Meat price pressure mars rosy outlook for poultry

Sanderson Farms highlighted the vastly improved conditions for US poultry producers as it unveiled a near-quintupling in earnings, helped by falling grain costs - although these may in future be offset by lower meat prices.

The Mississippi-based group unveiled a jump to $45.3m in earnings for the August-to-October period, the fourth quarter of its fiscal year, from $9.35m a year before, on revenues up 12.1% at $717.1m.

The increase reflected a benefit from this year's decline in grain markets reaching its feed bills, flagging cash prices down 33% year on year for corn and 1.6% for soymeal.

The previous quarter, corn prices remained on the increase year on year, up 8.1%, and rising 10.3% for soymeal.

Production increases

The results highlight improved fortunes for US chicken producers which have manifested themselves in increasing broiler meat production, at 3.5bn pounds in October, up 4.1% year on year.

"Broiler meat production in October continued the strong gains of the last three months," the US Department of Agriculture said in a report overnight, highlighting that average broiler chicken slaughter weight had reached 6 pounds for the first time.

And prospects looked upbeat for output ahead, with placements of chicks for growing into broiler chickens continuing to show year on year growth.

 "The forecast of relatively lower prices for both corn and soymeal in the remainder of 2013 and into 2014 is expected to give broiler integrators incentive to continue expanding production."

Sanderson Farms itself began work in October on a processing plant in Texas which will raise capacity by 16%.

'Downward pressure on prices'

However, the USDA briefing also cautioned over signs of softness in chicken meat prices, undermined by the rising production, and an increase in inventories.

Chicken leg prices have fallen by some $0.09 per pound over the last two months, with wings last month averaging $1.23 per pound, down 35% on November 2012.

"Higher broiler meat production has resulted in increases in cold storage holdings, which, in turn, have placed downward pressure on many broiler product prices," the USDA said.

"With higher year-over-year production expected in fourth-quarter 2013 and into 2014, broiler prices are expected to continue to be under some downward pressure."

'Strong finish'

Joe Sanderson, the Sanderson Farms chairman and chief executive, said that the latest quarterly results "marked a strong finish to a successful year for Sanderson Farms and the poultry industry.

With the group's enhanced prosperity having allow it to "significantly reduce outstanding debt… we are well positioned to continue our growth strategy", he said.

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