US poultry firms to benefit with Russian export market's return

American chicken companies will gain from the resumption of Russian exports as chicken prices are set to rise this week, an analyst said Tuesday (June 29).

The nation's chicken producers, including Sanderson Farms Inc., could see upside to their fiscal 2010 performance from the reopening of Russia's export market, said BMO Capital Markets analyst Kenneth B. Zaslow.

Russia and the US reached an agreement late last week to reopen the market to US chicken producers, although it was not clear when trade would begin again. Russia had banned all chlorine-treated poultry imports as of January 1, outlawing the 600,000 tonnes of poultry allowed from the US under revised quotas.

The industry is recovering from a downturn caused by weak demand and high ingredient costs, which kept pricing low and hurt profits.

Zaslow said the Mississippi-based company is well positioned to quickly renew exports with Russia because it has plants that are in compliance with Russia's safety terms. The 10-cent-per-pound rise in prices could mean an extra US$0.40 a share to his estimate for Sanderson's fourth-quarter earnings of US$0.97 a share.

The company will also benefit from lower feed costs as corn planting is ahead of its historical pace, meaning more supply and lower prices.

He maintained his fiscal 2010 earnings per share estimate of US$5.33 and fiscal 2011 estimate of US$6.03. Analysts on average expect the company to earn US$5.59 per share in fiscal 2010, and US$5.87 in 2011.

Shares of Sanderson closed Monday (June 28) at US$51.45. The stock, which bottomed at US$36.09 last fall, steadily climbed in the early part of this year to peak at US$59.43 in April.