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Andersons Fortifies Nebraska Region

Zacks Equity Research

In a bid to serve the local agricultural community, The Andersons, Inc. (ANDE) has opened its grain elevator near the towns of Anselmo and Broken Bow in Custer County. The elevator with both train and truck loading capabilities has a capacity of 3.8 bushels.

The newly constructed elevator is the first-of-its-kind in Nebraska and also the largest elevator in Custer County. It will benefit the farmers of Custer County by increasing the efficiency as well as speed of grain export.  

The Andersons planned to begin the construction of the grain elevator in Nebraska in October 2011. The company has opened the new elevator now for the 2012 harvest.

The decision to construct the grain elevator in Nebraska goes well with The Andersons’ strategy to serve the western regions of its traditional eastern market. Accordingly, the company has expanded its operations in Nebraska to nine more locations, either through acquisitions or merchandising agreements.

The new elevator will benefit The Andersons by fortifying its position in Nebraska. Moreover, with this new addition, the company’s capacity has now been increased to 113 million bushels in the regions of Indiana, Michigan, Ohio and Nebraska.  

The Andersons generates the majority of its revenues from the Grain and Ethanol Group. The group accounted for nearly 67.4% of its total revenues during the second quarter of 2012. Therefore, the company remains committed to upgrading the business and strengthening its market position in the face of growing competition.

However, the prevailing drought conditions in the U.S. may negatively affect the performance of the segment. Moreover, it is expected that wheat production will drop year over year in the second half of 2012. Therefore, lower wheat storage is likely to be headwinds for grain margins.

The Andersons retains a short-term Zacks #4 Rank (Sell). We have a long-term Neutral recommendation on the stock.

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