October 22, 2007

Russian ban on US meat supplies worries investors

Russia's ban on a total of 17 US poultry plants and six US meat warehousing facilities prompted a short sell-off of stocks of US meat companies last week. 

Shares of Smithfield Foods shares were down 68 cents at $29.45, a 2.3 percent drop while Tyson's shares fell 3.8 percent or 67 cents to US$17.20. Shares of Sanderson Farms fell 4.9 percent.

Shares of top US chicken producer Pilgrim's Pride Corp. fell 10 percent in early trading to a 9-month low of $28.21 before going up to US$28.95. It was 7.9 percent down at the end of the day.

Both Tyson Foods and Sanderson Farms had two plants each on the list of plants banned by Russia. The ban follows inspections by Russian officials this summer, but commentators said these bans were believed to be more politically motivated than any indication there were problems within those plants.

The bans are expected to be temporary. USDA has the authority to approve the facilities for Russia once Russia's concerns are addressed, USDA said.

However, investors are also worried that the bans are coming at time of larger supplies of pork and chicken due to increased production. Russia is the top buyer of US chicken.

Chicken companies are expected to limit the impact of the ban by re-routing chicken supplies to other approved plants.

Although Russian imports of US pork and chicken has been declining in recent years, any potential hiccups are bound to send investors heading for the exit, analysts said.