Credit crisis gives world farm sector a jolt

KANSAS CITY, Missouri (Reuters) - Wall Street woes have washed down Main Street and on Thursday plowed their way through farm country, leaving big companies that buy and sell to farmers with plummeting share prices and shaken outlooks.

Sinking commodities prices for grains, cotton and livestock, along with doubts about a government rescue package for the U.S. banking system and growing recession fears, brought the credit crisis home to roost in agribusiness shares.

From the world's largest tractor maker Deere & Co (DE.N). to seed company Monsanto Co (MON.N), fertilizer producer Mosaic Co (MOS.N) and grain processors Archer Daniels Midland Co (ADM.N) and Bunge Ltd (BG.N), farm-related firms caught the downdraft of Wall Street's latest weakness.

"The impact on the man on the street -- a rural street or a city street -- is dramatic," said Bruce Scherr, chairman of Informa Economics Inc, an agricultural consulting firm. "The financing process is frozen. The only way it will thaw out is with some sort of definitive action by the Congress.

The outlook for higher farm production costs spurred the sell-off in farm-related shares.

Deere was down more than 12 percent to $40.72 on Thursday afternoon while Mosaic shares fell 37 percent to $42.71, the second-sharpest drop on the New York Stock Exchange.

ADM, one of the world's largest grain and food ingredient processors, was also down about 11 percent at $19.05 after hitting a new 52-week low of $18.13. Bunge, one of its main competitors, was down more than 22 percent.

Tyson Foods Inc (TSN.N) and other big meat producers who depend on farmers were also hit, with Tyson shares down about 3 percent and Smithfield Foods Inc (SFD.N) down about 6 percent.

Farming is intensely dependent on bank credit, so the outlook for farm production and profits tightened even after two years of record farm income and soaring grain prices.

The outlook for weaker consumer spending as the U.S. economy faces recession weighed on shares, analysts said.

"It's the start of a recession," said Jim Clarkson, livestock analyst at A&A Trading Inc. "It is going to cut the demand for everything, including beef and pork.

Cattle ranchers, hog producers, dairy farmers and poultry processors are all feeling the effects of tighter credit markets and the economy's weakness, analysts said.

"People are still going to eat but they are going to eat cheap because they are going to be unemployed and not going out to any restaurants," Clarkson said. "Everybody is just going to be cutting back."

EFFECTS FELT IN THE FOOD, BIOFUELS CHAIN

The American Farm Bureau said last week that the financial crisis now gripping the United States could moderate both global and domestic demand for U.S. farm products.

"The fallout from the general financial malaise is being felt worldwide," Farm Bureau economist Terry Francl said.

Francl said farmers are being offered lower prices for their products at the same time they are being forced to pay higher prices for the fertilizer and other supplies they need.

Consumer demand worries are just part of the negative tone in the agribusiness and food sectors. With credit crisis uncertainties spreading out globally, suppliers to farmers are being swamped with doubts.

Tighter credit in the United States may force farmers to cut back on equipment spending and fertilizer use. But it could have the same effect in Brazil, Argentina, Australia, Canada and the European Union, all key sources of food exports.

Monsanto shares fell as much 21 percent on Thursday on concerns about reduced global demand for its herbicides before recovering somewhat; they were off 13 percent to $84.94 in afternoon dealings.

The U.S. Agriculture Department, in its latest world crop supply-demand projections issued on September 12, forecast higher prices in the coming year for major U.S. row crops like corn, wheat and soybeans, all positive for grain farmers.

But futures prices continue to sink, with Chicago Board of Trade wheat prices hitting a 14-month low, corn a 9-month low and soybeans an 11-month low on Thursday.

Chicago Mercantile Exchange cattle, hog and pork futures also set life-of-contract lows.

(Reporting by Carey Gillam, additional reporting by Jerry Bieszk, James Kelleher, Julie Ingwersen and Euan Rocha. Editing by Peter Bohan and Gerald E. McCormick)