Coal Companies' Weird Moves

Party time for coal producers...not.

What's up with Arch Coal preannouncing negative results? You would think that with global coal demand expanding, and with the Queensland, Australia floods, there would be all sorts of positive comments from coal producers.

Not so. This morning ACI lowered guidance, citing "poor Eastern rail service" and "geologic issues" at their Mountain Laurel mine, which will cause the mine to be shut down for at least part of the first quarter.

They're not alone. Last week I noted Massey also said coal shipments would be lower than anticipated...they too cited "inconsistent rail shipments" and "lower than anticipated production." CEO Baxter Phillips also hinted at the intense regulatory scrutiny the coal industry is under: "We must mine coal safely and strive to miminize regulatory violations."

The simple fact is it is not possible to snap your fingers and just ramp up coal production. BMO Capital Markets summed up the bottom line for coal: "Existing producers have limited ability to increase production quickly in the face of high prices and the Queensland floods."

Still, long-term demand is so strong that most of these companies remain near new highs.

Speaking of commodities, there are food inflation headlines all over the world in the last few days. Today (Wednesday), Agricultural ETFS — which invest in baskets ofagricultural commodities (think PowerShares DB Agricultural Fund ) — are at new highs, as are fertilizer and ag equipment stocks. And this, after the government lower its crop production outlook for wheat, corn and soybean production.

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