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UPDATE 1-Pilgrim's Pride shares rise on takeover speculation

(Adds analyst comment, details)

CHICAGO, Oct 9 (Reuters) - Shares of chicken producer Pilgrim's Pride Corp PPC.N rose more than 50 percent at one point on Thursday on apparent speculation that smaller rival Sanderson Farms Inc SAFM.O might be looking to buy the company -- speculation that Sanderson denied.

Also, analysts said, a USDA report on Wednesday showing that the chicken industry is cutting production may have given Pilgrim’s shares a lift.

Barclays Capital food analyst Christopher Bledsoe said in a note to clients that Sanderson’s balance sheet makes it a strong candidate to buy a competitor and that Pilgrim’s Pride’s depressed assets make it “ripe for further consolidation.”

Early on Thursday, Sanderson said it filed notice with the U.S. Securities and Exchange Commission that it might want to sell up to $1 billion worth of shares to fund acquisitions and strategic opportunities. However, the company said an acquisition is not pending.

“We deemed it prudent to be in a position if an acquisition opportunity presented itself,” Sanderson’s Chief Financial Officer Mike Cockrell told Reuters. “Nothing has presented itself.”

Pilgrim’s Pride would not comment on the speculation regarding Sanderson Farms and said that it had not issued any statements that would have caused its shares to rise.

On Wednesday, the U.S. Agriculture Department reported that the number of eggs that will hatch meat-producing chickens dropped 11 percent last week from a year earlier, at 188.985 million, the lowest since October 2003.

“I think it is just because USDA reported there was an 11 percent drop in egg sets,” Morningstar analyst Ann Gilpin said of the reason for Pilgrim’s Pride shares being up.

Chicken companies have been hurt this year by higher costs for feed and fuel and by low prices for meat. That has prompted calls by analysts and industry sources for production cuts.

If the decline in egg sets continues, that could drive up meat prices and return profits to the industry by late this year or early next, said Paul Aho, economist at Poultry Perspective.

In New York Stock Exchange afternoon trading, Pilgrim’s Pride shares were up 14 cents, or 4.5 percent, at $3.27 per share, after trading as high as $4.98 earlier. Sanderson’s shares were down $2.55, or 7 percent, at $33.45 in Nasdaq trading. (Reporting by Bob Burgdorfer; Editing by Brian Moss and Gerald E. McCormick)

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