Source:  MEATINGPLACE.COM, 12/2/10

Goldman Sachs cut its rating on Sanderson Farms to “sell” this week, citing an oversupply of chicken in the U.S. market, according to media reports.

Goldman Sachs analyst Lindsay Drucker Mann also upgraded shares of Tyson Foods, which sells pork as well as chicken, to “neutral” from “sell.”

Heavy production of chicken and a stagnant export market will weigh on chicken prices, the analyst was quoted as saying, but hog prices might rise as supplies tighten. Meanwhile, rising feed costs will eat into Sanderson’s profit margins, according to reports. Sanderson’s stock came under pressure, while Tyson’s got a boost from the Goldman actions.

"We do not yet see signs of the supply response we believe is needed to push chicken prices higher," Drucker Mann was quoted as saying.

Meanwhile, Stephens analyst Farha Aslam reduced her rating on Sanderson to “equal-weight” from “overweight,” citing lack of visibility in the commodity chicken market due to increased poultry production and elevated grain prices.

“We believe the chicken industry is headed for a difficult six months,” Aslam wrote in a report to clients.

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