Soaring Raw Material Cost May Delay a New U.S. Chicken Plant
(Bloomberg) -- The cost of raw materials is so high right now that the third-largest chicken producer in the U.S. is considering shelving plans to build a new processing plant -- even as the company struggles to keep up with demand.
Sanderson Farms Inc. is one of the first companies to signal it could pause plans for expansion as the price of everything from lumber to steel skyrockets, driving up construction costs.
“I need a plant to open up next week, but it is not a good time to be building,” Chief Executive Officer Joe Sanderson said. The company, which had planned to begin construction on a new facility during the first half of 2021, will “look very hard” at building costs given the market for raw materials, he said.
Lumber prices rose to new records this past year before softening this week, with many wood products quadrupling in value amid a surge in home building and renovations. Steel prices have also hit all-time highs, with the domestic benchmark price up almost 50% this year.
“It’s more lumber than it’s steel and concrete,” Sanderson said Wednesday at the BMO Farm to Market virtual conference. “Steel and concrete go up all the time. Every complex costs more than the last one, but it’s lumber right now” that’s giving the company pause.
The timing is unfortunate, with the economic recovery also boosting demand for chicken to the point that Sanderson can’t take on any more orders without expanding.
“We’re totally sold out and we’ve had people call us to service them and we cannot take on anymore business, and that’s not a good place,” Sanderson said Tuesday at the Goldman Sachs Global Staples Forum.
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