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Sanderson Farms: Good start to fiscal 2010

Sanderson Farms reports results for the first fiscal quarter ended January 31, 2010. Net sales were $420.1 mln compared with $388.9 mln for the same period a year ago. For the quarter, the company had net income of $15.8 mln compared with a net loss of $6.7 mln for the first quarter of fiscal 2009.

"The results for the first quarter of fiscal 2010 reflect an improved overall poultry market compared with the first quarter of last year," said Joe F. Sanderson, Jr., chairman and CEO of Sanderson Farms. "Demand for chicken at the retail grocery level has remained good and current supply levels are balanced with consumer demand in that market. Our food service business remains soft, reflecting the prolonged slowdown in restaurant traffic caused by current economic conditions. We expect these demand trends to continue until we see a meaningful improvement in the national job market and consumers resume spending and dining out again. Our results for the first quarter also reflect lower overall feed costs compared with the prior year. Grain prices have come down over recent weeks in reaction to the USDA's January crop estimates, and we believe our feed costs for fiscal 2010 will remain below last year's levels."

According to Sanderson, market prices for poultry products were mixed during the first quarter of fiscal 2010 compared with the same period of fiscal 2009, but were higher overall. A simple average of the Georgia dock price for whole chickens was approx. 5.3% lower in the company's first fiscal quarter compared with the same period in 2009.

Boneless breast meat prices during the quarter were approx. 6.2% higher than the prior-year period. The average market price for bulk leg quarters increased approx. 11.6% for the quarter compared with the same period last year. The increase in leg quarter prices during the quarter is primarily due to better world economic and credit conditions compared with a year ago and more stable export demand. The bright spot in the poultry market is noted in jumbo wing prices, which averaged $1.57 per pound, up 36.4% compared with an average of $1.15 per pound a year ago, reflecting strong seasonal demand during the football season. Feed costs, the company's largest single component in cost of sales, decreased 4.6% compared with the first quarter a year ago.

"We are pleased with the start to fiscal 2010 and are cautiously optimistic about the year ahead," Sanderson continued. "We believe that we have reached a more favorable industry balance of supply and demand levels for poultry products, and egg sets and breeder placements remain in check. The construction of our Kinston, North Carolina, plant is moving forward as planned and we expect to begin processing chickens at this location in January 2011."

Natalie Berkhout

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