24/7 Wall St. » ADM

24/7 Wall St. Closing Bell (WPI, AZN, ANF, SPWR, YGE, COST, MERU, ACI, VECO, PBY, ADM, CPO, AVP, DPZ, PFE, VLO, ABX, JDSU, MRO, FSLR, V, PFCB, DAL, CHK)

Paul Ausick — Tue, 01 May 2012 20:03:50 +0000

The major US stock indexes opened flat this morning but started to move higher following the better-than-expected ISM report on manufacturing (our coverage here). Construction spending in the US was a bit lower, but not enough to quell the enthusiasm over the manufacturing report. The US dollar index rose slightly today, now up 0.056% at 78.820. The GSCI commodity index is up fractionally at 684.88, with commodities mostly lower on the rising dollar. Cocoa put up a big gain today, while orange juice posted another sharp decline. WTI crude oil closed up 1.2% at $106.16/barrel, and Brent crude trades up 0.17% at $119.67/barrel. Gold settled up 0.1% today, at $1,662.40/ounce.

The unofficial closing bells put the DJIA up nearly 67 points to 13,280.31 (0.5%), the NASDAQ rose about 4 points (0.13%) to 3,050.44, and the S&P 500 rose 0.57% or nearly 8 points to 1,405.89.

There were several analyst upgrades and downgrades today, including Watson Pharmaceuticals Inc. (NYSE: WPI) reiterated as ‘buy’ at Canaccord Genuity; AstraZeneca PLC (NYSE: AZN) raised to ‘neutral’ at BofA; Abercrombie & Fitch Co. (NYSE: ANF) raised to ‘buy’ at UBS; SunPower Corp. (NASDAQ: SPWR) raised to ‘buy’ at Citigroup; Yingli Green Energy Holdings Co. Ltd. (NYSE: YGE) raised to ‘buy’ at Citigroup; Costco Wholesale Corp. (NASDAQ: COST) cut to ‘hold’ at Deutsche Bank; and Meru Networks Inc. (NASDAQ: MERU) cut to ‘neutral’ at RW Baird.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Arch Coal Inc. (NYSE: ACI) is down -3.8% at $9.39 (more coverage here); Veeco Instruments Inc. (NASDAQ: VECO) is up 14.8% at $34.67 (more coverage here); Pep Boys – Manny, Moe & Jack (NYSE: PBY) is down -21.8% at $11.67 (more coverage here); Archer Daniels Midland Co. (NYSE: ADM) is up 7.9% at $33.25; Corn Products International Inc. (NYSE: CPO) is down -0.14% at $56.98; Avon Products Inc. (NYSE: AVP) is down -7.6% at $19.95; Domino’s Pizza Inc. (NYSE: DPZ) is down -9.6% at $34.18; Pfizer Inc. (NYSE: PFE) is down -0.14% at $22.87; and Valero Energy Corp. (NYSE: VLO) is up 0.9% at $24.92.

Tomorrow we get earnings from Barrick Gold Corp. (NYSE: ABX), JDS Uniphase Corp. (NASDAQ: JDSU), Marathon Oil Corp. (NYSE: MRO), First Solar Inc. (NASDAQ: FSLR), and Visa Inc. (NYSE: V).

Other standouts from today include the following stocks:

P.F. Chang’s China Bistro Inc. (NASDAQ: PFCB) is up 29.7% at $51.46. The company is being taken private in a deal worth $1.1 billion. More coverage here.

Delta Air Lines Inc. (NYSE: DAL) is up 0.8% at $11.05. The airlines bought an oil refinery from newly-public Phillips 66 (NYSE: PSX). More coverage here.

Chesapeake Energy Corp. (NYSE: CHK) is up 6.3% at $19.60. The company’s chairman will be replaced and the company reports earnings after markets close today. More coverage here.

Stay tuned for Wednesday. Fed Governor Daniel Tarullo and Richmond Fed President Jeffrey Lacker are giving speeches. We have noted the following events on the schedule (all times Eastern):

7:00 a.m. – Mortgage Bankers Association purchase applications
7:30 a.m. – Challenger job cut report
8:15 a.m. – ADP employment report
10:00 a.m. – Factory orders
10:30 a.m. – EIA weekly petroleum status report

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: ABX, ACI, ADM, ANF, AVP, AZN, CHK, COST, CPO, DAL, DPZ, featured, FSLR, JDSU, MERU, MRO, PBY, PFCB, PFE, SPWR, V, VECO, VLO, WPI, YGE

