Agricultral Stocks Pop and Drop After USDA Report

On Thursday morning, the U.S. Department of Agriculture released its latest report detailing corn (NYSE:CORN) and wheat (NYSE:GRU) estimates.  According to the report, the U.S. is exporting more corn and wheat than expected.

Corn exports for 2011-2012 are expected to be 1.65 billion bushels, which is a 50 million increase from last month’s estimate.  The USDA also raised its estimates for domestic corn production by 48 million bushels to 12.35 billion bushels.  Wheat exports for the year are expected to be 950 million bushels, a 25 million bushel increase from the agency’s previous estimate.

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Several agriculture stocks (NYSEARCA:RJA) traded lower after the USDA report.  John Deere (NYSE:DE) traded more than 1 percent lower, while fertilizer names such as The Mosaic Co. (NYSE:MOS) and Potash Corp. (NYSE:POT) declined nearly 4 percent.

  • John Deere announced on Thursday that it has broken ground on its second India tractor factory.  Deere plans on investing $80 million to build the new facility in India, and the factory will make small tractors to be sold in the region.  “John Deere products have been well accepted by customers in India and our investment in this new factory is a direct result of that success,” said Samuel R. Allen, chairman and chief executive officer of Deere. “John Deere is committed to helping customers in India and around the world to increase their productivity and to prosper.”
  • The latest USDA report also reported a higher-than-expected stockpile of corn and soybeans.  The U.S. corn stocks came in at 846 million bushels, which was 13 percent higher than traders were expecting, according to a Reuters survey.  As a result, fertilizer company CF Industries Holdings (NYSE:CF) declined almost 4 percent.  “These crop nutrient equities trade along with the corn price,” said Mark Gulley, an analyst at Ticonderoga Securities in New York, adding CF is typically the most closely linked to corn, the crop that is one of the biggest users of fertilizer.  Citigroup (NYSE:C) recently named CF as their top pick in the fertilizer industry.
  • The additional corn supply has given a boost to other agricultural names such as Sanderson Farms, Inc. (NASDAQ:SAFM) and Pilgrim’s Pride Corp. (NYSE:PPC).  Shares of both companies surged more than 7 percent after the USDA report.  Tyson Foods, Inc. (NYSE:TSN) is also receiving a 1.10 percent boost, as more corn supply should help reduce feed costs.

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