Tyson Foods Inc., the largest U.S. meat processor, fell the most in four months on speculation higher corn prices will increase the cost of animal feed.
Tyson, which is based in Springdale, Arkansas, fell 92 cents, or 5.4 percent, to $16.10 at 11:46 a.m. in New York Stock Exchange composite trading. The shares earlier fell as much as 7.9 percent, the biggest intraday drop since May 6. They gained 39 percent this year before today.
Corn futures in Chicago reached $5.1175 a bushel, the highest price for a most-active contract since Sept. 30, 2008, as U.S. crop yields decline and import demand rises.
“We believe rising grain costs are likely weighing on protein margins,” Vincent Andrews, an analyst for Morgan Stanley in New York, said in a report today. “The bias to corn prices remains to the upside, and we do not expect protein players to fully pass through higher feed costs.”
Meat processors may not be able to pass on higher costs to customers because food-service demand remains slow, meat supply may be expanding and record levels of so-called choice beef may weigh on prices for all meats, he said.
Sanderson Farms Inc., based in Laurel, Mississippi, “has the most downside to higher corn prices” because it doesn’t have a processing business like Tyson and Smithfield, Virginia- based Smithfield Foods Inc., he said.
Sanderson, the fourth-largest U.S. chicken processor, fell as much as 1.7 percent in Nasdaq Stock Trading. Smithfield, the largest U.S. hog producer, declined as much as 5.3 percent in New York.
Tyson is the largest U.S. chicken processor based on 2009 production, followed by JBS SA’s Pilgrim’s Pride Corp. unit and closely held Perdue Inc., according to WATT PoultryUSA, a magazine covering the industry.
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