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Sanderson Farms Sees ‘Tough Headwinds’ in Short Term

Sanderson Farms Inc. Chief Operating Officer Lampkin Butts said the chicken industry may face “tough headwinds” in 2011 because of rising feed costs and increasing supplies.

“We’re going into next year with much more expensive grain costs and also more chickens, and it could be tough headwinds for the industry for the short term,” Butts said today at a conference hosted by JPMorgan Chase & Co. in New York. The Laurel, Mississippi-based company is the fourth-largest U.S. chicken processor.

The U.S. government cut its estimate for the corn crop on Nov. 9 for a third straight month and the price of the grain is up 26 percent since Aug. 31. Sanderson is processing more than 8 million birds a week, Chief Executive Officer Joe F. Sanderson Jr. said today. That will jump to more than 9 million when a new plant in Kinston, North Carolina, reaches full capacity in January 2012, he said.

Kinston is expected to begin output on Jan. 3, Sanderson said. The company plans to start construction on another plant in North Carolina next year. Sanderson has said that the two facilities will increase the company’s capacity by 30 percent.

“The environment for the next six months is setting up to be pretty challenging,” said Mike Cockrell, the company’s chief financial officer. “But we have a lot of confidence in the long term for our industry.”

‘Strong’ Consumption

Per-capita consumption of chicken is “strong,” Butts said. Grocery-store and export demand are both good, while food-service is flat, he said.

“During this recession, demand for fresh chicken at retail has continued to be strong as consumers eat at home more than eating out at restaurants,” Butts said.

Sanderson Farms fell 0.48 cent, or 1.1 percent, to $41.38 today on the Nasdaq stock market. The shares have dropped 2.4 percent in the past year.

Tyson Foods Inc. is the largest U.S. chicken processor based on 2009 production, followed by JBS SA’s Pilgrim’s Pride Corp. and closely held Perdue Inc., according to WATT PoultryUSA, an industry publication.

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