Strong chicken demand propels Sanderson Farms earnings

by Keith Nunes
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Strong demand for chicken products in retail grocery contributed to a good quarter for Sanderson Farms.

LAUREL, MISS. — A confluence of positive events, including lower grain costs, tight beef supplies and the impact of the porcine epidemic diarrhea virus (PEDv), propelled the earnings for Sanderson Farms, Inc. during the third quarter of fiscal 2014.

“Sanderson Farms’ financial results for the third quarter of fiscal 2014 reflect continued favorable market conditions,” said Joe F. Sanderson Jr., chairman and chief executive officer. “Market prices for poultry products were higher than the third quarter of fiscal 2013, as the Georgia Dock whole bird price remained historically high during the quarter. The higher Georgia Dock price reflects good retail grocery store demand. While boneless breast meat prices peaked below last year’s high, they remained above $2 per lb through June and into July.”

Net income during the quarter was $76,080,000, equal to $3.30 per share on the common stock, compared with $67,919,000, or $2.95 per share, during the previous quarter.

Sales during the third quarter totaled $768,395,000, up from $738,964,000.

Looking ahead to the fourth quarter and fiscal 2015, Mr. Sanderson was optimistic about market conditions.

“While the crop is certainly not yet in the bin, and we have priced none of our fiscal 2015 needs at this time, had we priced all of our fiscal 2015 needs at yesterday’s close, our cash grain cost during fiscal 2015 would be $50 million lower than this fiscal year,” he said in a conference call with securities analysts on Aug. 27.

He added that he anticipates demand will be strong in 2015.

“We think retail will continue to be good, and what we really want is people start going out to eat a little more,” Mr. Sanderson said. “If the economy will improve another notch and labor participation rates improve and wages improve, which we hope that to start inching up a little bit, food service demand should improve a little bit. So I am optimistic about demand.”

Lampkin Butts, president and chief operating officer for Sanderson Farms, said he did not anticipate the recent ban of U.S. chicken imports by Russia to have an effect.

“The Russian market accounts for less than 7% of the industry's total export markets, and we believe the industry and our company can find alternative markets for product otherwise sold to Russian customers,” he said.
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