Q1 2021 Sanderson Farms Inc Earnings Call
Good day and welcome to Sanderson farms first quarter 2021 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 the Sanderson farms first quarter Conference call. This morning, we announced net income of $9 5 million.
Our 42 cents per share for our first quarter of fiscal 2021 <unk>.
This compares to a net loss of 38 <unk>.
$6 million per $1 76 per cent per share for our first quarter fiscal 2020.
I will begin the call with comments about the recent winter storms and general market conditions and grain cost and then turn the call over to Lampkin and Mike for a more detailed account quarter.
Boy, Mike any further comments I'll ask Mike to give the cautionary statement regarding forward looking statements.
Thank you Joe and good morning to everyone. On this morning's call will contain forward looking statements and Thats, a business financial condition and prospects and the company.
Actual performance of the company could differ materially from that indicated by the forward looking statements because of various risks and uncertainties.
These risks and uncertainties are described in our annual report on form 10-K for the fiscal year ended October 31, and 2020 and.
And our quarterly report on form 10-Q filed this morning with the SEC and also in our press release that we published this morning and these documents are available on our website at www Dot Sanderson farms Dot com.
Should not place undue reliance on forward looking statements we make this morning.
Each statements speaks only as of today, and we might not update or revise our forward looking statements extra.
And external factors affecting our business such as weather feed grain cost market prices for poultry meat the health of the economy and of course, the COVID-19 pandemic among others.
And highly uncertain and volatile and our view today and may be very different from a few days from now.
Thank you Mike.
Before addressing our first fiscal quarter results I want to update you on the effect of the recent winter storms on our business.
Our employees managers, and contractors and contract Polk, and producers and Texas, Louisiana, and Mississippi have navigated and historic weather events over the past two weeks.
Shell and Richard from that.
And determination and we are extremely grateful and proud for their efforts.
And our record low temperatures and power failures snow and ice and hazardous road conditions, we were unable to operate our processing plants and deliver by the day Omega checks to borrow on our farms on a regular schedule.
Pickup hatching eggs from Rader farms, and flagstone, zags, and and our hatcheries and our manufacture and deliver chicken feed to the farms of our contract bulk and producer.
Fortunately, none of our facilities were damaged and our employees remain safe.
And we retire and to normal operations at all of our facilities and on February 22.
<unk> SaaS from 'twenty, one, except the Hazel harsh, Mississippi processing plant, which resumed normal operations on February 23 2021.
However, our lab production supply chain expired experienced interruptions and losses similar to a hurricane.
We lost 455000, broilers and houses and lost power water our feed our net collapse under the weight of snow and ice.
We were forced to humanely used and ash and 545000 and change and our Texas average and.
And I would pick up and said 703000 hatching eggs and our hatcheries.
We deeply regret the losses incurred due to extraordinary circumstances beyond our control or independent contract poultry producers control.
As a result from these interruptions, we will have $1 6 million fewer chickens to process and market and our Mississippi, Louisiana, and Texas processing plants over the next 10 weeks.
For the store and we expect it to process $167 million during our second fiscal quarter.
So this represents just under 1% of our expected quarterly production.
In addition to these bird losses, both greater and broader chickens.
Those two extreme temperatures typically suffer some performance losses over their lives.
While the economy is insured for these events.
And retained to seven and $5 million and to risk and is subject to a seven day deductible under business interruption coverage.
We will work with our insurance partners over the next few months to quantify these losses.
I want to thank everyone associated with Sanderson farms and their work.
Over the past two weeks, while we have experienced managing through significant weather events and this one was unique.
Working with utility providers local authorities and the emergency management agencies and employee and contract poultry producers were able to mitigate what could have been a much worse and more significant impact on our operations and.
I'm very grateful for their efforts and extraordinarily difficult circumstances.
I'll turn now to our first fiscal quarter results, which reflect continuing challenges presented by the COVID-19, pandemic and higher feed cost.
However, we ended the quarter on a strong note and are.
