Q1 2020 Earnings Call
Please standby we're about to begin.
Good day and welcome to de Sanderson farms incorporated first quarter 2020 conference call. Today's call is being recorded at this time for opening remarks, and introductions I would like to turn the call over to Mr. Joe Sanderson. Please go ahead Sir.
Thank you good morning, and welcome to sanction for first quarter Conference call.
This morning, we announced a net loss of $38.6 million or dollar and 76 cents per share for first quarter fiscal 2020.
This compares to a net loss of $17.8 million or 82 cents per share for first quarter.
School 2019 I.
I will begin the call was comments about general market conditions and grain cost then turn the call overlapped in my for more detail account of the quarter.
Before we make any further comments I will ask Mike to give the called generic statement regarding forward looking statement.
Joe and good morning, everyone. This morning's call will contain forward looking statements about the business financial condition and prospects of the company.
Samples are forward looking statements include statements regarding supply and demand factors future grain and chicken market prices economic conditions production levels and our future growth plans. The actual performance for the company could differ materially from that indicated by the forward looking statements because of various risks and uncertainty.
[music].
These risks and uncertainties are described in our most recent annual report on form 10-K and on the company's quarterly report on form 10-Q.
For the quarter ended January 31, 2020, which was filed with the FCC. This morning.
Thank you Mike.
Results for the first quarter, it's like continued challenging market conditions for products for huge for foodservice customers at our plants processing or larger burden.
Demand for retail grocery store customers has remained stable and that's the ability is reflected in overall average chill pack prices that were slightly higher than during last year's first quarter.
On the other had market prices for boneless breast meat chicken tenders and bonus sadly so I'm sure that's great well lower compared to last year's first quarter.
In fact quoted boneless breast meat market prices fell to all time lows in January and remains there and to say Larry.
It was prices have moved most are older past week.
Cash market prices for corn were higher during the quarter compared to last year, while soybean meal prices were lower.
I see Cogs per pound chicken process were higher by 1.53 cents per pound when compared to chickenpox stretch.
Compared to the first fiscal quarter of 29 team.
Both corn and soybean.
Now it's tables are healthy as we head into the 2020 planning season, but corn basis, just for my is much higher than last year.
As a result, we about little corn basis. This past April well, we had most of actually been meal bikes as well for the full fiscal year.
The next advanced it will impact grain markets are the South American Harvey.
In the March 31 planting intentions report.
South American harvest is progressing very well.
Expectations now are for good crop for in the region.
Hey, it's 2020 agricultural outlook form last week.
The U.S.P.A. after making corn acreage in 2020, well be 94 million acres versus 89.7 million acres last year.
And then acres planted in soybeans would be 85 million acres, Russia, setting to 6.1 million acres last year.
It is not unusual for the U.S.P.A.J. significantly revise its outlook before March 31 planting intentions report so we will be watching for that report.
What do you have priced our grain age through March.
Box substantially all our soybean Oh I saw it meal basis.
Full fiscal year like have low corn basis price past April.
Based on our call there was a first fiscal quarter.
What we have price so far.
When combined with prices, we've kind of locked in for the balance for the year at yesterday's close.
Our grain cost for fiscal 2020 would be flat with fish was 29 seen thanks don't 2019 volumes.
I've told our shareholders at our annual meeting two weeks ago.
In addition to grain crops in South America.
Planning intention.
Oh, the United States farmers were focused on several things as we start physical 20 to 20.
Well, we will of course watch chicken production numbers.
The U.S.J. is projecting that our industry will produce.
4.3% more chicken.
During calendar 2020 than last year, which will compete with more pork as well.
According to U.S.P.A. data.
Well its placements are higher by over 2% inspection mine and egg sets in chicks placed are trending higher by 4% compared to last year.
I have several reasons to remain optimistic about 2020.
First we are operating well in all areas of our business.
While our model selling fresh chicken at market prices, that's not compete when commodity market prices aren't historic lows those are alive production in our processing division.
To start the year very strong position.
Jack and I believe grain markets well at work the benign.
Finally, why market prices for boneless breast meat produce at our plants processing large bird.
Third Sherbet cups remain under pressure.
And market conditions during our first fiscal quarter, we're very challenging.
We continue to be positive about our opportunities in both domestic and export markets over the next year.
With respect to domestic markets, we expect to see continued favorable demand and retail grocery store.
They're going to remain favorable price compared to other propane.
And we believe that that dynamic will continue.
I also believe we will see improved demand from foodservice customers supported by an increase in promotional activities and quick service restaurants for chicken.
With respect to yes export markets.
Yeah, right the bathroom swine fever in China has affected the worldwide platform.
Breaking a significant propane deficit that should also benefit open market in the United States.
At the end of 29 chain, China lifted nearly five year ban.