24/7 Wall St. Closing Bell (TRP, DMD, ARII, CHK, KFT, DG, KALU, LDK, HUM, SNH, SOHU, ACI, ADM, RATE, BRCM, DPZ, ODP, PFE, SIRI, VLO, BKS, SUN, PAY)

Paul Ausick — Mon, 30 Apr 2012 20:13:01 +0000

The major US stock indexes opened slightly lower this morning and continued drifting lower all day. The Chicago PMI report got the day started on the wrong foot, showing a decline in spending even though personal income rose in March (our coverage here). Spain’s slip into recession did not help (our coverage here) and a report on global unemployment doesn’t offer much hope for economic expansion (our coverage here). The US dollar index rose slightly today, now up 0.05% at 78.780. The GSCI commodity index is up 0.35% at 684.45, with commodities mixed. Cocoa and orange juice posted sharp declines today. WTI crude oil closed down -0.1% at $104.87/barrel, and Brent crude trades down -0.24% at $119.54/barrel. Gold settled down less than -0.1% today, at $1,664.20/ounce, and an overall loss for the month of April of -0.5%.

The unofficial closing bells put the DJIA down nearly 15 points to 13,213.63 (-0.11%), the NASDAQ fell nearly 23 points (-0.74%) to 3,046.36, and the S&P 500 fell -0.39% or more than 5 points to 1,397.91.

There were several analyst upgrades and downgrades today, including Demand Media Inc. (NYSE: DMD) cut to ‘equal weight’ at Evercore; TransCanada Corp. (NYSE: TRP) cut to ‘hold’ at Desjardins; American Railcar Industries Inc. (NASDAQ: ARII) raised to ‘neutral’ at UBS; Chesapeake Energy Corp. (NYSE: CHK) raised to ‘outperform’ at BMO Capital; Kraft Foods Inc. (NYSE: KFT) raised to ‘overweight’ at JPMorgan; Dollar General Corp. (NYSE: DG) raised to ‘strong buy’ at Raymond James; and Kaiser Aluminum Corp. (NASDAQ: KALU) raised to ‘buy’ at Dahlman Rose.

Earnings reports since markets closed last Friday have led to some price changes as of the last half hour of trading today: LDK Solar Co. Ltd. (NYSE: LDK) is up 10.8% at $3.28 (our coverage here); Humana Inc. (NYSE: HUM) is down -8.4% at $80.49; Senior Housing Properties Trust (NYSE: SNH) is up 0.32% at $22.09; and Sohu.com Inc. (NASDAQ: SOHU) is down -7.4% at $51.62.

Tomorrow we get earnings from Arch Coal Inc. (NYSE: ACI), Archer Daniels Midland Co. (NYSE: ADM), Bankrate Inc. (NASDAQ: RATE), Broadcom Corp. (NASDAQ: BRCM), Chesapeake Energy Corp., Domino’s Pizza Inc. (NYSE: DPZ); Office Depot Inc. (NYSE: ODP); Pfizer Inc. (NYSE: PFE); Sirius XM Radio Inc. (NASDAQ: SIRI); and Valero Energy Corp. (NYSE: VLO).

Other standouts from today include the following stocks:

Barnes & Noble Inc. (NYSE: BKS) is up about 54% at $21.07 after posting a new 52-week high of $26.00 earlier today. The company has created a joint venture with Microsoft Corp. (NASDAQ: MSFT). More coverage here.

Sunoco Inc. (NYSE: SUN) is up 19.5% at $48.89 after posting a new 52-week high of $49.50 earlier today. The company is merging with Energy Transfer Partners L.P. in a deal worth about $5.3 billion. More coverage here.

VeriFone Systems Inc. (NYSE: PAY) is down -12.7% at $47.52. The company’s stock was downgraded at Deutsche Bank, along with comments that the company was inflating its organic growth estimates.

Stay tuned for Tuesday. Richmond Fed President Jeffrey Lacker, Minneapolis Fed President Naryana Kocherlakota, San Francisco Fed President John Williams, and Philadelphia Fed President Charles Plosser are all giving speeches. Motor vehicle sales are expected to be reported throughout the day. We have noted the following events on the schedule (all times Eastern):

10:00 a.m. – Institute for Supply Management manufacturing index
10:00 a.m. – Construction spending
11:30 a.m. – 4- and 52-week bill auctions

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: ACI, ADM, ARII, BKS, BRCM, CHK, DG, DMD, DPZ, HUM, KALU, KFT, LDK, ODP, PAY, PFE, RATE, SIRI, SNH, SOHU, SUN, TRP, VLO

The Top Earnings Previews For The Week Ahead (NYX, ACI, ADM, BRCM, CHK, SIRI, VLO, AWK, NLY, CMCSA, FSLR, GRMN, HIG, MA, SYMC, V, WFM)

Administrator — Fri, 27 Apr 2012 16:01:24 +0000

Earnings season is in full swing and the coming week is going to be extremely active with big earnings reports. 24/7 Wall St. has tried to preview several top earnings for the week ahead.

