July 13, 2012

Hormel Foods hurt by higher corn prices

An analyst said Thursday (July 12) that Hormel Foods Corp.'s upcoming results are likely to be hurt by higher corn prices, and downgraded the stock to "Sell".

The meat industry is facing problems as intense heat and dry weather across much of the country has damaged corn production and driven up prices. On Wednesday (July 11), the USDA predicted that farmers will get only a fraction of the corn anticipated from this year's crop. That will drive up prices even more for corn, which meat makers rely on as feed for animals.

That could cause a problem for Hormel's margins -- the amount of each dollar in revenue that the company actually keeps as profit -- Janney Capital Markets analyst Jonathan Feeney said.

Lower-than-expected hog production may also hurt results, he said.

Feeney's previous rating on Hormel, whose brands include Jennie-O turkey, Spam and Hormel packaged meats, had been "Hold."

Hormel's shares are down less than 1% in 2012.