Investopedia: Is There Still Time To Play The Rebound In Sanderson Farms?

Sanderson Farms (Nasdaq:SAFM) may be one of the best-run protein producers in North America, but that is not worth much to long-term investors, as big institutions run hot and cold on the shares based on the cyclical moves in poultry profitability. With the poultry market perhaps bottoming out and Sanderson's stock already off its lows, is there still time to play the eventual rebound in this business?


A Tough Second Quarter 
Sanderson definitely had a tough fiscal second quarter, but it could have been quite a bit worse. Revenue fell 2% this quarter (and rose almost 12% from the prior quarter) as increased production volume was offset by lower pricing. Although whole-chicken prices rose and leg-quarter prices increased on resumed Russian imports, boneless breast prices have been quite weak, and wing prices have plummeted.

At the same time, feed prices continue to march higher. Sanderson reported that feed costs rose 41%, and that pretty much corroborates what has been going on in the grain futures markets (chicken feed is usually about two-thirds corn and one-quarter soybean meal). Unlike Tyson (NYSE:TSN) and Pilgrim's Pride (NYSE:PPC), though, Sanderson Farms does not hedge grain exposure to a large degree.

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