On the import of United States, poultry, and we resumed shipments to China almost immediately.
Just a ban was lifted we have ship or have customer or.
For approximately 18 million pounds of chicken products, including dark meat parch to China.
This includes a hunger and 37 loans of dark meat and 283 loads of chicken feed.
We continue to receive strong indications of ventures.
For our product from buyers in China.
And we were pleased to see the recent announcements regarding the reduction of terrorists.
On the United States, poultry, which should further support our business.
Wow, the devastating grown virus.
It's currently disrupting the markets.
Depression demand and negatively affecting shipping logistics and slowing China's economic growth rate, we believed demand for propane from China is strong we expect the benefit in 2020.
From the return to an open market.
Finally, we'll focus our efforts on our growth.
Operations in Tyler will reach near full production by over 2.2 way.
And we're seeking a new site for a next plant.
At this point I'll turn the call overlapping for more details scratch and other chicken markets and our operations going forward.
Thank you Joe good morning, everyone.
Overall market prices for poker product were higher by 2.58 cents per pound.
Well at 4% during the quarter when compared to our fourth quarter last year.
Overall average market prices for Killpack promise reflected good demand during the quarter and averaged just under a penny higher per pound during the quarter compared to the fourth quarter fiscal 2019.
Based on mix improvements.
Prices were lower by quarter over cent per pound sequentially again, mostly all makes.
Blackwater project during our fourth quarter average 31.5 cents per pound.
Compared to 25.7 cents per pound last year.
Vital number for calendar 2019 filled the volume of all brought on Leap X Board was higher by one half of 1% compared to 2000 basin.
The average quoted market price for Jumbo lags was hired or our fourth quarter compared to last year that reflected a good Super Bowl sleep.
Jumbo wing prices averaged $1.60 loves Jesper founder fourth quarter this year compared to $1.56 have profound during last year's fourth floor.
Boneless breast prices averaged 92 cents during this year's fourth quarter compared to 95 cents Atlanta last year.
We sold 1.15 billion thousand poultry products during the fourth quarter and 8.2% increase from the 1.06 billion pounds sold during last years fourth quarter.
Actually it's Bob were up from 1.6 million for 1.1.
1.17 billion pounds.
That is 3.3% higher than our guidance about process during fourth quarter as both a number of their process during the quarter.
And live weights were higher than our estimate.
We expected process, approximately 1.23 billion south during our second quarter.
From one born always billion pounds processed during last year's second quarter.
We expected processed approximately 1.29 billion thousand Q3, and 1.27 billion pounds.
Okay.
Prepared chicken sales were 51.6 million now 6 million or 10.5%, all 4 million fewer pounds. So.
Our average sales price per pound of prepared chicken was higher by 5.3 cents per pound.
2.9%.
We remain focused on our operations during the quarter.
And we'll maintain that focus as we move towards full production in April as Joe noted, our big burden, Nick a big bird product mix is a challenge in the environment. We faced November through February.
We will continue to look for efficiency improvements and do everything we can to meet our goal of performance at the top of industry.
At this point I'll turn the call over to Mark to discuss financial statements.
Thank you Lansing.
Net sales for the quarter totaled $823.1 million and that's up from $743.4 million for the same quarter last year.
Our net loss of $1.76 per share during the quarter compares to a net loss of 82 cents per share during last year's first quarter.
Our cost of sales of poultry products for the first three months ended January 31 is compared to the same pretty much a year ago increased 17.9%.
This increase as a result of more pounds sold and an increase in the average cost of goods sold.
Ramp up inefficiencies at Tyler and additional cost inherent in the tray pack plan accounted for 1.2 cents per pound of our higher cost of goods, so compared to last year's first quarter, we expect to get three quarters of one share of that back by September 2020.
Non feet related Cogs were higher by $74.3 million or 2.7 cents per panel compared to last year.
Several factors contributed to this.
First lower think capacity volumes impacted cost per pound.
Brazos and Mccomb plants were down a week during the quarter for the installation of new equipment.
Labour costs were up $31.7 million or 1.67 cents per panel compared to last year and fixed costs were higher by 8 million or just under one half of the cent per pound as we have begun depreciating somebody equipment, we've been adding to the plants over the last year.
Change in benefit.
The reversal of the fiscal year end locum adjustment was two thirds of this in higher in 2019 and this year.
Our feed cost per pound the poultry products processed were higher by 25.
Were higher in 25.97 cents per pound compared to 24.44 cents per pound last year.
While our cost per pound of poultry products sold were higher by five and a half cents per pound our sales price per pound the poultry products increased only 4% or 2.58 cents per pound compared to last year and this combination obviously resulted in lower operating margins. During this year's first quarter.
Yes, DNA expenses for the first fiscal quarter of 2020 were $9 million lower than the same pretty much a year ago. This decrease compared with last year's the result of a 1.4 million dollar reduction and train he calls the elimination of 9.3 million entire startup costs and lower stock.