We're optimistic about the future for many reasons and.
Including encouraging and market trends.
Demand from retail and grocery store customers remains strong and that strength is reflected an overall average chill pack prices that were higher and then during last year's first quarter.
Market prices for boneless breast meat sold a foodservice customers.
And under pressure during the first two months of the fiscal quarter prices improved in January and February.
Market prices for Jumbo wings, and chicken chicken tenders show relative strength throughout the quarter, reflecting both seasonal demand and the fact that those products are and relatively strong demand from food service customers with strong pickup and delivery platforms.
Cash market prices for both corn and soybean meal were higher during our first fiscal quarter compared to last year, our feed cost per pound of chicken processed were higher by a third of a cent per pound when compared to the first fiscal quarter of 2020.
Lower supply estimates and strong export demand has driven both corn and soybean market prices significantly higher since all of us.
<unk> estimated supply relative to demand and both corn and soybeans are very tight as we move into 2021 planning as.
As we said at our annual meeting last week, we are focused on several things that could affect markets as we move as we start fiscal 'twenty 2000.
21, and the upcoming South American harvest and the USDA March 31 planting intentions report along with of course chicken production numbers.
The SaaS American crop was late getting planted and the hot dry weather during the growing season affected the crop.
Pam and the arrival of Lake range stable as a Brazilian crop the harvest has been slow and by wet weather.
The USDA and a SaaS American production estimate steady and it's February and report and it's 2021 agricultural outlook Forum last week, the USDA estimated corn acres planted in the United States and.
And 2021 will be 92 million acres.
<unk> 90 per one 8 million last year.
And then acres planted and soybeans will be 90 million acres up $6 9 million acres from $83 1 million last year.
It's not unusual for the USDA to significantly ramp and revise its outlook before the March 31 planting intentions report so we will be watching for that report.
While we have priced most of our corn basis through July and.
Sure so and basis through the end of the fiscal year, we have priced none of our grain past March net.
Based on our comps through the first fiscal quarter and what we have priced so far when combined with prices, we could have locked in for the balance of the fiscal year at yesterday's close our grain costs for fiscal 2021 would be $325 $4 million.
And during fiscal 2020 based on 2020 volumes.
The USDA projected net our industry will produce one half of 1% more chicken during 2021 and last year.
And we'll compete with slightly more beef and pork as USDA estimates flow pork and beef will be up.
And at one 4%.
2021 compared to 2020.
According to USDA data pullet placements during calendar 2020 were 1% higher than 2019 and have been below year ago numbers for the past two months Inc.
Cash and Chick placements have trended lower during the past six weeks by one 5% compared to last year.
Looking ahead, we have many reasons to remain optimistic about fiscal 2021 first we are operating well and all areas and our business and our life production and processing Division and started the year and very strong positions.
Market prices for boneless breast meat produce and our processing and Ed.
Processing large birds from foodservice customers and improved significantly in January and continued to improve this month.
Much of that improvement to demand from quick serve foodservice restaurants, and promoting new chicken products and we believe foodservice demand will improve even more when consumers returned restaurants and greater numbers once the COVID-19 vaccines and more widely distributed and we move into the spring.
And summers warmer weather.
We also expect continued strong demand from our retail grocery store customers as American consumers continue to put many if not most of the meals at home.
Export demand has also strengthened and recent much due we believe to improved crude oil prices and favorable currency valuations and more liquidity.
As you May know I received a COVID-19 vaccine and January and February and our company is providing educational materials and training videos and explaining the importance of the vaccine and protecting the health of our employees and their families as more vaccines become available and we're hopeful that our EMS.
<unk> will be able to be vaccinated in the coming weeks and months.
50 of our workers is paramount and our ongoing success.
We're working with health care professionals, and appropriate government agencies, and the states and which we operate and make arrangements to vaccinate our employees on site at our locations. We were able this month to off of vaccines on site and our Mississippi locations to all employees over the age of 60.
Sure.
75% of those eligible accepted the vaccine.
