Meat companies placing global emphasis

by Staff
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CHICAGO — Protein processors are placing more emphasis on international markets as this business becomes more important, according to a new report from Fitch Ratings called "U.S. protein companies expand internationally: The ‘steaks’ are high."

Companies such as Tyson Foods, Inc., Smithfield Foods, Inc. and Pilgrims Pride Corp. have benefited from increased export demand and expanded offshore operations, which have led to non-U.S. sales growth.

"Absent higher-than-normal outbreaks of animal viruses and diseases, which can disrupt international trade, strong per capita consumption trends and a weak U.S. dollar should continue to support export activity," said Carla Norfleet Taylor, director of Fitch Ratings.

In fact, the Foreign Agricultural Service of the U.S.D.A. predicts the value of U.S. meat and poultry exports will increase 5.1% to $9.6 billion in 2008.

Fitch said in addition to growing exports, U.S. protein companies are focused on expanding international sales by acquiring or building foreign production facilities.

"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 E. Moultire II, senior director of Fitch Ratings.

Fitch predicts as protein markets become more globally integrated, there will be instability in supply and demand conditions and greater foreign exchange rate risk should be expected.

Tyson’s international sales are currently at $3 billion, up 25% since 2002. Smithfield’s international exposure has increased more than 350% in the past five years with sales currently at $1.6 billion, or 14% of the company’s total sales for 2007. Pilgrim’s Pride’s international efforts have doubled in the past five years to $1.1 billion, or about 15% of sales.

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