June 5, 2020
Sanderson Farms lowers poultry output forecast
Sanderson Farms Inc. decreased its prospects for poultry production as the company adjusts to current changes in consumer behaviour, Bloomberg reported.
"Unprecedented social and economic impact of the virus and the related government actions to contain its spread materially affected every aspect of our business, including our labour force, sales, operations and production levels, as well as our customers," Chief Executive Officer Joe Sanderson stated Thursday.
Sanderson Farms has not seen significant COVID-19 outbreaks or plant shutdowns, although it has slowed processing due to absenteeism. The company has also been upping output at plants that serve grocery stores, though some restaurant-related demand is being restored. It should benefit from a tighter domestic chicken market, reported Stephens Inc. analyst Ben Bienvenu.
Poultry producers have cut output due to labour constraints as well as poor food-service demand in the pandemic. It is unclear whether plants will be able to fully staff facilities in Q3, Sanderson has said.
Food-service demand came back to about two-thirds of normal in mid-May for Sanderson. The company said chicken breast prices were volatile in the quarter, dropping at one point to a historic low.
Sanderson expects prices paid for feed to be lower in the second half, compared to a year ago.
Expects to produce 5.9% fewer pounds in Q3 compared with February outlook, as it reduces production at plants that process larger birds for food-service customers.
On the earnings call to discuss results with management, investors will be looking for updates on domestic supply and demand, exports and virus-related impacts.
Market Reaction
Sanderson, down 20% this year, traded lower before the start of regular trading Thursday.