BofA: Farmers Are In Better Shape Than You Think

missouri drought

Photo: Jessica Salmond

While the drought has generally been looked at as extremely devastating, Bank of America’s Andrew Obin sees the drought as a positive for farmers, according the bank’s most recent recent report.Our view is that that the drought conditions as of the latest WASDE report on July 11th are actually a
positive for farmers as soft commodity price increases more than offset production decline.

Although Obin sees this as a positive, he believes if yields drop below 130bu/acre, that farmers in the affected regions will find themselves with lower cash receipts.

Along with their positive view in regards to farming, Obin also sees the current drought as a positive for for farming equipment.

Our key takeaway is that so far the company has seen very limited impact from the weather and the drought is more likely to be a positive going into 2013 extending the ag cycle. Ag remains our favourite theme and we reiterate our Buy on Deere and $104 PO.

This is certainly a very interesting angle on the drought and its future repercussions.

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