US chicken, meat producers slip amid Chinese tariff battle

 

 

Shares of poultry and pork producers were down Monday (Sept 14) amid concerns that China was going to impose a tariff on US chicken as part of a tit-for-tat trade battle between two of the world's largest economies.

 

Tyson Foods Inc., the largest US meat processor by revenue, counts on chicken as its highest-margin product and saw shares slip two percent to US$12.50 in recent trading. The company had already said last week that the chicken business was "a little bit soft," and a further blow from China could be damaging.

 

D.A. Davidson analyst Timothy Ramey said a potential Chinese tariff would likely hurt Tyson the most, but warned it would be bad news for the entire protein producing sector as the US is still hurting from Chinese restrictions on U.S. beef following a mad cow disease scare in 2003.

 

"All proteins are insanely cheap right and any further evaporation of demand would be bad for everyone," Ramey said. "These trade wars are just no fun and they go on forever."

 

China on Monday lodged a complaint with the World Trade Organisation over what it says are unfair tariffs imposed by the Obama administration on Chinese tire imports. President Barack Obama imposed the duties Friday (Sept 11) and China responded by saying it would investigate US exports of chicken meat and car parts.

 

Also falling Monday was bankrupt Pilgrim's Pride Corp., which was down 2.3 percent to US$5 in recent trading. The second-largest US chicken company is in the process of Chapter 11 restructuring in Texas, and hopes to leave the courts by the year's end.

 

Spokesmen for both Tyson and Pilgrim's Pride declined to comment on the possible tariffs and said it was a matter for industry trade groups the National Chicken Council and the USA Poultry & Egg Export Council.

 

Dick Lobb at the National Chicken Council said China's imposing a tariff would be a concern for the industry, while Toby Moore of the Poultry & Egg Export Council said there was a lot of money to be lost.

 

The U.S. exported 436,544 tonnes of chicken worth US$376 million to China during the first seven months of 2009, about half of which were chicken feet, according to the National Chicken Council.

 

Also trading lower were other US meat producers Smithfield Foods Inc., which fell 2.1 percent to US$14.09, and Hormel Foods Corp., which dropped 0.4 percent to US$37.33. Sanderson Farms Inc. slid 1.3 percent to US$39.76.