Finally, our balance sheet is healthy our work force is strong our sales team is picked up several new customers over the past few months and we are continuing do Joe just on the site for our new folks and complex.
We are well positioned to continue executing our organic growth strategy and create value for all of our stakeholders, particularly as market conditions stabilize.
And just one I'll turn the call over to length and for a more detailed discussion of the chicken markets and our operations during the quarter.
Thank you Joe and good morning, everyone.
Overall realized prices for poultry products were higher.
868 cents per pound or 13% during the first fiscal quarter of 2021 compared to our first fiscal quarter of last year.
Overall average prices for <unk> products reflected good demand during the quarter and averaged $4 one per pound higher during the quarter compared to the first quarter of 2020.
Yes.
As a result of both price and mix improvements and chill pack prices were higher by $1.05 per pound sequentially again, as a result of both price and mix improvement.
Leg quarter prices during our first fiscal quarter average $23 <unk> per pound compared with $31.05 per pound last year.
And it'll numbers for calendar 2020 showed the volume of all broiler meat exported.
And was higher by five 2% compared to 2019.
The average quoted price for Jumbo wings was higher during our first fiscal quarter compared to last year and reflected both a good Super Bowl season, and the fact that wings and tenders remained very popular among foodservice customers.
And with significant takeout and delivery sales, which have done well during the pandemic quoted prices for jumbo wings averaged $2.16 per pound during our first quarter of this year compared to $1 61 per pound.
And during last year's worth of all sequentially boneless breast prices average $1 <unk> per pound during this year's first quarter compared to 92 per pound last year.
We saw $1 1 billion pounds of poker products during the first quarter essentially flat with the pounds sold during last year's first quarter. Our process pounds were down from $1 7 billion to $1, one 5 billion times.
That is three 5% higher than our guidance per pounds processed during the first quarter.
And as the number of head processed live weights and yields during the quarter were higher than our estimates.
And the process approximately $1 1 billion per ounce during our second fiscal quarter flat with the pounds processed during last year's second quarter we.
We expect to process approximately.
123 billion pounds, and in Q3, and $1 2 billion pounds and Q4 our.
Our second quarter estimate is subject to change as we work through the production issues and Texas and Mississippi.
And that's why the winter storm.
<unk> process. This week were heavier than our target live weights and birds exposed to extreme temperatures.
Experienced performance issues, if we make these targets production during fiscal 'twenty and 'twenty, one will be essentially flat with fiscal 'twenty and 'twenty production.
Prepared chicken sales were $39 1 million.
And down 12, four and $5 million or 24, 3%.
And $6 1 million fewer pounds sold.
Our average sales price per pound and prepared chicken was lower by $4.04 per pound or two 3%.
At this point I'll turn the call over to Mike to discuss our financial statements. Thank you lampkin.
Net sales for the quarter totaled $909 $3 million and that's up from $823 1 million during the same quarter last year.
Our net income of 42 per share during the quarter compares to a net loss of $1 76 per share during last year's first fiscal quarter.
Our cost and sales of poultry products from the three months ended January 31, as compared to the same three months a year ago increased three 4%.
This increase is a result, and an increase and the average cost of goods sold.
Non feed related Cogs were higher by $20 1 million or 251 cents per pound and this quarter compared to last year's first quarter.
Several factors contributed to this increase.
First lower than capacity volume impacted cost per pound.
We continue to operate our big bird plants below full capacity and will continue to do so until foodservice demand improves further.
And that improvement appears sustainable.
We lowered the target lab weighted our Haynesville force, Mississippi processing facility and our transport product from that plant to our tray pack plants and in order to meet demand from our retail grocery store customers.
Your lab weight increases both our last cost and processing cost of that plan and non feed related Cogs and haynesville.
Were higher by just over one half cent per pound as a result of the lower lab weights.
Labor cost across all of our processing facilities were up $6 $7 million from 79 cents per pound when compared to last year's first fiscal quarter.
