Tyson finds chickens with mild bird flu strain

CHICAGO (Reuters) - Tyson Foods Inc, the second largest U.S. chicken producer, said on Tuesday it will destroy about 15,000 chickens in Arkansas exposed to a mild strain of bird flu, and while there was no risk to human health the news sent its shares lower.

The affected chickens, which will not enter the food supply, had antibodies of a mild or low pathogenic strain of bird flu called H7N3.

It is the deadly high pathogenic H5N1 strain, which has never been found in the United States, that worries scientists because it has spread to and killed people around the world.

While the findings are no threat to humans, shares of U.S. chicken companies dropped as investors worried foreign buyers may ban U.S. chicken. The United States exports about 16 percent of its chicken, and a loss of key overseas markets could create a glut of chicken here.

There have been previous cases of mild bird flu in the United States. Last year government investigators found cases in 13 states.

Because of the Arkansas findings the U.S. Agriculture Department already has suspended shipments of chicken from that state to Russia, the top overseas market for U.S. chicken. One concern is Russia may implement a broader ban.

"The Russians might say nothing or they may ban all sales from us. There is no predicting what they will do," said Paul Aho, economist with the consulting firm Poultry Perspective.

In addition to Tyson's shares, shares of top chicken producer Pilgrim's Pride Corp and smaller rival Sanderson Farms Inc also were lower on Tuesday.

"By itself, the ban of exports from Arkansas doesn't necessarily change the momentum of the export business," Jonathan Feeney, Wachovia food industry analyst, said in a note to clients.

He said chicken can just be exported from other states.

While the stock market may be justified "to give some pause to the news," Feeney said the drop in chicken company shares seems overdone.

"Honestly, it's a nonevent. So far, it's not something that's reportable to any international monitoring agency like the World Organization for Animal Health," said Toby Moore, spokesman for the USA Poultry and Egg Export Council, an industry trade group.

The Arkansas chickens were not sick and the antibodies were discovered as part of routine surveillance by the company, Tyson said in a statement.

Shares of Tyson Foods fell more than 9 percent on New York Stock Exchange trading on Tuesday, but by early afternoon were down about 8 percent, or $1.44, at $17.01.

While tests showed the birds had antibodies for the mild bird flu strain, "there was no indication the birds currently have the virus," the company said.

The deadly H5N1 strain has spread to humans overseas who have been in close contact with infected chickens. So far there have been 376 human cases worldwide including 238 deaths.

A major worry among health experts is the H5N1 strain will mutate into a form that can be transmitted from human to human, raising the threat of a global pandemic that could kill millions.

(Reporting by Bob Burgdorfer; editing by Jim Marshall)