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Sanderson Farms Cuts Egg Output After Grain Costs Increase

Sanderson Farms Inc. (SAFM), the fourth- largest U.S. chicken producer, said it cut egg output after record grain prices drove up feed costs.

The company made the 2 percent reduction starting Aug. 6, following a 4 percent cut implemented in January, Laurel, Mississippi-based Sanderson said today in a statement. It plans to run its plants at 6 percent below capacity until conditions improve, the company said today when reporting fiscal third- quarter earnings that topped analysts’ average estimate.

“While market prices for chicken remain higher than they were last year and have strengthened over the past few weeks, they are not high enough to offset what we now expect to be significantly higher input costs,” Chairman and Chief Executive Officer Joe F. Sanderson said in the statement.

Sanderson rose 8.5 percent to $44.05 at the close in New York, the most since May 4, 2009.

Higher feed costs may erode the company’s bottom line in September and October, Sanderson said in a telephone interview today. The company hasn’t bought any corn or soybean meal for those two months yet because yields from the coming U.S. harvest are unclear, he said.

“I never know what markets are going to do, but if they follow past trends, we have a chance of having a profitable quarter” for the three months through October, Sanderson said.

Beats Estimates

Most-active corn futures in Chicago rose to a record on Aug. 10 as the worst U.S. drought in five decades reduces the crop to the smallest in six years. Sanderson hasn’t purchased any corn from Brazil yet amid the rally and may consider buying from the country after the yields and quality of U.S. crops are clearer, he said.

Net income for the fiscal third-quarter was $28.7 million, or $1.25 a share, in the quarter ended July 31, compared with a loss of $55.7 million, or $2.51, a year earlier, Sanderson said today. That beat the $1.07 average of six analysts’ estimates compiled by Bloomberg. Net sales climbed 22 percent $624.9 million, beating the $611.8 million average of five estimates.

Sanderson also said it chose Nash County, North Carolina, as the site of its new poultry complex. Construction is on hold “until market fundamentals improve,” he said.

Tyson Foods Inc. was the largest U.S. chicken processor last year, followed by JBS SA’s Pilgrim’s Pride Corp. unit and closely held Perdue Inc., according to WATT PoultryUSA, an industry publication.

To contact the reporter on this story: Simon Casey in New York at scasey4@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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