December 22, 2016
Sanderson Farms to suspend Georgia Dock chicken-price index
Sanderson Farms, Inc. announces that it will indefinitely suspend the Georgia Dock weekly chicken-price index, an industry benchmark since 1972.
The company has priced a portion of its production from its tray pack plants based on formulas that used the Georgia Dock Whole Bird price as its base. For fiscal 2016, 10.15% of Sanderson's overall product mix was priced using these formulas. For the past 40 years and until recently, the Georgia Dock price was seen as a fair reflection of the dynamics of the retail grocery store market for chicken.
The company promptly notified its customers who are affected by this change, and is committed to determining an appropriate pricing formula as swiftly as possible. For the interim period until a new benchmark is established, Sanderson Farms and its customers have agreed on a pricing formula that is similar to what is already in place. As in the past, pricing formulas will be negotiated based on a customer's mix, location, volume and needs.
Commenting on the announcement, Joe F. Sanderson, Jr., chairman and chief executive officer explains: "Retail grocery tray pack products are important to our overall business, and we value our customer relationships in this market segment. With the suspension of the Georgia Dock, we are committed to working with these customers to find a new benchmark to use in beginning negotiations with our customers. It is important to note that regardless of the benchmark used, our negotiations with customers ultimately determine the price, and we believe our prices fairly and accurately reflect supply and demand dynamics. We have had positive conversations with our customers and do not expect this recent action to affect our business."
Sanderson, Jr. adds that Sanderson is aware of the Georgia Department of Agriculture's intent to introduce a new index the first week of January next year, with official reporting for the index expected to begin on February 1, 2017. "We believe they are going about determining the new system in the right way; being deliberate and getting input from every constituency group who is affected by the benchmark, including buyers, sellers, distributors, regulators and other interested parties," Sanderson, Jr. comments.
- Sanderson Farms