Bonus payouts to staff, and weaker-than-expected chicken volumes,
eroded the boost to Sanderson Farms from lower grain prices, leaving the
poultry group with a smaller-than-expected rise in earnings.
Sanderson Farms unveiled a 12.0% rise to $76.08m in earnings
for the May-to-July quarter, on revenues up 4.0% at $768.4m, underpinned by the
boost to margins from elevated chicken prices and depressed grain cost.
The company paid 29% less for its corn, a major feed
ingredient, during the quarter than a year before, and 17.6% less for its
"Market conditions were favourable during the quarter," said
Joe Sanderson, the group's chairman and chief executive.
"Market prices for poultry products were higher," he said,
putting the improvement down to "good
retail grocery store demand".
Bonus, volume hits
However, the earnings, equivalent to $3.30 per share, fell
short of Wall Street expectations of a $3.82-a-share result.
"Results were affected by accruals booked for the company's
bonus award programme and a contribution to the company's employee stock
ownership plan," Mr Sanderson said.
Accruals for the bonus plan for the quarter soared to
$15.5m, from $6.5m a year before, with those for the stock ownership scheme doubling
Furthermore, "the quarter was negatively affected by
lower-than-anticipated volume processed at the company's poultry plants," Mr
Sanderson said, saying that the group had handled 770.4m pounds of fresh poultry
– 44.7m pounds below a forecast made in May.
The group blamed the shortfall on "lower-than-target hatch
rates at our hatcheries and lower-than-target live weights of chickens
In fact, the relatively low rate of production increase in the
US poultry industry has surprised many analysts, given the potential for demand
at a time of elevated prices of rival meats beef and pork.
Paragon Economics and Steiner Consulting has said that it
appears that the sector "is either struggling to take advantage of a golden opportunity
or has learned that market share is not the holy grail of success measures.
"Chicken output is increasing very little,
even with competitive conditions that would normally have driven companies to cut-throat expansion."
Some commentators have attributed the weak output response
to US poultry producers possessing an aging flock, producing eggs with
relatively low viability.
Data on Friday showed US inventories of poultry in cold storage, at 612.6m tonnes, down 13% year on year.