US: Global expansion key to meat producers - study
International markets are becoming increasingly important to meat producers, according to a report out by Fitch Ratings.
The USDA's Foreign Agricultural Service predicts the value of US meat and poultry exports to increase by 5.1% to US$9.6bn in 2008 which, according to Fitch, may be due to absent higher than normal outbreaks of animal viruses and diseases, a weak US dollar and strong per capita consumption trends.
"Foreign production facilities provide asset diversification, offer direct exposure to international markets, and enable companies to sell products from regions not subject to import bans," said Wesley Moultrie, senior director of Fitch Ratings.
"International growth will be managed through small prudent acquisitions and joint ventures, although," he continues, "Large debt-financed acquisitions of foreign protein companies are not anticipated in the near-term."
Earlier this month, Tyson announced plants to expand its poultry business in China through a joint venture with the Jiangsu Jinghai Poultry Industry Group. Additionally, reports have also suggested the company's links with Brazilian chicken company Pena Branca.
"Periods of supply and demand instability will occur as protein markets become more globally integrated," said Taylor. "While international growth rates are attractive, increased volatility in revenue, earnings and cash flow could result in periods of higher than normal leverage for the industry."
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