Sanderson Farms Q2 benefits from low feed costs, good poultry demand

Export environment and market prices both improve during fiscal period.

Sanderson Farms Inc. reported results for its fiscal 2017 second quarter and six months ended April 30, 2017. Net sales for the second quarter of fiscal 2017 were $802.0 million, compared with $692.1 million for the same period a year ago, while net income was $66.9 million, or $2.94 per share, compared with net income of $47.6 million, or $2.11 per share, for the second quarter of fiscal 2016 (Table).

Net sales for the first six months of fiscal 2017 were $1.490 billion, compared with $1.297 billion for the same period of fiscal 2016. Net income for the first half totaled $90.1 million, or $3.96 per share, compared with net income of $58.3 million, or $2.58 per share, for the first six months of last year.

“The results for our second quarter of fiscal 2017 reflect benign feed costs, continued favorable demand for poultry products from retail grocery store customers, higher volume and an improving export environment," said Joe F. Sanderson Jr., chairman and chief executive officer of Sanderson Farms.

“Our sales price per pound increased during the first half of this fiscal year compared with last year as market prices improved steadily through the second fiscal quarter. Poultry export market fundamentals improved, market demand for wings improved counter seasonally and market prices for boneless breast meat improved significantly during the second half of April and have continued to move higher into May," he added.

Sanderson said the company's new facility in Palestine, Texas, is now running at full capacity, while the St. Pauls, N.C., plant is expected to reach 50% capacity next month.

He said, “In addition to higher sales prices, our net sales for the quarter also reflect more pounds sold," which increased 11.5% versus the year-ago quarter.

According to Sanderson, overall market prices for poultry products were higher during the second quarter compared with the same period last year. Market prices for chicken products sold to retail grocery store customers remained relatively strong for the quarter and continue to reflect good demand.

Compared with the fiscal 2016 second quarter, boneless breast meat market prices were approximately 9.1% higher, the average market price for bulk leg quarters increased around 17.2% and jumbo wing market prices were 5.1% higher.

Sanderson Farms reported that its average feed costs per pound of poultry products processed were essentially flat with the second quarter of 2016, while prices paid for corn and soybean meal, the company's primary feed ingredients, decreased 0.4% and increased 15.0%, respectively, compared with a year ago. Feed costs per pound processed were affected by changes in feed formulation and improved broiler performance.

“Looking ahead to the second half of the fiscal year, we continue to expect grain prices to remain relatively benign,” Sanderson noted. “There are ample supplies of both corn and soybeans worldwide, and the planting progress of the 2017 corn and soybean crops remains close to average despite a wet spring in the United States Grain Belt.

“With respect to production numbers, while 2017 breeder placements have been relatively flat with 2016 placements, hatch rates and live weights are trending below last year," he explained, adding that the U.S. Department of Agriculture's current forecast for 2017 U.S. broiler production to increase roughly 2.0% from 2016 seems reasonable "but may prove to be high, should these trends continue."

Sanderson said per capita domestic availability of chicken is up less than 0.5% due to improved export demand.

He added that the company expects production to be up 13.6% in the third quarter and up 11.7% in the fourth quarter compared to the same quarters of fiscal 2016. The increases reflect new production at the new St. Pauls and Palestine complexes "as well as the additional pounds we expect to process as a result of our previously announced agreement with House of Raeford Farms,” Sanderson noted.

Sanderson Farms is engaged in the production, processing, marketing and distribution of fresh, frozen and minimally prepared chicken.

Sanderson Farms

 

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