"As far as the markets, the retail grocery market is very hot," Sanderson said. "Very good prices; foodservice prices are as well. Although we have not seen any evidence of increased traffic in any segment of the foodservice markets, the pricing for boneless breast and tenders are approaching last year's levels.
"Chicken tenders are over $2.30 a lb.; boneless breast went to $1.97 a lb. yesterday, and I will give you two reasons we believe that's happening: One is competing prices for competing meats – pork and beef prices are extremely high. Maybe record prices on pork, and we hadn't seen the real shortage of pork. That's going to happen in June, July and August," he added.
Sanderson noted that the most immediate impact of higher prices for beef and pork can be seen at retail and foodservice. He cited strong demand by grocers for more features and more consumers bypassing higher-priced cuts of meat and buying more chicken. The company's chicken products also have made headway in the foodservice segment.
"We don't compete so much with pork in foodservice," Sanderson said. "The only pork that's sold in foodservice to amount to anything is bacon. But we do compete with beef. Our biggest foodservice customer is Sysco and they sell everybody, and the second is US Foodservice and they sell everybody. Our orders from both of them and all the others smaller than them that we sell are buying more chicken. So, we know that every one of those that are substituting that for beef, we believe."
Grain markets, especially lower prices for corn, also contributed significantly to higher margins in the poultry industry, according to Sanderson. However, the lack of significant volumes of organic corn and soy meal will keep Sanderson Farms out of the market for organic chicken.
"Organic chicken is a category that continues to increase," said Lampkin Butts, COO of Sanderson Farms. "It's not in our product mix. There's not enough organic grain to really produce a lot of organic chicken. So, we consider it a very small category. We consider it a marketing niche. We have no plans to add an organic line to our product mix."
Construction continues on the company's new poultry facility in Palestine, Texas. The Sanderson board approved Oct. 1, 2013, as a start date for work to begin on a new feed mill, hatchery, processing plant and a wastewater treatment facility. The Palestine facility has a processing capacity of 1.250 million head of chickens per week. Product is intended for the big bird deboning market.
"We are scheduled to start up in the first calendar quarter in Palestine," Sanderson said. "We had some weather challenges; there was a lot of red mud. We had a lot of rain in Palestine when we broke ground, but we are back on schedule, and we had ordered our pullets for Palestine a year ago. So we are fine with Palestine."
