Source: Chris Scott, MEATINGPLACE, 6/22/15


Three major U.S. poultry producers should see the usual positive stock boost after USDA makes its recently announced bonus purchase of dark chicken meat, according to an industry analyst.

Farha Aslam at Stephens Inc. says the stocks of Pilgrim’s Pride, Sanderson Farms and Tyson Foods should see the usual three-month rally that has occurred after previous USDA bonus purchase programs. Aslam reiterated her overweight/volatile rating for Pilgrim’s Pride stock and her overweight rating for Sanderson Farms and for Tyson.  

USDA’s Agricultural Marketing Service, Commodity Procurement Staff announced last week that the agency will purchase chicken leg quarters to reduce the surplus that resulted from lower exports in recent months. The agency did not provide the size or timing of the bonus buyback program beyond saying that a solicitation for companies that want to sell dark poultry meat will be issued “in the near future.”

Aslam noted that USDA’s bonus purchase programs tend to occur in August or September and most recently occurred in 2008. USDA spent $42.2 million during that special purchase.

Recent foreign bans on U.S. poultry in the wake of the avian influenza outbreak, a stronger U.S. dollar and declining oil prices have all hurt the purchasing power of key foreign markets for U.S. goods. The bonus purchase program is designed to stabilize prices that have weakened since nearly all U.S. chicken exports are leg quarters.

Meanwhile, Heather Jones at BB&T Capital Markets added that she believes the special purchase will remove about 100 million to 125 million pounds of dark chicken meat, representing about 55 percent to 70 percent of the current cold storage inventories. However, she doesn’t believe the program will drive substantially higher pricing, but should help stabilize the market.

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