LAUREL, MISS. — Lower market prices led to a wider loss at Sanderson Farms Inc. in the first quarter ended Jan. 31.
Sanderson sustained a loss of $38.6 million in the first quarter, which compared with a loss of $17.8 million in the same period a year ago. Sales, meanwhile, increased 11% to $823.1 million, up from $743.4 million in the same period a year ago.
“Our results for the first quarter reflect continued challenging market conditions with market prices for boneless breast meat produced at our plants that process larger birds for food service customers reaching record low levels in January,” said Joe F. Sanderson Jr., chairman and chief executive officer of Sanderson Farms. “However, average prices for tray pack products sold to retail grocery store customers were slightly higher when compared with the same period a year ago on improved product mix, and prices continue to reflect a good supply and demand balance in that market. Demand and prices for jumbo wings strengthened seasonally during the quarter, and market prices averaged above last year’s first quarter.”
Compared to the first fiscal quarter of 2019, the average realized prices of the company’s retail tray pack products were approximately 0.6% higher, boneless breast meat prices were approximately 3.4% lower, bulk leg quarter prices increased by approximately 23%, and jumbo wing prices were higher by 3.1%.
The company said average feed cost per pound of poultry products processed was up by 6.3% compared with the first quarter of 2019. Prices paid for corn meal increased 10.1% and decreased 2.3% for soybean meal compared to the same time period last year.
“Both corn and soybean balance tables are healthy heading into the 2020 planting season, and we believe the world has an adequate supply of both grains,” Mr. Sanderson said. “Had we priced all of our grain needs for fiscal 2020 at yesterday’s Chicago Board of Trade futures contract prices, cash paid for feed grains during fiscal 2020 on fiscal 2019 volumes would be relatively flat with fiscal 2019.
“We have several reasons to remain optimistic about poultry markets in 2020. While market prices for boneless breast meat produced for food service customers remain under pressure and market conditions during our first fiscal quarter were very challenging, we continue to be positive about our opportunities in both the domestic and export markets over the next year. With respect to domestic markets, we expect to see continued favorable demand in retail grocery stores. Chicken remains favorably priced compared to other proteins, and we believe that dynamic will continue. We also believe we will see improved demand from food service customers, supported by an increase in promotional activity for chicken at quick-serve restaurants.”
The company provided an update on its new processing facility in Tyler, Texas, saying full production is coming soon.
“We expect to reach full production during our second fiscal quarter, and we look forward to the opportunities the plant will create,” Mr. Sanderson said.
The earnings announcement said that the outbreak of African swine fever in China continues to affect the worldwide pork market which is creating a protein deficit that would benefit poultry markets in the United States.
Following China lifting the ban on U.S. poultry at the end of 2019, Sanderson said it has shipped or received orders from Chinese customers for approximately 18 million lbs of chicken products, including dark meat parts.
“We continue to receive strong indications of interest for our products from buyers in China, and we were pleased to see the recent announcement regarding the reduction of tariffs on United States poultry, which should further support our business,” Mr. Sanderson said.
He also mentioned the market disruption from the coronavirus is depressing demand, negatively affecting shipping, supply chain logistics and slowing China’s economic growth rate. However, Mr. Sanderson believes demand for protein in China is strong and expects to benefit in 2020.