Compensation expenses.
These reductions were offset by higher legal and other expenses.
We're modeling 50 million for history in a expansions in Q2 50 million in Q3, and 52 million in Q4 and these estimates include no accrual for a potential he saw contribution of bonus awards.
We spent 71.2 million on Capex during the first quarter and we've approved $203.8 million in Capex for the 2020 fiscal year.
The fiscal 2020 capital budget. Currently includes 40 million for several large scale equipment upgrades at our processing plants, and Brian textures, Mccomb and more Mississippi and multi Georgia. We've also budgeted 15 million during fiscal 2024, new hatchery under construction right now.
In Jones County, Mississippi, and that will replace the ball mr. should be hatchery.
Depreciation and amortization during the first quarter totaled 36.7 million and we expect approximately $154.6 million in depreciation.
The full fiscal year.
I don't ever shale that is all of our prepared remarks, and you can now open the call for questions.
Thank you that's a question and answer session will be conducted electronically if he would like to ask a question. Please press star followed by the digit one on your Touchtone phone. If you are using the speakerphone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. Once again star one and our first question today, we'll hear from.
Heather Jones with has Heather Jones research. Please go ahead.
Good morning, and I apologize for the background noise on the airport.
Morning.
Good morning.
I wanted to I could ask a question about on the cost.
Using the pounds, which all the projecting for Q2.
Given some of these conversions are over how should we be thinking about non calls per pound in Q2.
Yes.
Yeah sitting here.
Right. Yeah, you know you're not that labor is baked in and whether that's not going anywhere you are going to get back the inefficiencies at Tyler three quarters of the sent a pound.
We're going to get a little bit of that back in Q2.
Your volumes are going to be Rcs and key to your volumes are going to be higher.
Which are going to help.
You know you might model, a penny lower but I wouldn't model any lower than that and then you're going to get some more back in Q3.
Okay.
[music].
And no one to China, so talking about the tariff reduction.
Now well my understanding is that the different distributors have topped off about it on their water that it's not like a blanket its not like a blanket waiver is what is that correct.
That is correct.
Yeah, John published.
Data published the list.
Things that they exhausted said well completely.
Paul do was not all it but they allowed one quarter to a flat to that.
Fair exemption would stay at all what we deal with all the plan yes.
So the ones you deal with instead of all Clos or whatever and they've been okay.
I was 30% that's still in place.
Okay, and given that waiver I mean, how competitive is she left product into China right now.
Well as pricing then.
Dropped to 30% is just going be more that much better gross yeah.
Yeah look like on its own water so it.
It's competing.
And then my final question like on the strength that we seem to be a free market of late.
And what do you is that mainly just seasonal strength will have you started to see any of the QSR stepped in and buy for their anticipate it needs like what do you think is driving this recent strength.
I'd like several things.
We think it had I think wouldn't surprise your bonus right now.
I think it volumes from market share.
We're exporting.
Hey.
Good bit of boneless.
And in Mexico right now.
Brazil does not have not yet.
It has no quota right now to.
Ship any.
Both of which into Mexico. So.
And with our price.
You asked just shifted a good bit of phone.
We believe.
That oh, sorry, the processors are buying a good bit of bonus at these prices.
And fabricating and putting bone much away right now in anticipation of higher prices.
We also believe without knowing.
That.
There may be some.
A quick service restaurants.
Putting some product.
Yup.
For.
Oh features that are going to break into spring.
I think all those dialogues are hat.
Okay perfect. Thank you so much of the color.
Thank you.
And next to move to Peter Galbo with Bank of America.
Hey, guys. Good morning. Thanks, Thank you for taking the question.
Joe There there were some reports out this morning that that some of the ports a in China have actually started to lower the wait times to to offload product for from ships and I'm just wondering from from any of the importers you've spoken to just over the past couple of days have you heard about any incremental easing as people are returning to work.
They are actually able to move more product for the ports in a in a more orderly fashion.
Well that's gotten better.
You can't just this morning, he had an operating thing because I saw that I saw that same report Peter but I hadn't heard that from our guys I haven't heard anything in the last couple of days, but I will say.
Uh huh.
[music].
It's a little slower.
Getting stuff out of the fourth we had missed the we have a we've had everything we show the salts give you have gotten them, except for we had four loads diverted to different forward in Korea, and low but everything else has gotten it yeah.
It's it is kind of.
But we have always shift over there and they start shipping.
Right that's the first they Chamberlain.
And we don't ahead for vessels that were diverted and we'd probably I don't know how many landed but.
We got a it and they might go from one forward in China to another board in China.
But.
We got all we've got an almost every one of our xena.
And it's kind of getting back.
Getting slowly back to normal.
