LAUREL, Miss. – Softness in poultry prices coupled with higher costs for corn and soybean meal weighed on Sanderson Farms Inc. in the fiscal third quarter of 2018.
Chairman and CEO Joe F. Sanderson said results for the third quarter reflected a significant counter-seasonal weakness in market prices for boneless breast meat produced for foodservice customers.
“In fact, market prices for boneless breast meat, chicken breast tenders, boneless thigh meat, bulk leg quarters and jumbo wings produced at our plants that process a larger bird were all significantly lower this year when compared to last year’s third fiscal quarter,” Sanderson said. “We believe the counter-seasonal softness is due, at least in part, to a lack of chicken promotions at both foodservice and retail grocery stores and an ample supply of competing proteins.
“Market prices for poultry produced for retail grocery stores continue to reflect a more balanced supply and demand environment,” Sanderson noted.
Sanderson said market prices for chickens sold to grocery store customers remained relatively flat, reflecting a good supply and demand balance. However, jumbo boneless breast meat prices were lower by approximately 26.6 percent, the average market price for bulk leg quarters decreased approximately 12.0 percent and jumbo wing prices were lower by 35.4 percent compared with the third quarter of 2017.
For the three months ended July 31, 2018, the poultry processor reported net sales of $852.4 million compared with $931.9 million reported for the same period a year ago.
Net income for the quarter was $11.5 million, compared with $115.8 million, or $5.09 per share, for the third quarter of 2017. Sanderson said net income for the third quarter reflected “…an accrual for probable liability for a contribution to the company’s Employee Stock Ownership Plan of $2.4 million before income tax, or $0.08 per share net of income tax, compared to $12.5 million before income tax, or $0.36 per share net of income tax, for the same period a year ago.”
In addition to lower prices, costs for corn and soybean meal, Sanderson Farms’ primary feed ingredients, increased 4.3 percent and 15.5 percent, respectively, compared to the third quarter of 2017.
“Feed costs per pound of chicken processed during the third fiscal quarter were up 5.8 percent compared to last year’s third quarter and were higher by 7.7 percent sequentially,” Sanderson said.
Net sales for the first nine months of fiscal 2018 were $2,437.9 million compared with $2,422.3 million for same period of fiscal 2017, the company reported. Net income for the first nine months totaled $104.6 million, or $4.58 per share, compared with net income of $206.9 million, or $9.10 per share, for the first nine months of last year.