterprises Inc.||FLE||4.36||$0.06||1.4%|
|Gaylord Entertainment Co.||GET||31.74||-$0.09||-0.3%|
|International Speedway Corp.||ISCA||41.41||-$0.66||-1.6%|
|Mohawk Industries Inc.||MHK||74.68||$2.61||3.6%|
|Mine Safety Appliances Co.||MSA||43.62||$0.71||1.7%|
|Plum Creek Timber REIT||PCL||40.4||$0.41||1.0%|
|Penn Virginia Corp.||PVA||42.27||-$0.59||-1.4%|
|Regions Financial Corp.||RF||23.11||$0.18||0.8%|
|Sturm Ruger & Co.||RGR||8.41||-$0.55||-6.1%|
|Stage Stores Inc.||SSI||12.76||-$0.02||-0.2%|
|Tractor Supply Co.||TSCO||38.56||-$1.17||-2.9%|
|Waddell & Reed Financial Inc.||WDR||32.24||$0.15||0.5%|