CME: Market Comments on Sanderson's Results

US - According to Steve Meyer and Len Steiner, Sanderson Farms announced significantly better earnings during its third quarter of fiscal 2009. The full-line poultry company earned $43.048 million or $2.12 per share.

26 August 2009

3 minute read

North America

That compares to a loss of $3.645 million in Q3 of 2008. CEO Joe Sanderson attributed the improved results to a combination of lower costs and improved market conditions. He cited continued difficulties in casual ding and food service segments but a relatively stale retail demand situation. Through nine months, Sanderson’s has earned 62.515 million, compared with only $8.794 million in the first 9 months of 2008. Those earnings amount to $3.08 per share this year compared to only $0.43/share last year.

Sanderson’s results are important because they signal a broader improvement in the economic fortunes of broiler producers. That does not mean they have shifted back to the never-ending growth of years past, but it does point to a slowing reduction in the amount of chicken that will be available on US markets — and the first step in getting out of a hole is to stop digging!

Weekly broiler egg sets have been unusually level for all of 2009. We did not see the normal spring growth in sets primarily due to relatively high feed costs and fears about feed supplies that was not allayed until crop conditions improved in June. Those high feed costs were driven by a huge run-up in soybean meal prices due to the short Argentine bean crop. Broilers require more soybean meal in their diets than any other meat/poultry species, so companies are quite sensitive to soybean meal costs.

Year-on-year comparisons for both egg sets and broiler chick placements look more and more positive but it is not due to any significant growth this year. We are merely comparing a rather typical seasonal pattern in 2009 to a decidedly atypical patter in 2008. We would not be surprised to see some year-on-year increases in these numbers in October and November but still expect them to stay below the 2003-2007 average. Things are better but they are far from rosy due to the continuing demand challenges cited by Mr. Sanderson. We have expected all along that the broiler industry would lead the way in the meat/poultry economic recovery. Sanderson’s improved results and stable sets and placements are likely the first signs of that happening.