Fitch to take no action on beef producers

Fitch Ratings said is not taking any action at this time on the major U.S. beef producers and restaurant chains' credit ratings following recent confirmation of the first U.S. case of a cow infected with bovine spongiform encephalopathy (BSE), also known as Mad Cow Disease.

Fitch said the temporary import restrictions by major trading partners of the United States will result in an increase in domestic supply and lower beef prices, which are expected to negatively impact the operating earnings and cash flow of the beef producer industry.

However, exports represent only 10% of production and the likelihood of further cases and the impact this could have on consumer behavior is not ascertainable at this time. That impact could influence the demand for beef at restaurants.

The largest beef processors representing over two-thirds of the industry are Tyson Foods Inc., Cargill Inc. and Swift and Co. (45% owned by ConAgra Foods Inc).

The firms that are likely to be impacted the greatest from reduced consumption and price declines are Tyson and Swift & Co. However, any negative impact on Swift and Co. will have minimal financial impact on ConAgra Foods, Fitch noted.

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