"People eat duck and you think, well, we've got loads of chickens, leave the ducks alone!" - Karl Pilkington, An Idiot Abroad
Good day members,
It was our last night in paradise. One final celebratory dinner before packing up our things and heading home to begin school, baseball practices and music lessons. We would reluctantly kiss Key West goodbye the following morning. Our fantastic few weeks in the Conch Republic had finally come to an end...
Wandering into the backyard of a hundred year old cigar house, ducking the banana leaves and stepping over fallen mangos and coconuts, we arrived at the gathering. There were about 20 other people back there, all sipping on some alcoholic concoctions, some smoking stogies and a few of the older men playing dominoes. It was dripping hot in the tree covered yard, with no breeze penetrating the thick canopy. Even in the shade it was 95 degrees. The mosquitoes were sweating.
The sounds of salsa music emanated from an old single speaker radio, and children's laughter filled the air. In the back right corner, a small cage with two very quiet chickens... next to it, a chopping block and knife.
They were friends of my wife's family; longtime residents of the island, going back generations. They kept many of the traditions of their Cuban ancestors, including Sunday morning church service followed by drinking and feasting all afternoon. This Sunday, it would be rum followed by an early dinner, then rum, some more rum, Cuban rum cake for desert, then some more rum.
I'd never seen a chicken butchered before. Even with a half-gallon of Bacardi coursing through my veins, I was taken back by the whole process. "It's free range chicken, very good for you. I bet you've never had one like this before", my new friend said. He was right. But "free range?" I asked. The chickens were caged. Apparently, they'd only been caged a day... I promised not to tell anyone who my hosts were, as what they were doing was technically illegal. Their "free range" chickens were in fact wild chickens found all over the island. They weren't supposed to catch them, let alone eat them.
As the rum bottles continued to disappear, our conversation focused on the birds roasting on the spit. My wife, a very health conscious, organic food loving, granola muncher was excited to try the "natural" poultry, and of course a jug-full of homemade mango sangria.
There's been a movement in the chicken farming industry lately. You've probably seen the Perdue Chicken commercials touting their "antibiotic free" farming practices. In fact, privately held Perdue only uses human antibiotics in a very small percentage of their flock. Less than 5%.
Pilgrim's Pride (PPC) America's second largest chicken producer recently announced their goal to reduce antibiotics their flock as well. By 2019, they expect "only" 75% will be using antibiotics (outpacing most of their competition). The reason is simple, consumers are demanding it. Pilgrim's Pride is not doing this to be good stewards. They simply see the trend and want to sell more chickens. The Key West chickens, on the other hand, are antibiotic free simply because they're feral.
Antibiotic free chicken sales have increased by double digits per year since 2011. Both McDonald's and Chick-fila have announced they will stop selling chicken products raised on antibiotics important in human medicines. The trend is clear, poultry is going clean.
Looking at the Pilgrim's Pride (PPC) chart over the past year you can see the stock has taken a beating.
investment-idea
However, after a recent low well under $20 per share, PPC seems to be on the rebound. After a quarterly report showing a sharp rise in profit, and the announcement of a $150 million share buyback program, the stock is now looking like healthy times may be ahead.
PPC's main publicly traded competitor, Tyson Foods (TSN) is nearly three times the size. Boasting a market cap of $17.5 billion, TSN is also more than double the price (based on PE) of PPC. Tyson's PE is 16, Pilgrim's is "only" 7.
You may have noticed the price of poultry products has been rising lately. Everything from chicken wings to eggs has been going up, up and up. The culprit is the dreaded bird flu. More than 48 million American chickens have succumbed to the disease, crippling the supply of big farmers.
But this will not last forever. It's been two month's now since the last case was detected. Supply is once again rising, with an estimate of two years to full flock recovery. It's this disease that has is partly responsible for the slide in share price of Pilgrim's Pride, a poultry pure-play.
With the disease seemingly in the rearview, now may be the time go look at chicken stocks. And with PPC trading at less than half the PE of TSN, Pilgrim's may be the best bet.
Another rum drink hits my hands along with a cigar. Standing over the spit, the smell of roasting chicken makes me salivate. "You see, these are not regular chickens. They're a special breed of chicken only found here, and maybe a few other places, but mostly here. They were taken here a long time ago from Cuba as fighting cocks and hens. You'll see how different they taste."
Somehow another drink finds its way to my left hand, a mango mojito, prepared using the fruits on the property. Finally something refreshing I mumble to myself. The previous drinks were all rum and coke, not really my cup of tea, but I'm not one to be rude to my hosts. By now I've got quite the buzz on, from the cigar... yeah, the cigar did it.
Admiring the chicken slowly roasting before me, a strong desire to stay here overwhelms me. But that's just not possible, maybe in another life.
Dinner was served around 3pm. The roasted "free range" chicken, black beans and rice with a side of fried plantains. My new friend was right; the chicken was like no other bird I had ever tasted. It was much more primal, gamey... delicious.
By 6pm my family and I wobbled back to our abode to pack for the short trip home. I'll never look at those wild Key West chickens the same way. From here on out, I can only see those "free range, antibiotic free" birds turning slowly above an open fire.
"Where is Bum Farto?" - Citizens of Key West
Until next time...
read more at http://www.caesarsfinancial.com