Got it now that that's that's really helpful and just a quick clarification on the on the tariff comment is it your understanding that you know that the waiver as your important apply for it would would go to that your percent effective March 2nd similar to the other proteins.
That that would just be helping to clarify thanks.
Well if approved.
We don't know about the approval yet but.
No I understand what would happen quickly if they if they are approved.
John approval.
Got it Oh, okay. Okay. That's helpful. Thank you guys.
Thank you thanks Peter.
And next to move to Ken Goldman with JP Morgan.
Hi.
Thank you for a for a the question I have two quick ones.
One what's your appetite for buying back stock at these levels and too.
Is there any reason to expect earnings to be anything other than positive in the second quarter as you see it right now I feel like Ken Zaslow asking these brief bottom line questions I'll still somewhat since then [laughter] I gave you the first one rig build a plant and.
And then 70 $75.
80, something as a [laughter] where are you batch.
Rather than build plan I think there's a target.
Next time, we looked at it.
And I'd rather.
Taste price you, rather you better off building plant.
The second question did and that is it to that 0.2 can we bought stock back with all the hate 850000 shares back at 700 800.
We never Bard money to buy back stock I don't.
Question, when and $28 is.
Kind of getting like she up little bit, but no we haven't borrowing money to do that in the past and then the second question was asking about the second quarter was Oh.
Profitability is yeah, you're making us predict checkpoint.
Hello.
[laughter] Feb one.
[music].
Selling breadth.
I understood by on doesn't work.
Will observe this will you probably noticed that we did not book a lower of cost or market.
Entry at the end of the first fiscal quarter.
So we obviously think is gonna be much improved but.
Don't know about.
At March on April who go and yeah, that's right well on its just got to.
Improve like dark meat is improving.
Uh huh.
March.
Dark meat is going to be better than February.
This is got to get up but we can't paycheck bonus for 68, shedding shuts down and we have seven plants.
Owning and.
It doesn't matter what type of corn when you shut in bonus in savings judged by.
Understood. Thanks, guys.
You bet. Thank you Kim.
Next I'd love to Benjamin Theurer with Barclays.
Hey, good morning, Joel Lampkin Nautica.
Thanks for taking my question, so wanted to follow up and put a little bit into perspective, what you've been shipping to China. So you've mentioned in the press release and in your prepared remarks of Youve had shipped approximately 18 million pounds, how it's being the velocity off shiffman Bill recall that.
Last four to five weeks since a more severe corona virus outbreaks in some of the delays and and the Offloading in China have you continue to ship past few slow down shipment, yes, I remember you gave guidance last quarter call in December on your potential benefits from.
The the chicken feed sending shipping them over to just to understand if there's going to be a revision on that number because of lower level from should fund.
No what have we continue to shift.
We have slowed down anything then.
As I mentioned earlier.
Everything we've gotten over there has gotten into the Gulf.
Well, we have slowed down.
Okay, and how is your broke ground on getting the quality of the Pos because that was one of the discussions we have two months ago.
The Grey day, where do you think your target is gonna be have you started to conserve and proof that work on that just to get a steel off what the potential volume could be.
Yes, it's gotten better we still got some work that goes or what it slowly gotten better.
As of the flat they didn't try and get back on them.
While becoming out of the houses but it's.
It's not up to where we walked across the board.
I don't know it leave recalculated power.
What that Paul markets what.
Where what we've done so far.
Market prices.
Weaken recalculate, yet we haven't done.
Yeah that works for Oh, Yeah, it's today.
Today pre tax.
It's 65 $70 million.
And if we can get.
Yeah, we could add $30 million to $40 million to that if we can get everything right.
Yes.
Good.
The Polish coming out of the brawl, our house and grading and plans.
We can add $30 million to $40 million two that we believe.
Okay. No. That's 65 to 70 is that for fiscal 2020 or would that in annualized figure that fiscal 2020, Okay 21 extra annualized.
That's annualized Angola.
Yep.
Okay perfect well, thank you very much for that.
Thank you. Thank you Benjamin thanks.
Our next move on to then and then they know with Stephens.
[laughter].
Hey, good morning.
Oh, good morning bad.
Yes.
Mike I think you make some comments around.
Huh.
Rounds.
And then.
That's being down in the quarter for.
And then upgrades I think moultrie is supposed to be down.
You can see Q February.
Got it it's done are there.
Okay are there any other schedule.
I mean in some ways.
Good.
We have a merchandise.
Well, we had we had Waco and palace thing.
To punch and dark meat deep boenning.
And that we have delayed that.
Primarily because of China business.
And.
So we don't have any more.
Anything else schedule right now.
Great.
And then Joe you mentioned, it's been difficult to pressure corn basis any thoughts on when you think that improves.
Oh, gosh, there and keep it simple.
