US poultry giant Sanderson Farms said today (28 August) it had cut production to offset the spike in feed costs it expects after this summer's severe drought in the country.
Chairman and CEO Joe Sanderson Jr said the company had reduced "egg sets by 2%" in a bid to "lessen the impact of the higher grain costs we are facing".
The news, combined with higher-than-expected third-quarter earnings, sent Sanderson's stock soaring. At 14:49 ET, Sanderson's shares were up 8.4% at US$44.
Third-quarter earnings per share were $1.25. According to Thomson Reuters, analysts had forecast $1.20. Sanderson posted a net income of $28.7m for the three months to $28.7m, compared to a $55.7m loss a year earlier when corn and soybean costs jumped.
Sanderson - and others in the industry - reacted by reducing production, which pushed up retail prices for poultry products. Third-quarter net sales were up 22.2% at $624.9m thanks to higher prices and "steady" demand, Mr Sanderson said.
However, he warned Sanderson and the rest of the US poultry industry "face a challenging environment going forward".
The Sanderson chief warned grain prices were "at historic highs" and added: "We have priced little of our grain needs going forward, and will remain on the market for our needs for now."
