Sanderson Farms Inc. reported results for the third fiscal quarter and nine months ended July 31, 2021.
Net sales for the third quarter of fiscal 2021 were $1,352.8 million compared with $956.5 million for the same period a year ago. For the quarter, the company reported net income of $164.8 million, or $7.38 per share, compared with net income of $32.8 million, or $1.48 per share, for the third quarter of fiscal 2020.
Net sales for the first nine months of fiscal 2021 were $3,395.9 million compared with $2,624.2 million for the first nine months of fiscal 2020. Net income for the first nine months of fiscal 2021 totaled $271.2 million, or $12.14 per share, compared with net income of $0.35 million, or $0.02 per share, for the first nine months of fiscal 2020.
(Note: It was announced in early August that Sanderson Farms is to be acquired by Cargill and Continental Grain, parent company of Wayne Farms.)
Results for the three months ended July 31, 2021, reflect the accrual of $10.2 million before income tax, or $0.35 per share net of income tax, for probable liability for a contribution to the company’s Employee Stock Ownership Plan, and $45.9 million before income tax, or $1.58 per share net of income tax, for probable liability under the company’s bonus award programs and equity compensation awards.
Results for the nine months ended July 31, 2020, include a net discrete income tax benefit of approximately $38.1 million related to net operating loss carry-back provisions allowed by the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, which became law during the second fiscal quarter of 2020. Excluding this discrete income tax benefit, the company’s net loss for the nine months ended July 31, 2020, was $37.7 million, or $1.72 per share.
“Our financial results for the third quarter of fiscal 2021 reflect significantly improved demand and prices for products sold to food service customers, continued strong demand for products sold to retail grocery store customers, reduced volumes due to planned egg set reductions that we implemented during the early stages of the COVID-19 pandemic, and higher costs of feed grains,” stated Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc. “Our results also reflect superior execution in all areas of our business, including live production, processing and sales. We benefitted from improved market conditions for the products we sell to food service customers due to the phased reopening of more food service establishments across the nation. While food service customer demand has improved with more people dining out, consumers also continue to prepare meals at home. As a result, demand for the products we sell to retail grocery store customers remained strong throughout the quarter.
“We produced approximately 1.21 billion pounds during the third quarter, which is 53.2 million, or 4.2 percent, fewer pounds than we would have produced at full production. This reduction in volume is attributable to planned egg set reductions implemented during the early stages of the COVID-19 pandemic to compensate for the decrease in demand from our food service customers.”
According to Sanderson, overall realized prices for chicken products sold to retail grocery store customers remained strong during the third quarter, and volumes reflected the strong demand. In addition, the quoted commodity markets for products sold to food service customers were higher across the board, reflecting the improved demand from food service customers. The average quoted market price for boneless breast meat was 71.4 percent higher during the quarter compared with the third quarter of fiscal 2020, the average market price for bulk leg quarters increased by 66.3 percent, the average market price for chicken breast tenders increased by 107.3 percent and the average market price for jumbo wings increased by 107.0 percent.
During the third quarter of fiscal 2021, the company’s average feed costs per pound of poultry processed increased by 45.8 percent when compared to the third quarter of fiscal 2020, while prices paid for corn and soybean meal, the company’s primary feed ingredients, increased 87.7 percent and 50.1 percent, respectively, compared with the third quarter of fiscal 2020. In its report published August 12, 2021, the USDA decreased its yield estimates compared to earlier estimates for both corn and soybeans for the 2021-2022 crop year. Supplies of both corn and soybeans remain tight relative to estimated demand, and the company expects market prices for both grains to remain elevated relative to historical prices at least for the short term. Had the company priced its remaining fiscal 2021 feed grain needs at yesterday’s Chicago Board of Trade closing prices, cash paid for feed grains during fiscal 2021 would be higher by $369.0 million compared to fiscal 2020, based on fiscal 2020 volumes. The Company estimates those higher prices, along with estimated basis costs, would increase feed cost per pound of poultry processed during fiscal 2021 by 8.44 cents per pound compared to fiscal 2020.
Sanderson added, “With respect to chicken production levels, the USDA’s latest estimates forecast United States broiler production during calendar year 2021 to increase less than one percent compared to calendar year 2020. While egg sets have returned to pre-pandemic levels, lower hatchability rates have resulted in fewer chicks placed than egg set activity would suggest. We estimate our total production during the fourth quarter of fiscal 2021 will be lower by 3.1 percent compared to the fourth quarter of fiscal 2020. If that projection holds true, our total fiscal 2021 production will be 0.6 percent lower than our fiscal 2020 production.”
Source: Sanderson Farms