by Andrew Farrell
About a month ago, the Department of Agriculture provided preliminary 2007 estimates of 87 million acres of corn. Analysts had expected around 88 million in the Friday report.
Corn futures trading on the Chicago Board at midday dropped 20 cents, or 5.0%, to $3.74, from yesterday's close of $3.94.
The report bumped up shares of food producers since more corn should relieve feed costs. In midday trading, while the broader market was modestlyh lower, meat processor Tyson Foods (nyse: TSN) was up 41 cents, or 2.2%, to $19.37, pork producer Smithfield Foods (nyse: SFD) gained 82 cents, or 2.8%, to $29.95, poultry processor Pilgrim's Pride (nyse: PPC) jumped $1.22, or 3.9%, to $32.89, and Spam and turkey maker Hormel Foods (nyse: HRL) was up 4 cents, or 0.1%, to $37.14.
The report was also considered good news for ethanol producers. Ethanol is now required to be comprise up to 10% of gasoline and that percentage could rise, especially in light of soaring petroleum costs. Crude oil has been in a long-term uptrend, with the price rising from just above $10 in 1998 to the current level of about $66, creating demand for alternative sources of fuel.
In midday trading, Pacific Ethanol (nasdaq: PEIX ) was up 10 cents, or 0.6%, to $17.07, Archer Daniels Midland (nyse: ADM) gained 30 cents, or 0.8% to $37.06, and Xethanol (amex: XNL ) was up 2.5%, or 6 cents, at $2.50.
Some makers of farm equipment also gained. Deere (nyse: DE ), the tractor maker, was up 0.3%, or 36 cents, to $108.83. The company has already come far, rising from below $70 in August. Caterpillar (nyse: CAT ), which makes agriculture and construction gear, was up 1.2%, or 82 cents, to $67.01. Lindsay (nyse: LNN), which makes irrigation supplies, jumped 4.4%, or $1.33, to $31.85, and AGCO (nyse: AG), which makes agricultural tractors, added 1.0%, or 38 cents, to $37.08.
Rising ethanol demand has spiked prices of both corn and soybeans over the past year. The former is used in production of the fuel but both are fungible in many food uses. Also, farmers can switch fields from one to the other with relative ease each year.
The planting intentions report revealed that farmers did exactly that and at a rate that was higher than expected. The Department of Agriculture announced farmers intend to plant 67.1 million acres of soybeans in 2007, down 11.1% from 75.5 million last year.
The Agriculture Department previously predicted about 70.5 million acres of soybeans planted and analysts had been expecting around 69 million acres.
Traders had anticpated weak soybean planting though. Futures were down 5 cents, or 0.1% to $7.73 in midday trading but are way up from the $5.30 range at which they traded in September.