#4 building One Belt One Road Industry, Jinshui District, Zhengzhou, China
Extreme weather can make it impossible to farm. It may not be a bad thing for farmers who grow corn and soybeans in the United States because they can get the corresponding insurance claims. But for the downstream chicken industry, it may not be too good.
On May 30th, Sanderson Farms, one of the “big four” in poultry farming in the United States, announced its second quarter earnings for FY 2019. The report showed that the company’s net sales for the quarter was $845 million, compared with the same period last year. At the same time, the quarterly net profit fell by 3.1% year-on-year.
Joe F. Sanderson, chairman and CEO of the company, said second-quarter performance data reflected rising feed costs. The average cost per pound of chicken feed used by the company increased by 3% compared to the same period last year, mainly due to the price of corn. In the second quarter of 2019, the price of corn purchased by Sanderson Farm increased by 4.9% year-on-year.
Previously, floods and heavy rainfall caused flooding of farmland in the United States, and growers were unable to start planting as scheduled. As of this week, the US Department of Agriculture released a report showing that the country's corn planting rate is 58%, much lower than the average of 90% in the past five years, while the soybean planting rate is only 29%, making it fall for almost a year. US soybean prices are also beginning to show upward pressure.
As of May 30, the price of corn futures in CME Group has risen by 15%, wheat futures have risen by 13%, and soybean futures have risen by 1.6%. However, due to the bad weather, the insurance claims have not yet arrived. Farmers do not seem to have any incentive to continue to increase production.
On Wednesday, the collective rise in crop prices once caused the US poultry stocks to be sold collectively. The leading company Tyson fell as much as 5% and Sanderson farms fell 4.5%. However, with better revenue data disclosure, Sanderson Farm's share price rebounded sharply, and US stocks closed up 3.18% overnight.
Mike Cockrell, the company's chief financial officer, predicts that cereal prices will continue to rise in the future, and it may be a good opportunity to start booking feeds for this fiscal year.
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