Chicken shares downgraded to 'hold'

A Deutsche Bank analyst has downgraded shares in two top US chicken producers, citing risks facing the chicken processing industry.

Tyson Foods, the world's largest meat producer, and Pilgrim's Pride, the second largest poultry producer in the US, were downgraded to 'hold' from 'buy'.

Analyst Eric Katzman downgraded Tyson shares and lowered his price target by $3 to $16, discouraged by a wide array of negative trends hitting the industry.

Katzman said higher bird weights have resulted in a drop in the price of skinless boneless chicken breast to about $1.06 a pound (around $2.33 per kilo), compared to a historical average of about $1.70 a pound (around $3.74 per kilo).

"Whether prices recover remains to be seen and depends on the rationality and further discipline in the industry," Katzman wrote in a client note.

Katzman noted the rising price of corn, due to harvest delays from wet weather, among other factors.

"December corn futures are trading at about $3.15 per bushel versus the historical average for the month of December of less than $2.40 per bushel and last year's price of $1.90 for the month of December," Katzman said.

Katzman lowered his fiscal 2007 earnings per share estimate to 62 cents from 74 cents, saying it will take longer than expected for the chicken and beef industries to recover from current difficulties.

All prices are in $US.

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Editor WorldPoultry