February 25, 2011
Sanderson''s 2011 feed costs to reach US$337 million
Sanderson Farms Inc. (SAFM) expects its feed costs to soar by more than US$300 million in 2011, Chief Executive, Joe Sanderson Jr., said on Thursday (Feb 24).
Based on current prices, Sanderson expects to spend US$330.7 million more for feed in 2011 than it did in 2010. In December, it forecast an increase of US$243.5 million, mainly due to the increasing cost of feed, and a rise in volume.
The Laurel, Mississippi-based company said that the increased feed costs would bring about US$0.105/pound to poultry production costs.
Corn prices have doubled since the end of June, and they continued to increase following Sanderson Farms'' December earnings call, topping US$7/bushel for the first time since a record-breaking rally in 2008.
Soaring feed costs, and uncertainty about the direction of the grains markets this year, is causing the company to postpone a planned expansion at a new plant in North Carolina.
Sanderson added during a Thursday (Feb 24) conference call that restaurant demand will stay weak until the job market improves, which he does not expect to take place for several months. He added that industry cutbacks will happen but there are still months away before they occur.
Sanderson said he is not surprised that producers have not cut back. Although the industry has been making a loss for about three months, the balance sheets are in good condition because of the money made two years ago.
The company has no intention to reduce its own production. Doing so would pose hardship for its chicken farmers, particularly if grain costs ultimately force cutbacks in 2012, Sanderson said.