Source:  MEATINGPLACE.COM, 3/9/11

Expecting pressures on the chicken industry to force production cuts, Deutsche Bank analyst Christina McGlone upgraded shares of Tyson Foods to a “buy” rating.

Recent industry chatter suggests chicken producers are already starting to cut back, possibly due to continued corn price increases and a spike in oil prices, McGlone said.

“While it had appeared chicken production cuts wouldn’t come until a view on new crop corn was garnered, it now seems producers are starting the process,” McGlone said in a note to clients.

Production cuts would “markedly” improve chicken Industry profitability at a time when seasonal demand for chicken is picking up and competing meat prices are high, she said.

Tyson’s beef and pork businesses continue to perform well, McGlone said, while prudent corn hedges, an improved balance sheet, operational efficiencies and a better product mix are helping to insulate the company from higher chicken industry production and feed costs.

Although egg sets are still too high, the rise in egg sets and chicks placed has moderated considerably since fall, McGlone said.  “We expect this trend to accelerate, with production cuts ultimately evident,” she said.

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