NYSE Euronext, Inc. (NYSE: NYX) is on Monday and the following earnings reports are due on Tuesday: Arch Coal Inc. (NYSE: ACI); Archer Daniels Midland Co. (NYSE: ADM); Broadcom Corporation (NASDAQ: BRCM); Chesapeake Energy Corporation (NYSE: CHK); Sirius XM Radio Inc. (NASDAQ: SIRI); Valero Energy Corporation (NYSE: VLO).

Wednesday’s top earnings reports on deck are as follows: American Water Works Co. (NYSE: AWK); Annaly Capital Management Inc. (NYSE: NLY); Comcast Corporation (NASDAQ: CMCSA); First Solar Inc. (NASDAQ: FSLR); Garmin Ltd. (NASDAQ: GRMN); Hartford Financial Services Group Inc. (NYSE: HIG); MasterCard Inc. (NYSE: MA); Symantec Corporation (NASDAQ: SYMC); Visa Inc. (NYSE: V); and Whole Foods Market Inc. (NASDAQ: WFM).

We will provide previews for the larger report due on Thursday as the reports get closer. As a reminder, some of the dates and estimates may change and some of them may have already changed. Consensus estimates are from Thomson Reuters and we have provided color on each if applicable.

NYSE Euronext (NYSE: NYX) reports on Monday. The consensus estimates are $0.48 EPS and $611.1 million in revenues. Shares are around $27.00, and the consensus analyst price target is $32.30. Now that the German merger (the German takeover of America’s top exchange) is off the table, investors are focusing on the values here.

TUESDAY, May 1

Arch Coal Inc. (NYSE: ACI) is due Tuesday morning and its shares have been battered along with the entire coal sector. Estimates are $0.16 EPS and $1.12 billion in revenues. Shares are around $9.50, and the consensus analyst price target is $32.30.

Archer Daniels Midland Co. (NYSE: ADM) is due Tuesday morning and estimates are $0.59 EPS and $21.4 billion in revenues. Shares are around $31.00, and the consensus analyst price target is almost $34.00.

Broadcom Corporation (NASDAQ: BRCM) reports after the close on Tuesday and it has been riding the Apple wave. The consensus estimates are $0.55 EPS and $1.8 billion in revenues. Shares are around $36.30 and the consensus analyst price target is $42.40.

Filed under: Calendar, Earnings, The Week Tagged: ACI, ADM, AWK, BRCM, CHK, CMCSA, FSLR, GRMN, HIG, MA, NLY, NYX, SIRI, SYMC, V, VLO, WFM

Firms Approved to Make E15 Ethanol (ADM, BIOF, VLO)

Paul Ausick — Tue, 03 Apr 2012 11:23:59 +0000

The US Environmental Protection Agency yesterday released a list of 20 companies that have been approved to manufacture ethanol for use in blending the 15% ethanol-gasoline blend known as E15. Among the 20 companies are Archer Daniels Midland Co. (NYSE: ADM), BioFuel Energy Corp. (NASDAQ: BIOF), privately held Cargill Inc., and the US division of Spain’s Abengoa SA. Valero Energy Corp. (NYSE: VLO) does not appear on the EPA’s list, but firms were allowed to maintain confidentiality if they chose, so Valero’s absence does not mean that the firm isn’t approved to make E15.

Last year the EPA approved E15 for use in cars manufactured in 2001 and later, while cars made before that date may only use the 10% ethanol blend (E10). That has caused a problem because there are still so many pre-2001 autos on US roads. And just because the makers have been registered, that doesn’t mean they can sell E15:

E15 was granted conditional waivers to be introduced into commerce for use in model year 2001 and newer light-duty motor vehicles (cars and all but the largest pick-up trucks, vans and SUVs), and the misfueling mitigation conditions of the waiver must be met before E15 can be lawfully sold. Specifically, those fuel and fuel additive manufacturers wishing to sell E15 must obtain EPA approval of, and implement a misfueling mitigation plan and a survey plan before selling E15.

