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Worst Quarter in 4 Years - Time to Look South of the Border?
By: Matt McCall   Tuesday, April 1, 2008 6:24 PM
Symbols: AMX, CX, HA, MESA, TMX

McCALL'S CALL

NEWS: There were a few story lines that caught my eye today and want to share my thoughts on them with you.

THE BOTTOMLINE: First of all the Chicago PMI came in better than expected, but still below the 50 number, which indicates expansion. The number today indicates there is improvement in manufacturing in the Midwest. Considering the Midwest is one of the worst regions of the US, it was a positive sign to see improvement. There are more economic numbers due this week with the employment report on Friday stealing the headlines from everything else.

Another report from the Midwest detailed how farmers planned on using their acreage in the upcoming season. A sharp rise in the amount of acres used to plant soybeans sent the futures price of soybeans lower on the news. Corn acreage came in at the low end of estimates and will drop 8% from last year. Last year saw corn acreage at its highest level in 60 years as demand for corn by the ethanol sector skyrocketed. However, this year farmers had more options, such as soybeans, because the prices of most agricultural commodities are all elevated. At last check soybean futures were down 5% and corn futures rose 3%. Wheat also fell over 5% on the news today that the winter acreage will likely increase 6% over last year and another 8% in the spring. The implications of less land for corn could affect companies that use corn in their products or feed their livestock. Companies using soybeans and wheat could benefit from increase acreage. Hopefully we will see the price of products at the grocery store fall if wheat prices come down. However, before you believe the agriculture commodity run is over, consider there could be more inclement weather this year (drought, etc.) and the demand for the products continues to rise, especially overseas.

Finally, Aloha Airlines announced it will stop service after 61 years. The company will cease passenger operations as of today. So who will benefit from the failure of the airline? How about Hawaiian Holdings (symbol: HA), which owns Hawaiian Air. The stock was up 14% today and closed at the best level in a year. Mesa Air Group's (symbol: MESA) Go Airlines will also benefit from the move and was cited by Aloha Airlines as a reason for the closure. I would not run out and buy any airline stock today, but with one less player on the islands it is something to watch.


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