UPDATE 1-Pilgrims Pride shares fall on credit worries

(Recasts with analysts' comments, closing share prices, byline)

By Bob Burgdorfer

CHICAGO, Sept 24 (Reuters) - Chicken producer Pilgrim's Pride Corp PPC.N shares fell as much as 40 percent to a five-year low on Wednesday before being halted, leading a slide in U.S. meat companies' stock as investors worried that credit would become harder to get in the deepening financial crisis.

"I think it is a fallout from the credit issue," said Len Steiner, a food industry consultant with Steiner Consulting Group. "Anybody that needs lots of capital, which is any meat company, is going to get squeezed here. I keep hearing the availability of credit is just drying up."

Pilgrim's Pride was the biggest loser on the day with shares sliding to their lowest level since 2003. The stock closed down 38 percent at $6.37 on the New York Stock Exchange. Company officials could not be reached for comment.

"Tyson and Smithfield have had to access debt and equity markets to raise capital. Pilgrim's Pride has not done that, and it doesn't look like it is going to be any easier for them to do it now," said Morningstar analyst Ann Gilpin.

"I think of the three big meat packers, they need capital more than Tyson and more than Smithfield," she said.

Shares of Tyson Foods Inc (TSN.N), the largest U.S. meat producer, fell 5.3 percent to $12.14, and shares of Smithfield Foods Inc (SFD.N), the leading pork producer, closed down 9 percent at $16.92.

Morningstar suspended its stock ratings on the three companies in the wake of Wednesday's stock declines.

"Clearly something is going on, and we don't know what it is," said Gilpin. "We are taking a closer look at the fundamentals. These are highly leveraged firms with significant exposure to commodities, which have raised havoc with profits recently."

U.S. meat companies have been hurt this year largely because of high prices for feed and fuel. Chicken companies, in particular, have struggled because prices for breast meat, a key revenue producer, have been weak.

Also, concerns about the U.S. economy have some analysts thinking that consumers may shift to less expensive foods than meat.

Many option traders sought protection from further share losses in several of these meat companies by buying put options. An equity put option allows an investor to sell the company's stock at a preset price within a specified time period.

"Downside puts are being purchased by hedgers at expensive option prices in many of the producers," said Paul Foster, options strategist at Web information site theflyonthewall.com. (Additional reporting by Doris Frankel in Chicago)