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Chinese import ban hits Sanderson Farms profit

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Sanderson Farms missed profit expectations, as the Chinese import ban weighs on US chicken prices.

The Mississippi based company, the third largest poultry supplier in the US, saw profits plume by 71%, as the price of chicken falls sharply.

Sanderson saw boneless chicken breast meat prices down 30% over the quarter.

And bulk leg prices were saw an even sharper decline, by 53%.

"Lower dark meat prices reflect the significant decline in industry export volumes during the second half of fiscal 2015," Sanderson said.

Bird flu

US poultry exports have been hit by an outbreak of avian influenza.

China announced a ban on imports from the US in January this year, which remains in place.

Leg prices are more sensitive to export demand, as US consumers prefer white meat, while export markets, particularly East Asia, value dark meat more highly.

"If, as expected, export demand continues to be negatively affected by these factors, market prices for dark meat produced at our big bird deboning facilities will remain under pressure," Sanderson said.

Feet and wingtips

And the ban has particularly hit demand for chicken feet and wingtips, which are popular delicacies in China.

Sanderson said there is "no material domestic or export markets for these products other than China."

The company estimates that overall, the ban was costing it $4.3m a year before tax.

Cheaper feed

The lower chicken prices were partially offset by cheaper feed.

"While overall poultry market prices declined compared with fiscal 2014, grain prices were significantly lower," Sanderson said.

Soybean meal cash prices fell 21% over the year to October 31, Sanderson said, while corn prices rose 0.4%.

Falling profits

Profits in the three months to October 31 were $27.4m, down from $93.1m lover the same time last year.

The company's revenues fell 11% over the same period, to $679.6, where analysts had looked for revenues of $696.98m.

Earnings were $1.22 a share, short of the $1.35 a share analysts forecast.

Sanderson shares were up 2.0% in New York in midday deals, at $74.3175.

By Agrimoney.com

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