Salmonella, Melamine, Mad Cow: Do Food Chain Problems Offer Opportunities?

The latest food safety scare, in which nine people have so far died from salmonella linked to tainted peanut butter, may have received less attention from the general public that you’d expect due to the enormous coverage devoted to bank bailouts and stimulus packages. But it seems to have reached critical mass among members of Congress who are calling for new food safety regulations. That the peanut plant in question was not forced to disclose past violations to the FDA seems like it might be a heavyweight final straw on the proverbial camel. http://www.usatoday.com/money/industries/food/2009-02-11-peanut-food-reforms_N.htm

Since the Mad Cow scare of late 2003, the Agriculture department and the beef industry have tussled over a system that would trace tainted beef to its original source. A National Animal ID System has so far been voluntary; there are signs, however that the recent momentum for more food oversight could lead to mandatory changes.  If that happens, South St Paul, MN-based Digital Angel Corp (Nasdaq: DIGA, http://www.digitalangel.com) could see further adoption of its wide range of animal identification tags and growing RFID tracking systems. Some analysts note this latest food scare could provide a boon to RFID. http://computerworld.com/action/article.do?command=viewArticleBasic&taxonomyName=security&articleId=332796&taxonomyId=17&intsrc=kc_top

 The microbiology food testing market is expected to grow at a healthy 5.6% annual rate over the next few years. http://www.bccresearch.com/report/FOD011E.html.  Newark, DE-based Strategic Diagnostics (Nasdaq: SDIX, http://www.sdix.com/) provides a suite of diagnostic tests for seeds, grains, processed food and pathogens. Trading for $1 and near its low (down from $5.20), most of its upside remains ahead of it, should it receive more contracts as a result of new mandated testing.

 Lansing, MI-based Neogen (Nasdaq: NEOG, http://www.neogen.com/) labels itself  a “One Stop Shop For Food And Animal Safety Solutions.” In December it did something not seen often these days when it announced a new share repurchase program. The stock of this $383 million market cap company is trading at $26 – midway between its yearly low and high ($31.95).

 Rockville, MD-based Synutra (Nasdaq: SYUT, http://www.synutra.com/) rounds out the tainted food theme of this blog – but for a different reason. SYUT provides infant formula in China and it was one of the 22 producers whose products contained melamine, which was involved with infant deaths and hospital visits. The stock, at $8.65 mid-day 2-12, trades close to its 52-week low, down from a high of $52.24.  Investors who believe that China’s actions can bring back confidence to the infant formula market may want to take a look at this stock, which has distribution in 29 Chinese provinces.

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