Good question.
Just I don't know we.
Frankly, we book April yesterday, we went out.
First as a week and solved.
Basis through July corn basis through July and it will still sky high.
And we just above capable.
And my thought he is perhaps.
It might get better when they the March 31 planting intentions come out.
And if they come that was a big number 90 to 90 394 million acres.
It might that might bring something really.
Oh, but if not I'm all by hand to mouth.
No need to go out and I mean, the nicest is high.
Hi, guys I've ever seen.
And in the Asia.
For Kinston, a 90 day outage that's got a.
How's that they have a small drop out of Ohio, Indiana, I understand that but not in the Midwest I don't want to sterno and.
In Nebraska and.
But the farmers are.
I understand the farmers Ben.
[music].
Said about prices and Oh, God approximate Chicago Board Dray, they had that the price has been low for them since 2012.
And their hurting.
I got that.
But I'm I'm sounding boneless breast for 70 cents Brown.
We feel their pain I fail.
Emphasize.
I'm not going to pay but you have to selling yeah.
I paint store mine.
Fair enough. Thank you know that's the one.
Thank you Dan thanks much.
And next on live to Robert Moskow with Credit Suisse.
Hey, guys. Thanks for the question. This is Jay can you flush out for Rob or just a quick question on pricing.
I guess, you mentioned that foodservice, specifically quick serve to batch of ramp up this year, you know seeing some promos in the spring. He just provide some color on I guess, how this would exactly benefit the overall chicken pricing environment, considering going and correct me if I'm wrong, but most of the quick serve supplies are from smaller birds and you know it's a way.
Smaller portion of its total supply growth so like I guess how.
What would happen with the bigger birds supplies, you know and would that continue to pressure pricing I, yeah, I'm just trying to get some just some color on.
You know just how pricing would improve for quick serve.
We see.
In the past, what you're saying the best Arterberry market prices for boneless skinless breast.
Well in breast sandwiches or.
No yes.
Item.
Are they feared heavily on television nationwide.
Are you, saying that a win Mcdonald's and Burger King and Wendy's when they all promoting.
We see enough demand.
Or.
Boneless breast and I'm talking about how the jumbo flat.
Got it moves the market and we.
Those three I mentioned, we don't sell any of them directly.
When they bought and sell a lot of product to their restaurants.
Mark is respond to that and they [noise].
You can take branch out of.
Out of our plants out of a nine pound nine report found chicken.
And fabricate.
For out.
Patient Chickened out.
And and that's what happens a lot of times.
When there's not enough of the seven and a half pound chicken or.
Our.
Okay our.
Our bonus and cut for Foreigner had Florida has found sportsman out of our out of our.
Element.
<unk>, Yeah, we see some of that we've actually sold some the fabricator to have turned around and sold it to another.
Fast food company, that's got a really popular sandwich right now.
But even that definitely was out of.
Fixing the had yet to settles down and they cut it not another oh yeah.
Got it.
Very helpful.
Yeah, you know Super helpful. Thank you and just to follow up just kinda back and overall supply question just for the market when should we expect to see this you know the elevated supply levels kind of taper off you know the 4% it's kind of the high end of the range.
And.
No exists.
Yes. This is largely coming from capacity expansion and if so you know when should we see that expansion kinda taper off just in terms of though you know from what you can from what you can tell you know when should we see more balanced supply demand dynamics.
I don't I think quite likely to happen is is I think China.
China business and what we believe there's going to happen.
A quick serve service restaurants don't bail the industry out.
And a 4% when big too much along with the poor.
And that's too much protein.
It will probably Vincent probably don't get bailed out.
Because the export market.
And because of.
The feature business that we think is going to happen.
When that export market disappears whenever that is.
And I don't know when that's done a b.
And when ish.
Beat your business.
Disappears and I don't know when that's going to be.
And all that need.
Stage and.
Matt.
And you go through a period of losses.
And that's what we'll and when that happens.
It's one of 4% would wish there.
They'll be a time of challenge.
And.
That's wonderful percent goes away.
I think right and it seems like I think the industry is likely to get bailed out.
This year, what causes extraordinary circumstances in China and.
And.
Pop as chicken sandwich.
As you won't be a catalyst.
For the chicken sandwiches.
Thanks.
You know I think events are gone by all the.
Industry out in 2020.
Got it Okay, I I guess I was more focused on just specifically some slides in terms of you know.
The 4%.
You pick event.
Largely you know the elevated number there is that largely coming from capacity expansion. What does that just you know more utilization of existing existing plants and I guess you know if it is from expansion when should we see you know them for off if you have if you have any color. There that's helpful. Thank you.
Well I think it from expansion if you look at CIT placement they actually edge.
Half of the it's running about 8 million a week and half of that was a now.
That Sanderson Mount Air.
That's about.
