The likelihood of a drop in poultry prices grew after a slew of countries blocked poultry exports from Arkansas on Thursday.
Mexico, the poultry industry's top trading partner, joined more than 20 other countries and the European Union to ban all poultry imports from the state after a case of bird flu was found in a Boone County turkey flock.
Jessica Sampson, an agricultural economist at Colorado-based Livestock Marketing Information Center, said Mexico consumes 21 percent of chicken exports and 63 percent of turkey exports.
And more countries are likely to follow suit, said James Sumner, president of the USA Poultry and Egg Export Council, on Wednesday.
The move by Mexico and other countries raised concerns that poultry companies might face lower prices for meat as supply expands inside the United States.
Before the case of avian influenza in Arkansas, the greater number of countries with import restrictions were blocking poultry from California, Missouri and Minnesota. Those states accounted for about 10 percent of U.S. production by sales, according to USDA data.
With the addition of Arkansas, 20 percent of the United States' poultry production is off-limits.
"High pathogenic avian flu in Arkansas is definitely concerning because it's the first really major producer to be hit," Sampson said.
Prices for dark meat are likely to decline as supply builds up in the United States, but the cost of white meat could be dragged down as well, she said.
Farmers who contract with poultry companies could see less business if there's too much supply, she said.
H.L. Goodwin, a poultry economist and professor of agricultural economics and agribusiness at the University of Arkansas, said most bans last six months after the last positive test.
Sumner said that in Mexico's case, the statewide ban will likely soon be replaced by a county ban. Some other countries, like Japan, usually ban products for 90 days, he said.
Goodwin said poultry companies with facilities spread across the United States are less likely to be affected because they can export products from unaffected areas.
"Our company has the ability to ship products from multiple states, so we believe we can meet demand for both domestic and global markets," said Dan Fogleman, a spokesman for Tyson Foods, in an email.
Goodwin said it may be harder for poultry companies that are more regional to adapt to export bans.
"The companies that would really be most impacted would be the companies that only have one or two plants that aren't spread across several states," he said. "If you have a company that mainly has plants in Arkansas, how are they going to manage around that?"
Rogers-based Ozark Mountain Poultry has plants only in Arkansas. Siloam Springs-based Simmons Foods has facilities only in Arkansas and Missouri. Springdale-based George's Inc. has plants in Arkansas, Missouri and Virginia.
"So far it's had very little effect on our business. We're still able to export paws, which is the single biggest product we export," Ed Fryar, chief executive of Ozark Mountain Poultry, said of chicken feet. "Depending on how long it goes on, it could affect us more in the future. If dark meat builds up, it could effect pricing."
Representatives from Simmons and George's did not return requests for comment. It's unclear whether the companies have significant export businesses.
In Thursday trading, Tyson shares gained 0.03 percent, Pilgrim's Pride was down .73 percent, and Sanderson Farms slid 2.45 percent.
Last quarter, Tyson's chicken segment was a highlight for the company, earning $351 million in profit and an operating margin of 12.6 percent -- an all-time high.
"We won't speculate on the impact avian influenza may have on our company, but we'll point out that domestic and international demand for poultry continues to be strong," Fogleman said.
Business on 03/13/2015