US meat companies shares jump

Reuters | Wednesday, 16 July 2008

STUFF - New Zealand

Shares of leading US meat companies advanced overnight due to lower corn prices, as the corn crop may not be as bad as previously feared, and to lower crude oil prices, analysts said.

"Wall Street was hearing that these livestock companies would have to price corn up to $US8 ($NZ10.50) per bushel for the next year or so," said Rich Nelson, agriculture analyst at the Allendale Inc. "I think, at least so far, the crop has recovered a little bit. We are now seeing these Wall Street analysts re-price some of their corn projections."

Corn is an important feed for cattle, chickens, and hogs. High corn prices this year have hurt companies that produce these animals such as Pilgrim's Pride Corp, Sanderson Farms Inc, Smithfield Foods Inc, and Tyson Foods Inc.

Rain and flooding delayed the planting of corn in some key Midwest states and drove up corn prices, which were already high due to strong demand by livestock and ethanol producers and by exporters.

"The stocks of these have been under pressure for quite a while so I think when they found a little air of good news investors jumped on them," said Jim Robb, agricultural economist at Livestock Marketing Information Centre. "The corn is the No 1 reason, but the oil price softening gave them (shares) a little bit of a bump too."

Government data released on Monday rated the corn crop 64 percent good to excellent, up 2 points from a week earlier, and equal to a year ago. Also, weather forecasts call for warm, dry weather, which the crop needs now.

Corn futures for September delivery closed at $US6.48-1/4 per bushel on Tuesday at the Chicago Board of Trade, that is down 42-1/2 cents, or 6 percent, in two days. Also, a month ago the contract reached $US7.76.

Meat company investors also were cheered by the $US6-per-barrel drop in crude oil prices on Tuesday. Energy is a key cost as it is used to heat plants and deliver meat to customers.

In New York Stock Exchange trading, Pilgrim's Pride, the No 1 chicken producer, closed Tuesday at $US14.57, up 62 cents, or 4.44 percent; Tyson Foods, the largest US meat company, closed at $US15.39, up 49 cents, or 3.29 percent, and Smithfield Foods, the largest hog and pork producer, closed at $US20.57, up $US1.27 or 6.58 percent.

In Nasdaq trading, Sanderson Farms, the No 4 chicken producer, closed at $US42.26, up $US2.75 or nearly 7 percent.

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