May 24, 2006

US poultry industry regains confidence of investors

Shares of major US poultry processors rallied Monday (May 24), reflecting investors' confidence in the chicken industry as fears of bird flu subside and announcements of planned cuts in production sink in.

Since the middle of May, shares of Tyson have climbed 13 percent, Pilgrim's Pride gained 3. 5 percent and Gold Kist jumped 3 percent.

Prices for leg quarters, are up 59 percent from a six-year low in March while the price of breast meat is up 15 percent since January, the lowest in 14 years.

Merrill Lynch analyst Leonard Teitelbaum said prices have reached the bottom and conditions are improving adding that the worst is over.

The top three poultry companies had all registered million dollar losses in their second quarter reports released in early May.

Tyson had reported that second-quarter profit from its chicken unit fell 94 percent to US$9 million from a year earlier while making an overall loss of US$127 million.

John Tyson stepped down as CEO of the company last week, remaining as company chairman while President Richard Bond took on the post of CEO.

Pilgrim's Pride reported a US$32 million loss and announced it would cut chicken output by 3 percent, to ease the oversupply situation.

Gold Kist, the third-largest US poultry producer, announced its first quarterly loss of US$16. 2 million, since the company went public in 2004.

In spite of these gloomy reports, there are indications that things are looking up.

US chicken supplies in cold storage last month fell 3. 3 percent from a month earlier according to the USDA, reflecting the fact that chicken exports are moving, even though they are still 22 percent higher than last year's levels.