Sanderson CEO summarizes top issues for 2013

by Keith Nunes
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LAUREL, Miss. — On Dec. 18, less than two weeks before the new year, Joe Sanderson Jr., chairman and chief executive officer of Sanderson Farms, Inc., highlighted the five issues he and his management team will be watching in 2013.

Sanderson made the comments in a conference call with financial analysts discussing Sanderson Farm’s financial results for fiscal year 2012. As expected, feed supply and the cost of feed have his attention.

“First, we're keeping a close eye on South American grain crops,” he said. “As of today, the corn and soy crops in Brazil and the rest of South America are getting in the ground pretty much on schedule. There are a few places too wet or too dry, but overall the crop is progressing on schedule.

“A really good crop out of South America will likely take some pressure off of American exports. So while the influence is not likely to be large, the quality and quantity of the South American crops will influence the grain board in the United States.”

The ongoing gridlock in Washington is also an issue of concern for Sanderson.

“We have an eye on Washington and the political debate regarding the country's fiscal health,” he said. “We recall the significant negative impact the contentious debate regarding the debt ceiling had on American consumers in August of 2011, and we are hopeful that is not repeated. We are also hopeful that a successful resolution of the current debate might actually spur some optimism and relief among consumers who celebrate by going out to eat.”

In additional comments, Sanderson said he did not believe the industry will see meaningful demand improvement for chicken at foodservice until the number of consumers unemployed is reduced and they “gain some confidence that macroeconomic conditions are improving and that Washington is making progress on the fiscal and debt issues facing the country.”

“Third, we will be carefully watching the planning intentions report next March. American farmers have every incentive to plant corn and soybeans on every available acre, and we believe they will,” he said. “Fourth, we will, of course, watch the development of the 2013 crops. We have had three consecutive below-trend line yields of corn and soybeans in the United States. A normal-trend line yield on expected corn acres will go a long way toward repairing the corn balance sheet, while more work will remain to rebuild soy stocks. However, we would be happy with a normal year. A bin-busting year, of course, would be a bonus.”

In addition to the US economy, Sanderson said he also is watching economic conditions in Europe.
“To a much lesser extent, we will keep an eye on the European financial situation,” he said. “While it doesn't impact us directly, serious problems with the European economies or a European bank crisis could spill over on our shores and dampen our recovery. Anything that impacts the amounts of disposable income American consumers have to spend will impact our industry.”

For the year ended Oct. 31, Sanderson Farms had income of $53,944,000, equal to $2.35 per share on the common stock, which compared with a loss of $127,077,000 during the previous year. Sales for the year were $2,386,105,000, up 21% from $1,978,085,000 during the previous year.

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