10 Companies That Are Getting Crushed By The Drought

Drought Corn Graphic

Photo: Photo: Jessica Salmond, Illustration: Eric Platt/Business Insider

The U.S. agri-business has been hammered over the past two weeks as a drought in the lower-48 rages on.Business Insider screened U.S. equities for any relation to the farming business,  including suppliers of equipment, servicers, feed providers, and actual farmers.

Shares in four-of-five agriculture related business are down over the past 10 days, with nine companies off more than 10 per cent.

NOTE: This post was inspired by a conversation between BI editor Joe Weisenthal and Josh Brown, The Reformed Broker.

#10: Cal-Maine Foods — Down 9.7%

What Cal-Maine Does:

Cal-Maine is the largest producer and marketer of shell eggs in the U.S., selling 821.4 million dozen eggs last year -- or 18 per cent of the entire market. The company has a flock of 26.8 million egg laying chickens and 6.7 million pullets (young female chickens) and breeders.

Why Cal-Maine Is Down:

The intense heat wave has already killed thousands of birds in the Midwest and South. Increased feed costs are also weighing on Cal-Maine, as corn prices surge.

Source: Bloomberg, Company Filings

#9: Ralcorp Holdings — Down 10.2%

What Cal-Maine Does:

Ralcorp is the nation's largest supplier of private label cereal in the country, employing more than 1,500 employees across seven plants. Ralcorp also produces store brand pastas and frozen bakery products.

Why Cal-Maine Is Down:

Corn costs have been increasing at a rapid clip, while wheat has hit levels not seen in more than 12 months. Both ingredients are used in most Ralcorp products.

Source: Bloomberg, Company Filings

#8: Hillshire Brands — Down 11.4%

What Hillshire Does:

Hillshire Brands is one of the nation's leading meat providers for supermarkets. The company's brands include Jimmy Dean, Ball Park, Hillshire Farm, State Fair, and Sara Lee frozen bakery and Chef Pierre pies.

Why Hillshire Is Down:

Hog prices have surged since the end of May (retreating somewhat in the past few days), likely weighing on margins at the hot dog, sausage, and bacon producer.

Source: Bloomberg, Company Filings

#7: Flowers Foods — Down 11.6%

What Flowers Does:

Flowered Foods is a leading producer of packaged baked goods in the United States, with 41 plants that produce breads, buns, rolls, snack cakes, and pastries. The company's brands include Nature's Own, Whitewheat, BlueBird, and Tastykake.

Why Flowers Is Down:

Corn costs have been increasing at a rapid clip, while wheat has hit levels not seen in more than 12 months. Both ingredients are used in most Flowers Foods products.

Source: Bloomberg, Company Filings

#6: Andersons Inc. — Down 12.3%

What Andersons Does:

Andersons provides services to the grain, ethanol and plant nutrient sectors of the United States agriculture business. The company also owns rail car, turf products, and general merchandise businesses.

Why Andersons Is Down:

Andersons has been weighed down as many clients suffer from difficulty with poor crop, devastated by the heat. Crop ratings are currently at their lowest level in 24 years, with only 40 per cent rated good to excellent.

Source: Bloomberg, Company Filings

#5: Tyson Foods — Down 16.2%

What Tyson Does:

Tyson is one of the largest poultry providers in the country, producing more than 42.3 million chickens, 141,750 heads of beef, and 398,720 heads of pork a week. The firm contracts to more than 5,590 farmers and has 23 prepared food plants across the country.

Why Tyson Is Down:

Increased feed costs are likely to weigh on margins.

Source: Bloomberg, Company Filings

#4: Smithfield Foods — Down 17.3%

What Smithfield Does:

Smithfield produces fresh and packaged meats along three divisions: pork, hog production, and international. The Pork segment consists of its three wholly owned United States fresh pork and packaged meats subsidiaries and contributes roughly three-fourths of the company's sales.

Why Smithfield Is Down:

Increased feed costs are likely to weigh on margins.

Source: Bloomberg, Company Filings

#3: Sanderson Farms — Down 17.9%

What Sanderson Does:

Sanderson Farms is a massive processor of the nation's chicken stock, marketing frozen and fresh chicken across the company.

Why Sanderson Is Down:

Increased feed costs are likely to weigh on margins, particularly as Sanderson owns its own feed mills which rely heavily on corn and soy.

Source: Bloomberg, Company Filings

#2: Dean Foods — Down 21.7%

What Dean Does:

Dean is the largest U.S. processor and distributor of milk, creamer, and cultured dairy products, sold across more than 50 brands.

Why Dean Is Down:

Increased feed costs are likely to weigh on margins. A number of cattle deaths recently have also been related to drought-stress foraging.

Source: Bloomberg, Company Filings

#1: Pilgrim's Pride — Down 28.3%

What Pilgrim Does:

Pilgrim is the second-largest chicken producer in the world, employing more then 38,500 people. The company processes more than 36 million birds per week, producing 9.5 billion pounds of chicken a year.

Why Pilgrim Is Down:

The company's operations are heavily focused in the Southeast, an area hard hit by the heat wave. Increased feed costs are also likely to weigh on the company.

Source: Bloomberg, Company Filings

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