Chicken Sandwich Boom Helps Sanderson Beat Feed Cost Spike

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Americans’ appetite for chicken sandwiches and the return of restaurant dining are fueling profit at Sanderson Farms Inc., helping the poultry company offset soaring feed grain costs.

The third-biggest U.S. chicken producer saw earnings surge in the fiscal second quarter as more restaurants and food-service outlets restock and prepare for higher demand as communities return to pre-pandemic life.

Sanderson said it is seeing such a jump in the buying of chicken products that some items recently sold out and prices for parts like jumbo wings have doubled from last year. The poultry popularity tempered a 40% price increase in corn and soybean meal, the company’s main ingredients for animal feed. The trend is expected to continue.

“Looking ahead to the second half of the fiscal year, we continue to expect prices paid for feed grain to be significantly higher for the year compared to fiscal 2020,” Chief Executive Officer Joe Sanderson said Thursday in its earnings statement.

Sanderson posted net income of $4.34 a share for the quarter ended April 30 compared with 28 cents a year ago. Sales jumped 34% to $1.13 billion, topping the $1.04 billion average estimate of analysts.

Results “were all far better than expected,” JPMorgan Chase & Co. analyst Ken Goldman said in in note. Forecasts for the second half of the fiscal year should “rise meaningfully” given the latest results, he said.

Sanderson’s stock rose 1.7% to $169.71 at 11:12 a.m. trading in New York, its biggest jump in two weeks. Shares of the Laurel, Mississippi-based company have climbed 28% this year.

Key Insights

  • Sanderson expects total broiler production in its fiscal third quarter to fall 0.6% from a year earlier while the fiscal fourth quarter will be down 2.3% mostly related to changes at the Hazlehurst, Mississippi, processing plant to “better meet demand” from retail grocery store customers.
  • Production at plants processing larger birds for food-service customers will start returning to full output next month, after being curtailed by 5% last year due to lower demand as the pandemic took hold.
  • Sanderson expects to return to full production at all food-service plants by September except those in St. Pauls, North Carolina, and Palestine, Texas.
  • Export demand improved in the quarter due to “higher crude oil prices, improved liquidity as a result of currency valuations and some relief from Covid-19-related restrictions.”

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