Costco.
Salmon.
And our neighbor up in North Carolina right right for.
About half of that you account and then cook in a way Wayne and.
Added line [noise].
And then that account for about 4 million roughly about 4 million a week all that put together roughly.
And then there's another 4 million.
Good fish showed up.
So that might have to 8 million a week eggs and chick placements.
And so that people that have good Cesar.
They didnt have now so just showed up and that's people that have either run their lines from 140 to 175 or added a line or.
Something nobody knows about.
So that as a result of.
Tremendous profitability and 2014 2015 27 Jane.
Want to expand.
And and that's what they did and.
So what's going to stop that.
Is red ink.
And when that happens it will go away.
And that's.
And but I I think 2020.
And trees don't get bailed out.
Maybe 2021 as well.
Got it okay. Thank you very much appreciate it.
You bet.
And next and live to Eric Larson with Buckingham Research.
Yeah, 'cause Doug good morning, everyone. Thanks for taking my question here.
You bet.
So a couple of things I feel I'm I'm curious on the persistent increase in weights are.
Our Oh, yes, the industry holding back a little bit Joel just hit you don't for you know, hoping you know the thinking a perennial increasing price isn't.
That's a little bit sort of inconsistent with what we hear that you know you your quality of grain feed. Your one is just not quite as good. This year. So you actually have to seed more Glenn So I guess could you talk about so you know the persistent you know.
Yeah, increasing awaits at least CNN and what happens there.
Well.
We have we have had a very mild winter and our wage.
At our company got way out of line in January.
And so we had to run.
Probably three Saturday age at Big Bird plans.
Again, our wage back down.
So to our target weight.
And our wage her back.
Normal and and I believe were at least a day at least a day younger maybe in two days younger.
Right now than we were a year ago.
And on our Big Burj.
But oh my.
Our conversion right sure yes.
Exactly the right now.
I don't know a corn and soy.
Uh huh.
I hadn't heard anguish they manage.
Yeah, I don't think <unk>.
Our goal and saw it fine yeah.
Got it yeah.
But I think they understand the industry ran a lot of I think that's what happened in January.
Boneless breast industry had run a lot of Saturdays.
To get our wage down a little bit.
Okay.
So why.
The white shall we say.
Indicate.
That.
The industry. It has a heavier bird kicked into big bird de Boenning.
Region.
Our segment.
Definitely a bigger burden that in that category.
Got it okay. Yeah. It's so you know maybe maybe if the whole industry has experienced this kind of very mild winter.
And they're trying to do this catch up and stuff here as well when you kind of look at you know you've drifted up in boneless. The last two three weeks a bit but you have drifted down and wings.
But just kind of color seasonal because you're going into March madness, and now when you journey to get that big wing demand and so we've seen a little bit of dropped in I think in a leg I think in quarters N N wings recently and.
Maybe this is a the weakness here near term or just maybe a blow off of people trying to catch up with white across the industry is that.
Affable.
Yes, we leg quarters are going up right now by the way.
At March leg quarters are going be a very unfortunate pounds.
I don't know about weighing here they had made a move yet boneless leg quarters, though are both going up and.
Wayne's hadn't done anything that we think they bottomed out.
Got it.
Well, a little too early for March madness to hit the learning, but its common.
Yeah, I I would assume that you're probably getting pretty close to that because you're only.
Couple of Saturday Sunday, So what are your from function, Dan I would have batching, it or how do you need a couple of weaker you know.
To get back, but the final question that I have here yeah right.
I.
We get this current storage data I'm not sure how relevant it is and I think I'm like you've made a comment too. Many once said that you thought that maybe.
Maybe also and pork that debt there. It's all there's a bunch of meat that's going into into cold storage is sitting in ports in New Orleans, and it's already tag maybe I've done already sold for ship, but what's getting caught up in tallied up and this cold storage number. It is I think we'd distorting the numbers.
You know how do you feel about I mean, if that makes sense and how should we think about that.
Uh huh.
I think it shouldn't I think cold storage data is important.
And I wish I had brought that was mad.
So on Monday.
First thing I'm doing a cold storage thing is looking at that.
Last category, what Bush last cat over other how's that.
And I take that off.
And half of almost half of that 950000 pounds.
A million pound billion whatever it is not another 50 million is.
Other and we don't know what you know.
We think that is an era.
Yeah.
I don't think anybody knows what that is.
Say that when we see that total number [noise] run in nine states deal above.
We think that's too much and paying users.
So to matches up with the cold storage is we deal with their all busting at the same they're all full.
And a lot of its total the total makes sense I don't like.
Oh, no they say report the categories right.
I don't even without the boneless breast meat too high.
That's too much but we we pack.
Beginning in November we pack frozen.
Rationally for one of our customers.
And.
Every year.
Mark you get down at these levels.
