Russian deal raises US chicken producers'shares

Shares of chicken companies Tyson Foods, Pilgrim's Pride and Sanderson Farms closed higher on Thursday (June 24) after President Obama announced the deal to resume chicken exports to Russia.

Russia was once the largest overseas buyer of US chicken but had banned the meat earlier this year, claiming a chlorine rinse used here violated its food safety rules.

The ban angered US chicken producers, who argued that the rinse was safe. Prior to the ban, the US annually shipped Russia about US$800 million worth of chicken, said the National Chicken Council.

The announcement followed meetings on Thursday (June 24) between Obama and Russian President Dmitry Medvedev. In addition, Obama said the US would support Russia's bid to join the World Trade Organization.

"It should have an immediate effect on prices and demand for leg quarters. They usually buy a lot," said Paul Aho, an economist with the consulting firm Poultry Perspective.

"The Russian trade ban has been a large overhang on protein stocks. The market reopening should support protein prices due to a more favourable supply/demand balance," Farha Aslam, analyst with Stephens Inc, said.

Russia primarily buys the leg-quarter portion of the chicken. Chicken leg quarters have piled up in warehouses as chicken companies have been unable to divert Russia's entire share to other markets. As of May 31, US Agriculture Department data showed 132.16 million pounds in storage, up 37% from April and up 89% from a year earlier.

"We do not know on which date Russia will start allowing US chicken back into the country. The day that Russia says it can accept US chicken is the day that the US will start shipping, JP Morgan analyst Ken Goldman said.

At the New York Stock Exchange shares of top chicken producer Tyson Foods Inc closed up 1.0% at US$17.87 and Pilgrim's Pride's shares rose 5.4% to US$7.23. In Nasdaq trading, shares of Sanderson Farms went up 4% at US$52.60.