Analyst Bryan Agbabian of Allianz Global Investors says Tyson Foods, Inc. (TSN) is a solid play on the increase in chicken demand in the U.S. and internationally, particularly in areas like China, where they are battling food safety issues.
“Tyson is developing an in-country, in-China integrated production of chicken so that Tyson can then sell to not only the local market there, but also to the U.S.-based restaurants that are doing business there such as Kentucky Fried Chicken (YUM) and McDonalds (MCD) — two companies that are doing business in China and are having a problem with sourcing safe food,” Agbabian said.
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Agbabian says that chicken companies in general have done better over the last few quarters, due to an increase in corn acres and the resulting lower feed costs.
“Last year [farmers] increased to around 95 million acres of corn planted, and they actually had a good harvest; corn prices had declined. The increase in production has helped replenish some of the low inventories, and that in turn has been a positive factor for chicken companies that are now benefiting from lower feed cost,” Agbabian said.
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