But.
Boneless breast meat further processor.
But.
Yes, boneless breast meat in the Frazier.
Yeah, Hey will pull out in spring.
When bonus at 68 70 cents pounds.
And he will pull that out.
And one boneless breast meat goes to $1.20 dollars 30.
Ill pull it out running.
Part of the process.
So it doesn't surprise me.
But instead and and and the leg quarters.
It doesn't bother me, but I think that is stage and go to China.
Well I can understand breast meat now I understand the leg quarters.
Okay. Okay.
Okay.
And the other categories. The one nobody knows what it did.
Yeah that's.
It is the one that bothers me a little bit.
Yeah David.
I didn't say.
I do think that it made is significant.
It could be there other category.
Maybe.
Something that is.
No yeah, that's close to me.
Oh.
Chicken logs and.
That's all I got that can't be that many can't meet that.
Cabbage something else.
Got it.
But you have got that's that's very helpful. I mean, I mean, if something love watching pretty closely just like pull that up <unk>, what we're talking and.
Yes, you're right about half of that increase in the last in the last report was in that other categories.
That's a mystery to a certain mystery Josh.
<unk>.
Well I think that's the one that is.
Oh, I don't know what that is.
Okay.
Yeah. Thanks, guys I appreciate all the up.
The insight here.
You bet.
Thanks, Eric.
Next we'll move to my time with Cleveland Research Company.
You bet.
Thanks, guys, it's Chris I allies, and Mike Smallish, maybe taking a longer term marni I'm, taking a longer term do you guys think maybe the corona buyers creates a situation in China, where there's more dependent on imported proteins and kind of I guess he thought.
I've grid.
I've seen that I've seen that theory batted around.
We ended the day is unprecedented and by definition that means we don't know exactly how it's going to play out but you know the theory is the province, where they've had most of the problems and where the corn team has been most severe is where a lot of chickens and other protein or process and they haven't been able to get feed in there to feed the animals and what mark to just.
Mark is gonna be close yeah, I mean, I Uh huh.
I think theoretically that makes sense, but at the end of the day [laughter], let's wait and see what else do they want to do it they can go to commercial.
Thank you can go to large scale commercial.
Shifting processor, yes, and so the Lauberge yeah, no no no no no. They can go a commercial poultry industry in China Oh.
Long term, yes, right for a short term, they're going have to import.
That could develop on some Marshall industry [noise].
Most of what markets and go to commercial pork and commercial.
Oh for industry.
Sure.
The next three or four or five years.
The problem they have as they have avian influenza in that.
And multiple.
Sure.
That's fair danger.
Fair enough. Thank you second one is you had mentioned in new plant I guess, given that the tightness and small bird and relative strength in that category.
Are you guys, maybe looking to add and and the small bird category or how are you guys thinking about where you guys want to add capacity.
Once you got kind of cheese and attention.
Oh, we would add either tray pack for big Bird debone him.
We would not new small bird.
Fair enough.
Thank you.
Absolutely. Thank you. Thank you.
And we'll hear from Adam Samuelson with Goldman Sachs snacks.
Oh, yes, thanks, good morning, everyone.
Turning to Adam.
Maybe first Joe you alluded in one of the up earlier questions to exports in Qs jars bailing out the industry. This year I mean, just how do you frame what bailing is bailing out just meeting avoiding losses or to bailing out in your mind mean prospects.
Of above long term average margins I mean, there. So just a wide range of outcomes have all the pricing has been I. Just think we're kind of just narrow kind of what that could be.
I think.
Good.
China exports.
Could probably take.
All of this 4% expansion.
And pounds, that's going to be dark meat.
Merely.
And I think they can take.
All of the expansion in port.
And by taking those extra pounds off the market.
Ah once you get.
[noise] Golan.
Oh, that's gone the two things.
Thanks to dark meat out or do you actually protection for that's going to have.
Two ways.
I just don't have bullshit retail.
The port we're taking the port.
Yeah, it's going to help book by having to the industry I'm talking about.
Taking a dart me I also think.
There are going to be.
I believe they're going to be.
Features.
Good QSR on chicken sandwiches.
I think.
Good.
They have to get into ballgame I don't have any insight information on that.
Uh huh.
I think.
Right.
They cannot allow.
Predators.
I'm not sure still in that.
Two people dominate.
The chicken sandwich.
Segment.
The other players has to be relevant.
Okay and show.
That doesn't that's why I said, what I do.
Okay I know that that's very helpful color and then my second question was on.
The retail market and just how you've kind of alluded to a balanced kinda supply demand and pricing must be on mixes up modestly.
Right I, just trying to get a sense as you look forward for the next kind of couple of months, how kind of feature planning is going looking at the U.S. you did a year to date seems like feature activity is pretty similar to last year.