In addition to these restrictions, there are restrictions on E15 in some states as well.

E15 is a completely unnecessary fuel blend. The ethanol industry needed something to make up for the loss of its subsidies, so it persuaded Congress that a 15% ethanol blend would lower pump prices and reduce America’s dependence on imported oil. Neither of those is strictly true. What is true is that the lower energy content of ethanol (about 30% less than gasoline) typically ends up costing drivers at least as much as pure gasoline because they have to buy more of it to get the same mileage. An ethanol blend of 15% just lowers mileage even more.

The full list of EPA-approved ethanol makers is here.

Paul Ausick

Filed under: Alternative Energy, Green Biz, Oil & Gas, Regulation Tagged: ADM, BIOF, VLO

Cargill to Boost Ethanol Production (ADM, VLO, GPRE, ANDE, PEIX)

Paul Ausick — Fri, 23 Mar 2012 11:37:03 +0000

There are more than 200 ethanol refineries in the US with a total nameplate production capacity of nearly 15 million gallons/year. One of the largest producers, privately-held Cargill, plans to add a third plant with a capacity of 115 million gallons/year to its existing 215-230 million gallon capacity. The new plant will employ about 200 people in Nebraska when it becomes fully operational in late 2013.

The odd thing is that Cargill, like other large ethanol producers Archer Daniels Midland Co. (NYSE: ADM), Valero Energy Corp. (NYSE: VLO), Green Plains Renewable Energy Inc. (NASDAQ: GPRE), The Andersons Inc. (NASDAQ: ANDE), Pacific Ethanol Inc. (NASDAQ: PEIX), and privately held POET, has seen demand for ethanol drop. So why build?

Ethanol makers are anticipating the day that federal regulators will give them the green light to switch to an ethanol/gasoline blend of 15% (known as E15) from today’s current 10% (E10) limit. It doesn’t take a rocket scientist to figure out that means a 50% boost in demand.

The other reason to build more ethanol-making capacity is to export the stuff, principally to Brazil, which can’t seem to make enough to supply its drivers. Last year the US exported 1 billion gallons of ethanol out of total production of 13.9 billion gallons.

There’s not much money to be made in the ethanol business today, but producers expect the E15 rules to be adopted and they expect exports to grow. That’s reason enough to stick it out for now.

Paul Ausick

Filed under: Agriculture, Commodities, Oil & Gas Tagged: ADM, ANDE, GPRE, PEIX, VLO

Canadian Grain Firm Rising on Buyout Speculation (VTRAF, ADM, BG, NOBGY, GLCNF, XSRAY)

Paul Ausick — Thu, 15 Mar 2012 16:05:14 +0000

Canadian grain handling company Viterra Inc. (OTC: VTRAF.PK) is reported to have three potential buyers in its data room, in advance of making an offer to acquire the firm. Bloomberg News is reporting that an unnamed source says that Archer Daniels Midland Co. (NYSE: ADM), Bunge Ltd. (NYSE: BG), and Noble Group Inc. (OTC: NOBGY.PK) are currently conducting their due diligence. A bid of at least $16.13/share was necessary to get the key to the data room. That values Viterra at around $6 billion.

More interesting is the source’s revelation that Glencore International plc (OTC: GLCNF.PK) may also be interested in acquiring Viterra. Glencore is named as a potential buyer for nearly every commodity trading company, mining company, or ag company that is now or ever might be on the market. The company’s proposed merger with Xstrata plc (OTC: XSRAY.PK) will create an $80+ billion behemoth and even Glencore might want to take a breather before plunking down even more cash.

Viterra shares are up 7.7% today, at $15.90 after posting a new 52-week high of $16.08 earlier.

Paul Ausick

Filed under: Agriculture, Commodities, Mergers and Buy Outs Tagged: ADM, BG, GLCNF, NOBGY, VTRAF, XSRAY

Media Digest (1/12/2012) Reuters, WSJ, NYT, FT, Bloomberg

247wallst — Thu, 12 Jan 2012 11:27:19 +0000

Olympus may partner with Samsung. (Reuters)

RBS cuts 3,500 investment bank jobs. (Reuters)

RealtyTrac reports that foreclosures reached a four-year low in 2011. (Reuters)

International Monetary Fund senior executive Lipton sees no hard landing in China. (Reuters)

Microsoft (NASDAQ: MSFT) will delay it web TV plans. (Reuters)

