Source: Rita Jane Gabbett, MEATINGPLACE, 1/18/16


Poultry company stocks fell on Friday as USDA confirmed a new strain of highly pathogenic H7N8 avian influenza in a commercial turkey flock in Indiana, but analysts said the U.S. poultry industry is better prepared and export markets may not react as severely as they did a year ago.

This is the first U.S. outbreak since last June.

Noting the negative investor reaction, BB&T Capital Markets analyst Brett Hundley said, “We understand these reactions, but believe that the outbreak by itself is not meaningful.” It should also be noted that the broader stock market plummeted on Friday, reacting to falling markets in China.

In a note to investors, Hundley added, “We think that industry is much better prepared today, following upgrades to biosecurity, evidenced by a lack of outbreak during the fall/early winter.”

Export markets
In terms of export markets, Hundley expects a more nuanced reaction than in 2015, when some countries initially banned all U.S. poultry imports.

“We see an export trade community that should be considerably less reactionary than last year. Many export partners of the United States knowingly came back to the country ahead of this spring, a period when bird flu re-emergence has been forecasted,” he wrote. Developing bird flu conditions in France and across Western Europe may level the playing field and force export partners to soften conditions about how and from where they will take product.

Hundley expects to see more county or state bans in the future, rather than blanket country bans.

Stephens Inc. analyst Farha Aslam agreed, noting that USDA’s Animal and Plant Health Inspection Service (APHIS) has negotiated increased regionalization of export bans. The key markets are South Africa, South Korea, and the Middle East as those are the markets that have been supporting prices in the last few weeks.

In a note to investors, Aslam added, “Poultry producers have invested heavily in biosecurity measures over the past year, which should help limit the high path AI from spreading and the impact to market access.”

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