NEW YORK (AP) — Higher corn prices are likely to hurt meat producer Hormel Foods Corp.'s upcoming results, an analyst said Thursday, 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, The U.S. Department of Agriculture 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 percent in 2012.