CHICAGO--(BUSINESS WIRE)--The ratings of U.S. agribusiness companies are likely to remain stable in 2009 due to their well-diversified product lines and geographic footprints. Diversification tempers the severity of earnings volatility. Internally generated liquidity and cash flow for agribusiness companies have improved dramatically during the past few months as agricultural commodity prices tumbled from their peaks in mid-year 2008.In the near-term, agribusiness companies should benefit from being able to store, transport and process the large U.S. crops from this year's harvest. Another bumper crop of corn and soybeans is needed in 2009 to replenish stocks, which are still low. However, it is too early to tell what events may transpire that could impact spring 2009 crop plantings. If severe weather problems occur in 2009, that could send shocks through the market and lead to another round of price spikes.
Earnings in certain sub-segments of agribusiness companies may be pressured in 2009. Global demand has diminished with weak economic conditions and U.S. protein meal demand is expected to slow with cutbacks in meat production. Ethanol production is suffering from weak margins due to overcapacity as well as a sharp decline in gasoline prices, which reduces ethanol's value as a gasoline blendstock.
CROP OUTLOOKS: PRICES BECOME MORE REFLECTIVE OF SUPPLY/DEMAND FUNDAMENTALS
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