LAUREL, Miss. – Lower feed costs and favorable demand for poultry products at retail weren’t enough to help Sanderson Farms Inc. offset weak demand for boneless breast meat and jumbo wings in the foodservice segment.
Speaking to analysts during the company’s second quarter earnings call on May 24, Joe Sanderson, Jr., chairman and CEO of Sanderson Farms, noted that market prices for poultry were lower during the second quarter compared to a year ago. Market prices for boneless breast meat were approximately 5.3 percent lower compared to the second quarter of 2017, while jumbo wing market prices dropped 23.6 percent. Market prices for chicken breast tenders slipped 4.7 percent compared to the year-ago quarter, Sanderson said.
|Joe Sanderson, Jr., chairman and CEO of Sanderson Farms|
“Traffic through casual dining restaurants decreased during the first calendar quarter of this year for the 15th straight quarter,” Sanderson told analysts. “We thought weak demand during March and April was at least in part because of poor weather and expected boneless breast meat and tender market prices to move higher in April and May.
“Instead, market prices have weakened on continued weak demand. We do not believe supply is an issue,” he added.
Sanderson said only 1.1 million more lbs. of boneless breast meat per week are on the market compared to last year when boneless prices were strong and moving higher. “That volume is approximately equal to our production at our St. Pauls plant and should be easily absorbed by the market.”
“The bottom line is we need foodservice demand to improve for better white meat prices at our plants producing products for that market,” Sanderson added.
Sanderson Farms’ feed costs per pound of poultry products processed eased by 3.3 percent compared to a year ago, while prices paid for corn decreased 1.3 percent and increased 3.6 percent for soybean meal compared with the second quarter a year ago.
Net income for the second quarter ended April 30, 2018 was $41.9 million, or $1.84 per share, compared with net income of $67.0 million, or $2.95 per share, for the second quarter of fiscal 2017. Net sales for the second quarter were $813.5 million compared with $802.0 million for the same period a year ago.
“We sold 1.067 billion lbs. of poultry during the second quarter, an increase from the 1.036 billion lbs. sold during last year’s second quarter,” explained Lampkin Butts, president, COO and director at Sanderson Farms. “We processed 1.092 billion lbs. of dressed poultry during second quarter, up 5.3 percent from the 1.037 billion lbs. we processed during last year’s second quarter.
“We now expect to process approximately 4.439 billion lbs. of breast chicken this fiscal year, and that’s an increase of approximately 3.4 percent compared to fiscal 2017.”
CFO and Treasurer Mike Cockrell said the conversion of the company’s Hazlehurst and Hammond facilities to tray feeder plants from big bird plants was completed in April. “Together, Hammond and Hazlehurst will process right at 100 million lbs. of processed meat during each of Q3 and in Q4,” Cockrell told analysts.