Global Processing

Beef producers rise after South Korea lifts ban

April 21, 2008
According to the Associated Press, shares of beef producers rose recently after South Korea lifted its ban on bone-in beef from the U.S. -- a development that analysts said should help companies grow profits.

Shares were also helped by a boost in the overall market as several big-name companies, including Citigroup and Google, reported quarterly earnings that either matched or exceeded expectations.

Before the market opened, South Korea''s farm ministry said it would allow U.S. beef imports to be expanded gradually. As a first step, the country said it will allow in imports of bone-in beef from cattle under 30 months old. Once the U.S. improves its safety standards, the country said, it will then allow in U.S. beef from cattle over 30 months old.

Currently, South Korea imports only boneless beef from U.S. cattle younger than 30 months. The country banned bone-in beef after a mad-cow disease outbreak in the U.S. more than four years ago.

The export ban has been one factor reducing beef processor profits in the past year.

Deutsche Bank North America analyst Eric Katzman raised his price target on meat producer Tyson Foods Inc. to $19 from $18.

J.P. Morgan analyst Pablo E. Zuanic said in a client note that the agreement with South Korea may also serve as a precedent for a new agreement with Japan, which has an under-21-month age limit for U.S. cattle.

Zuanic estimated that in 2002, before the bans went into effect, the U.S. exported slightly more than 1 billion pounds of beef to South Korea and Japan at a value of about $1.5 billion. At the end of 2007, the U.S. had exported only 152 million pounds at a value of $347 million.

If the bans on both countries were lifted, that number would increase substantially, he said.

Tyson shares rose 55 cents to $18.98 in midday trading after rising nearly 6 percent earlier in the day.

Smithfield Foods Inc. could also be a beneficiary because the company is the fifth-largest beef processor in the U.S.