Source: MEATINGPLACE, 4/14/16

Chicken cutout margins should spring back from a dip in March, supported by favorable production and feed cost trends, BMO Capital Markets analyst Kenneth Zaslow said in a report Thursday.

A seasonal tendency for cutout margins to rise should also help margins rebound, the analyst said.

Chicken margins declined less than 1 percent, or half a cent per pound, in March, compared with the month before, marking the first contraction in four months, Zaslow said. Weakness stemmed from a drop in wing prices that offset gains in leg quarters and breasts. Higher soybean meal costs increased overall feed costs.

But he predicted the margin pullback would be temporary, citing renewed pressure on feed costs, expected to come from the South American harvest, and seasonal support for breast meat prices.

In addition, egg set trends remain manageable at less than 2 percent growth, despite a 2 to 3 percent increase in breeding flock capacity, he said.

Zaslow raised his earnings expectations for Tyson Foods and Sanderson Farms as a result, noting Pilgrim’s Pride will also likely benefit from seasonal strength in chicken margins.

Zaslow said he expects Tyson to generate at least 10 percent growth in earnings per share long term, noting profits may exceed the $4-per-share mark as soon as fiscal 2006.

For more stories, go to www.meatingplace.com.