This is one food processor that could reap signficant gains if the drought persists in USA.
Anyone know of other major agriculture ADRs listed on U.S. markets in Australia or Europe?
Bunge Group shipped some corn from Brazil to USA. Brazil had an record corn crop. See new under BG.
This company should benefit from the world crop situation, for the next 12 months at least.
FYI: Corn is the 1st component / ingredient in poultry feed with soy /wheat /fish meal as alternative sources of protein (in the western world). Rice can be used as a corn substitute if the price is low enough (not now). Other replacements or partial replacements for corn include various root crops grown more outside USA.
All are indeed relative /cost and it sure appears Brazil is going to have the lower cost this year.
The cost of corn is going to be exhorbatent this year. The cost of soybean is not yet baked in because it might still be salvaged with late season rain in the USA.
I read that article.
I base this observation on having been in the farming business for many years.
IMHO BRFS is going to do extremely well in this drought environment.
As to TSN, since they are addressing the situation early on, it is likely the stock is a bargain, certainly for long term. Half price long term.
In this business one must understand the relativity factor.
Crop production in Brazil is likely to be fine this year resulting in RELATIVELY lower prices than other parts of the world.
Relatively lower prices are the reason Tyson has negotiated purchasing corn from Brazil this year.
Since Tyson, Smithfield, etc. need to ship corn but Brasil Foods does not need to do so, RELATIVE costs should be lower for BRSF than for their competitors.
RELATIVEly lower costs of goods /crops /inputs to food processing should result in BRFS being more competitive. This should translate into higher revenue & profits and ... exports to places like China over the next two years.
Above assumes Brasil crop production is not impacted as much as are India and United States.
On that basis I am long BRFS.
We shall see how this turns out.
I have been thinking the same thing. Brazil's corn I hear is looking good and U.S. crop is estimated to be down by 20-25%. That may spell cost problems for Tyson.
If I had more info I'd buy in about now,...but I'm a chicken!
While you wait you should play something like
iPath DJ-UBS Grains TR Sub-Idx ETN (JJG)
Syngenta AG, POT, Agrium Inc. (AGU)-NYSE , mapple leaf foods, alliance grain
I like this and marfrig but I do not like your thesis that Tyson will suffer as it is my understanding they have already began import feed talks
Long-Term Sentiment Disclosure
Bottomline - Never fall in love with Commodities as they are not loyal and fall quicker than they rise...especially in times of the uncertainty and listeria;)