The FCC may ask TV broadcasters to return unused spectrum so it can be auctioned to wireless carriers. (Reuters)

LG’s handset numbers rise in Q4 and the company says it will continue to invest in its wireless division. (Reuters)

Eastman Kodak (NYSE: EK) faces trouble with pension money it owes in the UK. (Reuters)

Raymond James (NYSE: RJF) will buy Morgan Keegan. (Reuters)

An oversupply of natural gas pushes prices to historic lows. (WSJ)

Carlyle’s three founders earned more than $400 million last year. (WSJ)

More senior bankers leave Goldman Sachs (NYSE: GS). (WSJ)

CIT (NYSE: CIT) will no longer finance loans to Sears Holdings (NASDAQ: SHLD) suppliers. (WSJ)

Emerging market nations step up their activity as they sell more bonds. (WSJ)

The Environmental Protection Agency releases a list of plants that emit the most greenhouse gases. (WSJ)

Food prices in India fall. (WSJ)

The Fed Beige Book says holiday sales helped the economy at the end of last year. (WSJ)

President Obama to propose tax cuts for companies that bring jobs back from overseas. (WSJ)

Economists surveyed by the Wall Street Journal say Europe is the greatest threat to U.S. expansion. (WSJ)

Daniel Alegre, Google’s (NASDAQ: GOOG) chief in Asia, says the company will press for more market share in China. (WSJ)

Coca-Cola (NYSE: KO) finds an unapproved fungicide in orange juice products. (WSJ)

Hotels establish a booking site to compete with Priceline (NASDAQ: PCLN). (WSJ)

Industry researchers Gartner and IDC say PC shipments fell in the past quarter. (WSJ)

Chevron (NYSE: CVX) says its fourth-quarter results were weak. (WSJ)

News Corp. (NYSE: NWS) may make a bid for the LA Dodgers. (WSJ)

Archer Daniels Midland (NYSE: ADM) will cut 1,000 jobs. (WSJ)

Coors Light passes Bud as the number two beer in the U.S. (WSJ)

Ford (NYSE: F) will introduce new models to try to salvage Lincoln. (WSJ)

The Commodity Futures Trading Commission tightens rules for swaps activity. (WSJ)

The eurozone will be challenged again as members refinance billions of dollars of debt early this year. (NYT)

Fannie Mae and Freddie Mac to announce programs to extend the mortgage payments of the unemployed. (NYT)

EU oil refiners cut ties with Iran. (FT)

China’s consumer inflation falls to 4.1%. (FT)

The head of Fiat says car makers must merge. (FT)

A move to safety cuts Treasury yields below 2%. (FT)

German December inflation slowed. (Bloomberg)

Delhaize Group, which owns Food Lion, will cut 5,000 jobs around the world. (Bloomberg)

Italy and Spain to offer 17 billion euro in debt sales. (Bloomberg)

Douglas A. McIntyre

Filed under: Press Digest Tagged: ADM, CIT, CVX, EK, F, GOOG, GS, KO, MSFT, NWS, PCLN, RJF, SHLD

US Ethanol Subsidy is History (ADM, VLO, PEIX, GPRE, CZZ, RDS-A)

Paul Ausick — Fri, 30 Dec 2011 13:00:36 +0000

After 30 years of payments to farmers and blenders, the federal subsidy on corn-based ethanol expired when Congress adjourned last week without taking any action to renew the payments. A cynic might say that this Congress has finally accomplished something by doing what it has done best — nothing. The subsidy cost US taxpayers about $6 billion annually.

The lack of Congressional action ends the $0.45/gallon blender’s credit on US-produced ethanol and the $0.54/gallon tariff on imported ethanol. US ethanol producers Archer Daniels Midland Co. (NYSE: ADM), Valero Energy Corp. (NYSE: VLO), Pacific Ethanol Inc. (NASDAQ: PEIX), and Green Plains Renewable Energy Inc. (NASDAQ: GPRE) had already seen the writing on the wall and are not likely to feel any appreciable pain from the end of the subsidies. Brazilian cane-based ethanol maker Cosan Ltd. (NYSE: CZZ) and its partner, Royal Dutch Shell plc (NYSE: RDS-A) have also been making a profit exporting ethanol to the US in spite of the tariff.

The end of the subsidy does not end the federal mandate on the use of alternative fuels for transportation. Earlier this week we looked at the nonsensical mandate adopted by Congress in 2007 that calls for 200 million gallons of alternative fuels to blended with gasoline in 2012. Virtually every drop will come from ethanol, and the producers really don’t need a subsidy on top of a mandate to make a profit. The mandate alone will do quite nicely, thank you very much.

