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Challenging Year Sees Loss for Sanderson Farms

22 December 2011, at 9:19am

US - Despite increasing sales, Sanderson Farms reported a loss for the fourth quarter 2011 and overall financial year.

"The fourth quarter of fiscal 2011 marked the end of a challenging year for Sanderson Farms and the poultry industry," said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc.

"We reported record annual sales of $1.978 billion, a 2.7 per cent increase over fiscal 2010. However, we also reported a record net loss of $127.1 million, or $5.74 per share. Our results reflect the combination of weaker poultry markets throughout the year and the significantly higher feed grain costs we experienced during the entire year. For the year, we sold 2.794 billion pounds of dressed poultry, another record, compared with 2.570 billion pounds in fiscal 2010."

According to Mr Sanderson, overall market prices for poultry products were lower in the fourth quarter of fiscal 2011 compared with prices a year ago. As measured by a simple average of the Georgia dock price for whole chickens, prices were higher by approximately 1.5 per cent in the Company's fourth fiscal quarter compared with the same period in fiscal 2010, and were higher by 1.7 per cent for the fiscal year compared with the prior year. The higher Georgia Dock whole bird price reflects steady demand for the Company's retail chill pack product during this fiscal year.

On the other hand, food-service demand has remained very weak. That weakness is reflected in boneless breast meat prices, which averaged 19.1 per cent lower in the fourth quarter than the prior-year period. For fiscal 2011, boneless prices were 14.5 per cent lower when compared with fiscal 2010. Jumbo wing prices averaged $0.87 per pound during the fiscal year, down 31.6 per cent from the average of $1.27 per pound for fiscal 2010.

The average market price for bulk leg quarters increased approximately 29.8 per cent for the quarter, and increased approximately 19.2 per cent for fiscal 2011. The relatively strong dark meat prices reflect good export demand during the year. Prices paid for corn and soybean meal, the Company's primary feed ingredients, increased significantly during the year and were up 73.0 per cent and 23.5 per cent, respectively, during the fourth fiscal quarter when compared with the fourth quarter a year ago. For the year, total feed costs in flocks sold were 38.8 per cent higher than fiscal 2010.

This fiscal year, Sanderson Farms started up a new poultry complex in Kinston, North Carolina. Mr Sanderson said that the first chickens were processed in January.

"We look forward to the new marketing opportunities the Kinston plant will provide for Sanderson Farms. The increased production at the Kinston plant during fiscal 2012 will more than offset the four per cent production cut we announced in August at our other plants. We will institute that cut in January to better balance our production with our customers' demand.

"Because we expect demand from our food-service customers to remain soft until American consumers regain their confidence and the employment outlook brightens, we currently plan to leave our production cut in place through fiscal 2012."