The US Department of Agriculture has calmed fears over the outlook for feed prices, prompting shares in protein groups such as Pilgrim's Pride and Sanderson Farms to rise.
In its World Agricultural Supply and Demand Estimates (WASADE) report, the USDA said it anticipates improving corn and bean yields, when the sector had widely expected declines on the back of US weather trends. The agency increased its corn yield estimate to 168.8 bushels per acre from its previous estimate of 166.8 bpa. The USDA also lifted its soybean yield estimate to 46.9 bpa from 46 bpa.
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BB&T Capital Markets analyst Brett Hundley said the report was a "positive" if "unexpected" development for the US protein sector. "Certainly, this is unexpected (for us, anyway), and is a positive development for protein industry earnings models, if indeed such production levels are maintained," he noted.
Hundley continued. "We wonder if lower feed prices will keep some producers from instituting normal fall cutbacks. We wonder if the public chicken guys will now finally get long corn and meal. Into 2016, we will be curious if chicken industry earnings can be better than expected, given overall supply expansion constraints… A key is likely bird flu this fall."
Shares in Sanderson Farms closed up 3.81% on the news yesterday (12 August) while shares in Pilgrim's Pride – majority-owned by Brazilan meat group JBS – gained 2.9%.
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