Sanderson Farms cuts thin forward grain purchases

Poultry giant Sanderson Farms flagged "considerable optimism" over US crops, which had prompted it to cut thin its forward purchases of grain, even as a weather scare underpinned a rally in corn and soybean futures.

Joe Sanderson, the chairman and chief executive of the US-based group, said that the company had "priced out grain needs through August, but will be on the market for our needs starting in September". September starts next week.

The strategy reflects a shortening in forward coverage from that revealed in May, when Mr Sanderson said that the group had "priced our needs through July".

And it comes amid a rally in grain prices from multi-month lows reached earlier in August, with December corn futures on Tuesday staying close to t $5 a bushel, which they closed above in the last session for the first time in a month.

November soybeans hit an 11-month high of $13.98 a bushel on Monday, up more than $2 a bushel from an early-August low.

'Considerable optimism'

The price rises have been fuelled by concerns for US crops, amid expectations for unusually hot conditions this week, with little rain relief, after a decline in corn and soybean condition already reported for last week.

However, even if it bought its outstanding feed grains needs for the August-to-October quarter at Monday's prices, Sanderson Farms faces a bill for the period down $65m year on year, Mr Sanderson said.

In August last year, front-month soybean futures hit $17.94 a bushel in Chicago, and spot corn a record $8.43 a bushel.

"Favourable growing conditions this summer have fuelled considerable optimism about this year's corn and soybean crops," Mr Sanderson said.

"The crop is not yet in the bin, however. And as we saw yesterday, market prices will likely remain volatile until the crop is made and harvested."

Earnings soar

The comments came as the group unveiled earnings up 136% to $67.9m for the May-to-July quarter, on revenues up 18.3% at $738.9m.

While cash corn prices rose by 8.1%, and soymeal prices by 10.3%, chicken values increased even faster, by 11.6%, as measured by the benchmark Georgia dock figure.

"The Georgia dock price remained historically high," a factor which reflected "steady retail grocery store demand", Mr Sanderson said.

Breast meat prices soared 32%, "as several quick-serve restaurants and other food service establishments featured chicken on their menus".

The earnings figure equated to $2.95 per share, well ahead of Wall Street expectations of a $2.62-a-share result.

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