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Published October 13, 2011, 02:01 PM

Greatest demand for chicken is at grocers

NEW YORK — Demand for chicken is mixed, with weakness in restaurants and the food industry and strength at grocers, an analyst said Thursday.

NEW YORK — Demand for chicken is mixed, with weakness in restaurants and the food industry and strength at grocers, an analyst said Thursday.

Akshay Jagdale of KeyBanc Capital Markets said in a client note that demand in the foodservice sector — which includes restaurants — is soft partly because of weak consumer demand and high inventories.

“We do not expect foodservice demand to improve by any meaningful extent unless the employment picture gets better,” Jagdale wrote.

The analyst anticipates that breast meat supply will have to be cut back significantly in order for prices to rise.

On the flip side, Jagdale says retail chicken prices will probably continue to be high at grocery stores because the demand is there.

Jagdale raised the 2012 earnings estimates for chicken producers Tyson Foods Inc., Sanderson Farms Inc. and Pilgrim's Pride Corp. on Thursday, citing lower feed costs. The analyst now expects earnings of $2.40 per share for Tyson Foods, up from $2.13 per share. Jagdale calls Tyson “the way to play an eventual recovery in the chicken cycle.”

Jagdale predicts earnings of $1.27 per share for Sanderson Farms compared with a prior estimate of $1.07 and earnings of 17 cents per share for Pilgrim's Pride compared with a previous forecast for a loss of 5 cents per share.

Analysts surveyed by FactSet expect 2012 earnings of $2.08 per share for Tyson Foods, $1.51 per share for Sanderson Farms and 28 cents per share for Pilgrim's Pride.

Tyson Foods said it is in the quiet period leading up to earnings and would rather not comment. Company representatives for Sanderson Farms and Pilgrim's Pride could not be immediately reached for comment before the market opens.

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