US chicken producer Sanderson Farms posted a third-quarter loss today (26 August) as feed costs hit profits.
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Sanderson posted a loss of US$3.6m, or $0.18 cents a share, for the three months to 31 July. During the third quarter of last year, Sanderson earned $30.7m, or $1.51 a share.
Sales during the period increased 18% to $467m, boosted by higher selling prices among certain poultry products and stronger export markets. However, these gains were overshadowed by a 31% increase in the cost of corn and a 52% increase in the cost of soybeans.
The company also said that the weaker US economy, higher fuel prices and declining consumer confidence had decreased sales to casual-dining and foodservice customers.
“Our results for the third quarter of fiscal 2008 reflect difficult market conditions for our industry,” said Joe Sanderson, Jr., chairman and chief executive officer of Sanderson Farms.
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By GlobalData“The combination of much higher costs and the imbalance between domestic supply and demand in the foodservice markets resulted in much lower margins,” Sanderson added.
The company said that to protect against future losses it will run its new production plant in Waco, Texas at 90% capacity. Earlier this year, Sanderson decided not to construct a new chicken processing facility that had been planned in North Carolina.
“For the remainder of fiscal 2008, we believe market prices will continue to reflect soft consumer demand trends and the uncertain economic outlook. However, having been through volatile cycles, we remain confident that the fundamental rules of supply and demand will work to maintain industry profitability over the long term,” Sanderson added.
