Lower prices for feed grains and strong consumer demand for poultry lifted second quarter profits at Sanderson Farms, Inc.
For the three months ended April 30, Sanderson reported net income of $51 million, or $2.21 per share, compared to net income of $24.4 million, or $1.06 per share in the comparable year-ago period.
“The results for our second quarter of fiscal 2014 reflect lower grain costs and continued favorable demand for poultry products," Joe F. Sanderson, Jr., chairman and CEO, said in a statement. “Our net sales were 6.4 percent higher compared with the second quarter of fiscal 2013, reflecting increased volume offset by slightly lower market prices. Demand for chicken remains strong from our retail grocery store customers, and it appears the relatively high prices of competing protein have shifted some consumer demand to chicken. In addition, while customer traffic through food service establishments remains challenged by macroeconomic factors, relatively high priced beef contributed to improving demand and market prices during the quarter for products produced at our food service plants.
“Our profitability for the second quarter continued to benefit from lower feed costs,” he added. “Feed costs in flocks processed decreased 19.1 percent compared with last year’s second fiscal quarter. Because of the tight supply of soybeans and the USDA’s lower ending stock estimates for corn, market prices for grain have moved higher since our first quarter. We expect grain prices to remain volatile at least until markets get some visibility on the quantity and quality of this year’s corn and soybean crops, as tight soy supplies and the lowered corn estimates place a premium on favorable growing conditions this summer.”
Market prices for poultry were mixed during the quarter, according to Sanderson. The Georgia dock price for whole chickens advanced 4.3 percent in the second quarter compared to a year ago, while bulk leg quarter were lower on weak export demand. Average boneless breast meat prices were flat, and jumbo wing prices dropped 27.9 percent in the quarter.
Sanderson expressed optimism for a strong performance during the summer which is typically a peak demand period for poultry as consumers transition to lighter proteins in hot weather.
“Total grain costs have moved higher but remain below last year’s prices, and demand for chicken products is expected to remain strong,” he said. “Weekly broiler egg sets continue to run slightly above last year’s numbers, but breeder placements remain constrained. It appears the reduced size of the breeder flock will constrain production over the short term despite higher industry returns. While macroeconomic conditions continue to affect consumer behavior, market prices for boneless breast meat sold to our food service customers improved through April and May, and market prices for retail grocery store products have also moved higher.
“Regardless of market conditions, however, we will maintain our focus on maximizing our operating performance and sales execution,” Sanderson concluded.