Paul Ausick

Filed under: Alternative Energy, Green Biz, Oil & Gas, Politics, Regulation Tagged: ADM, CZZ, GPRE, PEIX, RDS-A, VLO

New Biofuels Fail to Meet Government-Mandated Quantities (CDXS, AMYR, GEVO, SZYM, KIOR, ADM, VLO, PEIX)

Paul Ausick — Wed, 28 Dec 2011 14:49:11 +0000

Back in the heady days of 2007, the U.S. Congress established mandates for the amount of cellulosic ethanol and other biofuels to be used in the nation’s transportation fuel supply. Cellulosic ethanol and fuels based on algae are made from nonedible biomass, and thus avoid the criticism of replacing food with fuel. The congressional mandates were very aggressive, calling for 100 million gallons of cellulosic ethanol by 2009, 250 million gallons by 2010, and 500 million gallons by 2013. By 2022, U.S. transportation fuel is supposed to include 16 billion gallons of cellulosic ethanol.

In 2010, the mandate was lowered for that year to 6.5 million gallons and for 2012, the mandate set by the U.S. Environmental Protection Agency has been set at 8.5 million gallons. Companies like Codexis Inc. (NASDAQ: CDXS), Amyris Inc. (NASDAQ: AMRS), Gevo Inc. (NASDAQ: GEVO), Solazyme Inc. (NASDAQ: SZYM) and Kior Corp. (NASDAQ: KIOR) have so far failed to reach production levels anywhere near mandated levels. Traditional corn-ethanol makers like Archer Daniels Midland Co. (NYSE: ADM), Valero Energy Corp. (NYSE: VLO) and Pacific Ethanol Inc. (NASDAQ: PEIX) continue to supply the vast majority of nonpetroleum based fuels.

Refiners are required either to use cellulosic ethanol or to pay $1.20/gallon for the privilege of not using it. Because so little is available, refiners end up paying for something they cannot buy at any price.

Most biofuels makers have turned to producing specialty chemicals for the cosmetics and pharmaceuticals industries in order to make some revenue. Truth be told, a gallon of a cosmetic component is far more costly than a gallon of cellulosic ethanol, so these companies continue to work on developing substitute chemicals. The payback from these is more certain and nearer in time than is trying to scale up manufacturing of biofuels and facing uncertain political and distribution issues.

To show how hard things have been, the share price of many pure-play stocks pretty much sums it all up:

Codexis trades at $5.53 and its 52-week trading range is $3.91 to $12.24.
Amyris trades at $11.16 and its 52-week trading range is $9.90 to $33.99.
Gevo trades at $5.59 and its 52-week trading range is $5.18 to $26.36.
Solazyme trades at $11.27 and its 52-week trading range is $7.68 to $27.47.
KiOR trades at $9.31 and its 52-week trading range is $8.88 to $23.85.

Paul Ausick

Filed under: Alternative Energy, Green Biz, Oil & Gas, Politics Tagged: ADM, AMRS, AMYR, CDXS, GEVO, KIOR, PEIX, SZYM, VLO

Corn Crop Booms, Prices to Fall (ADM, VLO, HML, TSN, GIS, K)

Paul Ausick — Thu, 22 Dec 2011 16:38:28 +0000

Fears for a supply shortage of corn earlier this year led the world’s farmers to plant more of the crop on expectations of higher prices. Now that the crop is in, it turns out to be a sixth consecutive record crop and will surely push prices down next year. That’s good news for makers of ethanol like Archer Daniels Midland Co. (NYSE: ADM) and Valero Energy Corp. (NYSE: VLO) to meat processors like Hormel Foods Corp. (NYSE: HRL) and Tyson Foods Inc. (NYSE: TSN) to cereal makers General Mills Co. (NYSE: GIS) and Kellogg Co. (NYSE: K).

The US Department of Agriculture is forecasting a global corn crop of 867.5 million metric tons and analysts survey by Bloomberg News are forecasting a price of $4.305/bushel next year. Corn is trading today at about $6.20/bushel.

Demand for meat is driving the demand for corn and wheat as feed for cattle, pigs, and chickens, with total demand for feed expected to reach 640.6 million metric tons in the crop season ending next Spring.

The US share of the booming corn crop will decrease to less than 50% for the first time in 40 years.

Filed under: Agriculture, Commodities Tagged: ADM, GIS, HML, K, TSN, VLO