NEW YORK -- Russia's decision to lift its ban on U.S. chicken imports will help the U.S. industry and could bolster prices and profit margins, analysts say.
Russia was the second largest importer of U.S. chicken in 2009 -- just behind China at $752.5 million in imports but that tumbled sharply after the ban was enacted last winter. So the recent agreement reached by the two governments was "eagerly awaited" by the industry, B. Riley & Co. analyst Scott Bunton told clients in a note on June 25.
BMO Capital Markets analyst Kenneth Zaslow said leg prices should rise in the next few weeks, "as buyers other than Russia would have an incentive to purchase legs ahead of the actual shipments to Russia." No date has been announced but Zaslow said he expected shipments to resume by September.
Leg prices are currently at about 38 cents a pound but should settle in the mid 40-cent rage, he said. Without the Russia imports, prices could have dipped into the 20s, he said.
The industry is recovering from a downturn caused by weak demand and high ingredient costs, which kept pricing low and hurt profits.
So the high leg prices will help Pilgrim's Pride Corp., Sanderson Farms Inc. and Tyson Foods Inc., Zaslow said.
Zaslow rates both Sanderson Farms and Tyson as "outperform" and Pilgrim's Pride as "market perform."
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