Higher poultry prices boost Sanderson earnings
Aug. 28, 2012
by Meat&Poultry Staff
LAUREL, Miss. – Higher market prices and higher sales helped Sanderson Farms, Inc. return to profitability during the third quarter.
For the quarter ended July 31, the company had income of $28,721,000, equal to $1.25 per share on the common stock, which compared with a loss of $55,683,000 during the same quarter of the previous year. Sales for the quarter were $624,854,000, up 22 percent from $511,169,000.
“Sanderson Farms’ financial results for the third quarter of fiscal 2012 reflect improved market conditions when compared to last year’s third quarter,” said Joe F. Sanderson Jr., chairman and chief executive officer. “Market prices for poultry products were higher than the third quarter of fiscal 2011, as the Georgia Dock whole bird price reached historic high prices during the quarter. These prices reflect steady retail grocery store demand and lower production. In addition, market prices for wings continued a strong counter seasonal upward trend. While retail grocery store demand has remained steady, food service demand remains sluggish, keeping the market price for boneless breast meat under pressure during the third quarter. Boneless breast meat prices have strengthened during August.”
Sanderson was helped by improving poultry prices. Based on an average of the Georgia dock price for whole chickens, prices increased 8.6 percent in the quarter compared with the comparable year-ago period. Boneless breast prices also advanced, averaging 14.7 percent higher compared to the third quarter of 2011, but still remained relatively weak given sluggish food service demand. Jumbo wing prices averaged $1.59 per lb. for the third quarter, up 104.2 percent from the average of $0.78 per lb. a year ago. The average quoted market price for bulk leg quarters gained approximately 12.2 percent for the quarter.
Recent declines in feed costs provided some relief, but persistent drought conditions continued to pressure corn and soybean prices. Cash prices for corn delivered to Sanderson declined 5.7 percent compared to a year ago, the company said. However, the price for soybean meal advanced 8.2 percent. Sanderson's cash prices for corn decreased 1.2 percent and soybean meal decreased 2.5 percent for the nine months ended July 31.
For the nine months ended July 31, the company had income of $44,597,000, or $1.94 per share, which compared with a loss of $105,515,000 during the same period of the previous year. Sales for the nine months were $1,737,726,000, up 23 percent from $1,418,243,000.
“While market conditions improved during our third fiscal quarter compared to last year’s third quarter, the company and our industry face a challenging environment going forward,” Sanderson said. “Market prices for grain are at historic highs, and ongoing drought conditions across much of the country have created considerable uncertainty regarding this year’s corn and soybean crops. While the quantity available and prices we will pay for grain during the coming months will ultimately depend on this year’s final crop performance, prices are certain to be much higher than those paid for grain this fiscal year.”
In response to market conditions, the company reduced its egg sets by 2 percent to offset higher feed costs. This reduction follows a four percent reduction started in January. Sanderson also plans to run its plants at 6 percent below capacity until market conditions improve.
The company also announced that Nash County, NC, will be the site of a new poultry complex.
“We have purchased land near Rocky Mount, NC, on which a new hatchery will be built, and we own options to purchase property on which spray fields that will form a part of a waste water treatment facility will be located," Sanderson said. "However, the timing of building that complex remains on hold until market fundamentals improve, including sufficient confidence that the global supply of feed grains will be adequate to meet world demand at reasonable prices.
“In addition to market conditions, construction of the Nash County facilities remains subject to other contingencies such as obtaining the land on which the processing plant will be built, obtaining the necessary permits to construct and operate the facilities, and obtaining acceptable economic incentive packages from the State of North Carolina and the local government,” he added.