Food Companies' Bonds Could Get Junkier

It’s too early to call it a “food recession” – too many companies are still doing too well for that – but Standard & Poor’s move to put several food producers on “CreditWatch negative” isn’t a good sign.

The credit-ratings agency on Thursday said downgrades could be on the way for dairy company Dean Foods, poultry producer Pilgrim’s Pride, and meat producer Tyson Foods.

Dean and Pilgrim’s Pride currently have “BB-” ratings on their bonds. Those could be cut to “BBB-,” the current status of Tyson’s bonds, which are junk already. And Tyson’s could be made even junkier than that.

S&P said rising commodity costs could go even higher thanks to recent floods in the Midwest, which damaged corn crops, put some processing plants out of commission, and disrupted shipping.

“Our review will focus on the extent of the damage to crops, the pressure this will create for further record grain prices and the resulting effect that will have on dairy farmers, dairy cattle supply and milk prices and the company’s ability to quickly pass these higher costs to its customers,” S&P said in a statement.