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Source: Rita Jane Gabbett, MEATINGPLACE, 5/29/12
Higher chicken prices and lower corn prices contributed to Sanderson Farms second quarter profits of $23.9 million, or $1.04 per share, on sales of $595 million compared to last year’s second quarter loss of $16.3 million, or 74 cents per share, on sales of $479.3 million.
"The results for our second quarter of fiscal 2012 reflect improved market conditions driven primarily by a decrease in the supply of poultry products," said Chairman and CEO Joe Sanderson, Jr. "Our net sales were 24.1 percent higher than during the second quarter of fiscal 2011, reflecting increased production and higher average sales prices of chicken.”
Sanderson said increased production at its Kinston, North Carolina facility — now at 96 percent capacity — partially offset its previously announced 4 percent production cuts at its other plants. The company plans to hold Kinston production at that level through the rest of the year. He noted retail and export demand have remained steady while casual dining foodservice demand remained soft.
Despite producing 3 to 4 percent fewer chickens, the company processed 6.8 percent more pounds than during last year’s second quarter. Sanderson attributed the increase to weight gains from warmer than usual weather in February, March and April. Chief Operating Officer and President Lampkin Butts noted that with temperatures already in the 90s, he expects weights to now start to decline.
Feed costs
Feed costs decreased 9.8 percent compared to last year’s second quarter, but Sanderson warned he expects higher and volatile corn and soybean meal prices this summer as tight supplies remain ahead of the fall harvest.
Sanderson told analysts on a conference call the company has priced its corn needs through July and its soybean meal through June. He said if the company had priced all its feed through the end of the year its full year feed costs would be down $24.2 million from a year ago. With a good start to the corn crop this year, he expects corn prices to decline after harvest relative to current futures prices for fall delivery.
As for soybean meal prices, he said he expects to pay $110 more per hundredweight in June and July than he did in February, March and April. Sanderson expects soybean meal prices to remain strong until the South American soybean crop is harvested.
Sanderson said the company would make no decision on whether or not to break ground on a new plant in North Carolina until after the new corn crop is harvested this fall.
Chicken prices
According to Sanderson, market prices for poultry products were higher during the second quarter of fiscal 2012 compared with the same quarter a year ago. As measured by a simple average of the Georgia dock price for whole chickens, prices increased approximately 7.5 percent in the company's second fiscal quarter compared with the same period in 2011.
Bulk leg quarter market prices were 22.4 percent higher compared with last year's second quarter, and reflected continued strong export and demand. Boneless breast meat prices during the second quarter were 2.3 percent higher than the prior year period. Jumbo wing prices were up 121.5 percent for the second quarter of 2012 compared with the same period last year.
Sanderson admitted he was surprised by the strength of wing prices, noting business at sports bars and wing-concept restaurants has clearly been better than other casual dining concepts. The company has been short on wings every week since December, he said, noting chicken tender sales have also been strong.
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