The stock-rating agency, Fitch Ratings, suggests that meat and poultry processors make liquidity and debt reduction a priority in 2009.

This past year, equity issuances, convertible debt offerings and asset sales let some commodity food companies pay down debt or support near-term liquidity. However, in the year ahead, Fitch predicts that continued stock market weakness, a poor credit environment and higher risk premiums will limit such activities.

Hormel Foods received a stable rating due to its conservative financial strategy and significant exposure to high-margin packaged foods.

Fitch was less optimistic for Tyson Foods. It warned that the rating could be downgraded if the company's acquisition strategy becomes more aggressive, if leverage increases more than anticipated or if liquidity becomes an issue. Tyson's nearest material debt maturity is in early 2010, reports

Tyson could benefit, however, if Pilgrim's Pride goes bankrupt. Fitch reports it expects that to happen, calling it "the most significant change" the industry would face in 2009.

A Pilgrim's Pride bankruptcy would be positive for Tyson and other viable poultry players, notes Fitch, as the resulting reduced production would support higher pricing for the sector. 

However, Fitch acknowledges that current credit limitations, leveraged balance sheets, uncertain operating conditions and stronger U.S. dollar will limit the number of potential buyers for Pilgrim's Pride, should it go up for sale.

Pilgrim's Pride has named a chief restructuring officer to work on cost reduction initiatives, developing restructuring plans and improving long-term liquidity.