Standard & Poor’s Ratings Services is reviewing its credit ratings on three major US food producers in response to the recent floods in the Midwest.
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S&P said it had placed its ‘BB-‘ corporate credit rating on Dean Foods and Pilgrim’s Pride, and its ‘BBB-‘ corporate credit rating on Tyson Foods Inc. “on CreditWatch with negative implications”. The company said following the CreditWatch review it could affirm or lower the current ratings.
“The CreditWatch placement is the result of our concerns that in the near term these companies will be faced with even higher commodity costs than our previous expectations because heavy rains and flooding in the Midwest damaged the crops, especially the corn crop,” Standard & Poor added.
The review is to focus on the extent of the damage to crops, the pressure this will create for further record grain prices and the effect that will have on dairy farmers, dairy cattle supply and milk prices, and the companies’ ability to quickly pass these higher costs to its customers. In addition, S&P said it would discuss with management their plans to manage through these difficult market conditions.
S&P said dairy firm Dean Foods had rated debt of about US$5.2bn on 31 March, while poultry group Pilgrim’s Pride had rated debt on 29 March of about $2.1bn. Arkansas-based meat processor Tyson Foods, meanwhile, had rated debt of $3.2bn as of 29 March, 2008.
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