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Why BRF S.A. Stock Just Popped 10%

By Rich Smith – Apr 18, 2018 at 3:58PM

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For the time being at least, BRF is cleared of "food safety concerns" and able to produce more chicken.

What happened

Shares of Brazilian food company BRF S.A. (BRFS -2.50%) took flight on Wednesday, soaring more than 10.5% in early trading after it was revealed  that Brazil's Ministry of Agriculture will allow the company to resume production at nine chicken processing plants in the country.

BRF stock is holding on to most of those gains in the final minutes of today's trading, still up 9.7% as of 3 p.m. EDT.

Chick and egg

Which came first, the chicken or the ban on exporting chicken? Image source: Getty Images.

So what

Reuters reports that in mid-March, Brazil's agriculture ministry "pre-emptively suspended production and health certification of BRF's poultry exports to the EU" before regulators in the latter could ban imports from the company on food safety concerns. Now, however, the EU has cleared the BRF facilities of wrongdoing, "lacking technical reasons" to prevent their exports, a Brazilian government official said.

Accordingly, Brazil is lifting its own ban.

Now what

Before you get too excited, Reuters cautions that there's still a chance the EU could ban exports from other BRF facilities. If that happens, Brazil is expected to appeal any such decision to the World Trade Organization -- which could draw out this situation, and thus keep uncertainty simmering over the company's future.

That probably wouldn't be good news for BRF's stock price, so ... enjoy today's 10% pop while it lasts.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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