Sanderson 'cautiously optimistic'

Sanderson 'cautiously optimistic'

- Chicken prices increase, but corn and soybean meal costs rise 16% and 46%. - Grain prices peak, but costs remain challenging. - Texa

SANDERSON Farms Inc. has reported a loss for its fiscal 2013 first quarter, citing challenging conditions in the chicken industry but adding that the company did turn profitable in January and is "cautiously optimistic" about the remainder of the year.

For the November 2012 to January quarter, the company said chicken pricing was higher than in the same time frame in its previous year, but corn and other grain costs were also higher, and profitability was adversely affected by higher feed costs.

Sanderson Farms said retail-level demand for chicken products remains steady, but demand in the foodservice sector is weak and will remain under pressure until the national employment situation improves.

The company said the average chicken price in the first quarter, as measured by the Georgia dock, was 9.1% higher than the year before, boneless breast meat prices were 5.1% higher and jumbo wing prices were 24.6% higher.

However, Sanderson Farms said corn and soybean meal prices increased 16.2% and 46.1% in the quarter over the year before, and the feed cost per pound of poultry processed was up 12.1%.

Feed costs did peak at the beginning of the quarter in November, and market prices steadily strengthened through the quarter, allowing the company to reach profitability in the last month of the quarter, chair and chief executive officer Joe F. Sanderson Jr. said.

However, he said the company continues to experience "a challenging cost environment" that will continue for the rest of the fiscal year through October.

Corn supplies are at their tightest level in 15 years, which will keep corn and grain costs high "at least until the market gets some visibility into the quantity and quality of the 2013 crops," he said.

Throughout calendar 2012, egg sets and, therefore, chick placements remained below previous-year levels but have now started to trend up, Sanderson said, but despite increasing chicken production, market prices have held unchanged or have actually increased, indicating an improvement in demand.

Sanderson said the company has been running its plants at 94% of capacity since last October, which has hurt efficiency and increased its costs.

Now, he said, in order to meet customer demand and improve the company's cost structure, "we will move our plants to full production in June ... to keep our costs competitive."

Sanderson Farms is the fourth-largest chicken integrator in the U.S.

 

New complex

In a related statement, Sanderson announced that the company now plans to build a new chicken complex in Palestine, Texas, that will house a big-bird deboning plant, hatchery, feed mill and wastewater facility as well as support the contract growers who will be associated with the plant.

The location replaces the site in Nash County, N.C., for which Sanderson Farms abandoned plans in the midst of considerable public opposition over perceived environmental issues (Feedstuffs, Nov. 19, 2012).

Since deciding against the Nash County site, "we have evaluated and pursued alternative locations that will enable us to continue our pattern of steady growth," Sanderson said, adding that Texas appears to be "an outstanding place to do business."

The complex remains on hold pending approval by the company's board of directors as well as improved chicken and grain market conditions, permitting and identifying a base of growers.

Sanderson Farms, with headquarters in Laurel, Miss., reported fiscal 2012 sales that totaled $1.978 billion.

 

Sanderson Farms earnings and sales*

 

-First quarter-

 

2013

2012

Sales (million $)

595.9

517.8

Earnings (million $)

(6.9)

(8.0)

Earnings per share (cents)

(31)

(36)

*For the quarters ended Jan. 31, 2013, and Jan. 31, 2012.

 

Volume:85 Issue:10

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