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Mar 7, 2017

S3 BLACKLIGHT: Bird Flu Pecks Away at Poultry Producers’ Stock Prices

Poultry producers’ stock prices took a hit yesterday as a lethal form of avian influenza, also known as the bird flu, was discovered on a farm that supplies poultry for Tyson Foods (TSN US). Even though this outbreak is limited to one Tennessee based supplier, the stock prices of the top three poultry producers declined in yesterday’s trading.
TSN short interest is $1.2 billion - up $414 million, or 52%, in 2017 - and PPC’s short interest is up $46 million, or 10%, hitting $491 million after declining to two year lows late last year. SAFM’s short interest actually declined this year, down $101 million, or 15%, to $560 million.

Short sellers in the three publicly traded poultry producers, Tyson Foods (TSN US), Pilgrim’s Pride (PPC US) and Sanderson Farms (SAFM US) made $47 million in net of financing mark to market profits from yesterday’s price drop.

Short sellers in the three top poultry producers were down $62.4 million prior to yesterday’s announcement. TSN shorts were down $19.9 million and PPC shorts were down $43.4 million, while SAFM shorts were up $0.9 million. After yesterday’s announcement, TSN short sellers are up $9.7 million and SAFM’s shorts are up $12.2 million. PPC short sellers are still down for the year, showing $37.5 million of year to date losses.

If this bird flu virus remains contained to one supplier, the negative price impact on these three poultry producers will be minimal. However, if the virus spreads to other producers via wild fowl infecting other farms in neighboring counties and states, the impact could be significant.

For more information on the above analysis, please contact:
Ihor Dusaniwsky, Head of Research, S3 Partners, LLC     Ihor.Dusaniwsky@S3Partners.net
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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