Mexican Chicken Producer Bachoco Tumbles on Bird Flu

Industrias Bachoco SAB, Mexico’s biggest chicken producer, fell for the first time in seven days as bird-flu cases were detected at its breeder farms.

The stock fell 2.1 percent to 30.97 pesos at the close of Mexico City trading, snapping a seven-day climb that was the longest streak in almost two years. Trading volume today was more than triple the three-month daily average.

Bachoco, based in Celaya, had said in a statement yesterday that avian influenza may have broken out at five farms. Mexico’s agriculture ministry said in an e-mail after the market closed that outbreaks were confirmed at seven of the company’s farms in Guanajuato,

“If they confirm the outbreak, they are going to have to kill all the hatching chickens,” Gustavo Teran, an analyst with Mexico City-based Corp. Actinver SAB, said in a telephone interview before the government’s announcement. Under a worst-case scenario, an outbreak could cut revenue by as much as 3 percent, Teran estimated.

Bachoco’s risks are contained because the company has diversified its production into about 100 poultry farms, Teran said in the interview. He rates the stock a buy.

As many as 582,000 birds may have been exposed to the flu, the ministry said.

The company said in its statement it was working with authorities to verify the outbreak and would take necessary action if the cases were confirmed.

Obtaining Eggs

The agriculture ministry hasn’t determined whether the flu is the same strain that infected poultry farms in nearby Jalisco state last year, according to the e-mail. Guanajuato has 2.4 percent of Mexico’s egg-laying chickens, the ministry said.

A bird flu outbreak last summer caused egg and poultry prices to surge, driving up inflation in Mexico.

Bachoco should be able to offset losses by obtaining hatching eggs from third parties, Miguel Mayorga, an analyst with brokerage firm Grupo Bursatil Mexicano, said in a telephone interview before the outbreaks were confirmed. He rates the stock the equivalent of buy.

“The company has some flexibility to be able to prevent some of the damage,” Mayorga said.

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