And wondering if he and what you're seeing an engagement with retailers you think theres a pick up coming up that could could take some more impressed me off the market. Thank you.
Well I break seasonally effect will get seasonally.
Better demand and better free to activity it hadn't been it has not been.
It has not been.
Great the pay the true Oh, we got first of January like we always do right after.
Freshmen, but February has been pretty slow.
If this poor.
Good check supported like we think it well that's going to help us a great deal.
But hog prices are.
She.
Very.
Very cheap and.
It is hurting us wood.
Features that grocery stores right now.
It's been very slow in February.
Oh prices have held up but we're not getting.
February.
Where we're getting very little feature activity.
Okay that color when they get past Easton.
It will be better after Easter.
Okay that color is a super helpful. I'll pass it on thanks.
You bet. Thank you.
And next summit take Ken Zaslow with bank of Montreal.
I'd say.
Good.
Good morning.
Just a couple of questions fall off more than anything else.
We need to think about production levels. What is your full year production and how do you think it breaks down between the first half in the second half.
<unk>.
So that he assumption levels first right of first Stephens media.
I think you're gonna stay the same.
You don't think that their job.
Oh, no adversely affected so things like the industry production, yeah, Yeah, Oh shit, the or my understanding is a lot more plants coming on the front happened that maybe slowed down, but I don't know people leave that or not.
A couple of.
I don't think they'd be it yeah it and.
If.
And the industry, it's profitable, which I think it will be.
No.
Yeah.
You know after April May say April my the.
Breast prices and leg quarters do what we think they're going to.
[noise] then.
I think you'll have the same we'll have this 4%.
Inquiries Oh you.
Okay.
You keep on the for the idea that you want to those Mcafee, that's always been a long time thought recently they used to there's been labor constraints I do believe for you to get pick out it has that changed or are you feeling an easing of that where there's a greater problems that you will be able to see plant.
Right.
From a license Oh.
Well, we hadn't been able to find this.
Site was.
Ample labor.
But we were you know there 50 things when we look forward.
One of the thing you can do about locate the site.
I won't tell you everything.
[laughter].
It could go back and look 10 years back.
And see what the unemployment rate was 10 years ago or 15 years ago.
And shape, what historically unemployment was.
And.
And you might see what to labor was.
And anticipate.
You know that you're going to have a recession.
And it looked at something.
Then patch.
And not what it is today.
And you know today everything is hot.
Fiscal <unk>.
And go back and.
See what it was.
Pre 2000 sites 2007.
Which was a normal year.
And.
Hey, what's your unemployment was doing.
And let and labor availability was and look at that.
And that might.
To give you some idea which could expect when it sounds to me.
Normal.
And.
The thing we look forward so aquifer.
Where.
We can have will.
Our facility and where our growers [noise] can drill wells.
That's a couple of things we look for objectively assess 50 50, plus things on it but those are a couple of things.
Right right right.
Right now you can't find any places as plenty of life.
But you also talked back.
Yeah, sorry.
Go ahead.
They don't do you continue I I, that's I saw it just seems like your tone change that you don't give away or spot prices I think it was one of the first question that you would prefer to build but it should I didn't know your tone change, where hey, we're finding more opportunities to build but it doesn't seem like that has changed it up there.
That's fair.
We believe all have a new aside for the next when we're not ready to break ground today.
Yes.
My last question in terms of the logistics of getting product to try to <unk>. I think you made a pretty clear that you're still getting other cloud data do you think it's more of a desire and willingness for China by or do you think it's more logistics.
I guess im trying to think I think that's more the question because it seems like.
Yes that is obviously, there, but what's going to get in China that desire willingness actually really change their directionally, it's more political relationship with.
President Trump or how does that bother me just I guess, that's a pretty my one question, but is it more desire or is it logistic issues on what's going to change I leave it there.
You mean, you mean to go ahead and start pulling them product D N.
Yeah, like really moving exports right, yeah, I think it looks a little light.
Well they need the protein you right now they don't have the demand that they will because of the Corona virus and people are just now starting to move back around again, they've had restaurants I mean.
Hey, the local ordinances banning restaurants from opening I hadn't needed protein over the last month because.
They're corona bar system, and she's going to grocers domain.
Their whole economies disruptive.
But once they get that once that settles down and we don't need mobile I know, there's a big question Mark about.
Cologne virus, not just there, but in other places too, but they're going to need long late at night go need more I've anymore than they did.
I think that.
Thank you yeah. Thank you can again.
And that will conclude the question and answer session. At this time I'd like to turn the call back over to Mr. chose forms some finding additional for closing remarks. Good. Thank you for spending time with US. This morning, and we'll look forward to reporting our results to used throughout the year. Thank you very much.
[noise] not well conclude today's call. We thank you for your participation.
[noise] Oh.
[noise].