June 3, 2008

Poultry industry to become investors' favourite
 
 

World chicken consumption will soon rise to 57 percent from the current 35 percent as it is a cheaper alternative against other meats, a report by Morgan Stanley, a US investment bank, states.

 

Morgan Stanley forecast that players in the poultry industry would soon have healthy returns. 

 

Producing a kilogramme of chicken requires less grain than the same amount of beef, making it a more affordable option.

 

Furthermore, chicken hatcheries also cause less pollution than cattle or pig farms, said Morgan Stanley.

 

Companies heavily involved in the poultry industry including feed grain suppliers, equipment makers, breeders and vaccine producers are expected to gain soaring returns.

 

Poultry processors in developing nations are also looking good as meat consumption last year in developed countries were spread evenly between beef, pork and chicken, at 34.8 percent, 30.6 percent and 34.7 percent respectively.

 

While Morgan Stanley suggests that the lack of grain will bolster poultry consumption of 57 percent, it also points to the possibility that meat consumption may shrink.

 

Share prices may also force consumers to adjust as beef and pork companies will suffer from falling share prices, while poultry companies will experience rising share prices.

 

As such, investors may turn their attention to the poultry sector at the expense of the beef and pork industries.

 

In May 2008, an upswing in US chicken consumption was anticipated, bringing cheer to the US poultry sector, which has been reeling from high feed prices and low demand.

            

The top three US chicken companies - Tyson, Pilgrim's Pride and Sanderson have increased prices after suffering severe losses.

            

Pilgrim's Pride reported a net loss of US$111.4 million for the three months ended March 29, while Tyson's chicken business posted an operating loss of US$61 million.

 

Only Sanderson reported profit of US$6.2 million for the quarter ended January 31.

            

Despite losses, chicken stocks are up, reflecting investors' confidence in them.

 

Sanderson is up about 33 percent so far this year, while Tyson is up about 20 percent.

 

Although Pilgrim's Pride is down about 15 percent, the stock has been recovering from its recent lows.