Fixed costs were higher by $3 4 million or zero, three or four cents per pound as we began depreciating equipment upgrades installed last year.
Finally.
COVID-19 related expenses, both as cost of goods sold totaled $5 $3 million during the quarter compared to nothing last year.
Our feed cost per pound and poultry products processed were higher.
Higher at $26, three one cents per pound compared to $25 97 per pound last year.
While our cost per pound and poultry products sold were higher about 2424 cents per pound.
Our sales price per pound from poultry products increased 13% or $8 seven per pound compared to last year. This.
And this combination resulted and significantly higher operating margins. During this year's first fiscal quarter compared to the same quarter a year ago.
As Joe mentioned had we priced all of our grain needs at yesterday's quotes on the Chicago Board of trade, our grain cost and here in fiscal 2021 would be $325 $4 million higher and 2020.
Based on expected production these higher cost together with estimated basis costs would translate into feed cost per pound and poultry products processed.
31, eight <unk> per pound and Q2.
30, 337 cents per pound and Q3 and.
And $33 <unk> per pound gear, and our fourth fiscal quarter I'll stress again that we have not priced any of our grain needs past March. So these numbers are subject to change as the grain markets change.
SG&A expenses for the first fiscal quarter of 2021 seven.
$7 $1 million higher than the same three months a year ago.
One, 8% and higher than our estimates.
This increase compared to last year is the result of $6 2 million and COVID-19 related expenses and higher legal expenses offset by a reduction in travel and entertainment and slightly lower advertising and marketing and slightly lower <unk> expenses were.
And we remodeled and $58 million for SG&A in Q2, $59 million, and Q3 and $61 million and the fourth quarter.
These estimates include no accrual for a potential <unk> contribution or bonus awards.
We spent $36 $9 million on Capex during the first fiscal quarter.
And it improved $174 million and Capex for the full 2021 fiscal year.
The fiscal 2021 Capex budget currently includes $34 9 million for several large scale and equipment upgrades at our processing plants.
And $1 million to complete the new hatchery in Jones County, Mississippi.
$116 2 million from maintenance and $12 $4 million for rolling stock.
Our depreciation and amortization during the first quarter total reported $40 6 million and we expect approximately $172 million for the full fiscal year of 2021.
During the quarter, we also declared $9 8 million and dividends.
And Chuck that completes our prepared remarks, and you can open it up for questions.
Thank you we will now begin the question and answer session to ask a question and you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two and at this time, we will pause momentarily to assemble our roster.
Okay.
And the first question will come from Ben B and been venue excuse me with Stephens incorporated. Please go ahead.
Hey, good morning, everyone.
And then.
I wanted to start first on the feed side of the equation I thought your outlook for the $325 million higher a little bit better than the futures strip would suggest.
And in the quarter.
Looks like your your feed conversion ratio was quite a bit better than we were modeling.
I suspect some of that was maybe just a function of a biological lag of the feed work and its way through your system and I Wonder is there been any change to the feed ration mix kind of what's going on there and.
And is the $325 million outlook for grain, that's just a function of the basis, you've secured plus what the future strip looks like now for the grain embedded in your cost.
So let me let me do two or three things. If you look at the first quarter November December.
Those were berge that process.
Net.
Much cheaper corn.
And so and being mailed and priced in September and October at much lower prices.
Also performed exceptionally well they had great.
Great feed conversions.
I mean that.
And it's a good.
And then.
And grow chickens and.
And we didn't have any extraordinary weather events and.
And.
It was a normal grow out period for us.
Okay.
Our fate.
Our cost per ton and started going up and really and.
January and we will see the full impact and the second quarter.
We also had <unk>.
Cash start basis.
Through March.
And advice and started moving up.
And.
You know in December and we want and the good side and basis.
And we were wrong and good side of.
And.
Feed conversion.
Uh huh.
And.
You know, we went ahead and bought soy, but California and look to carry out on soy and you get down to 120.
Million bushels of solar and you don't know where that's going to be.
And is currently very difficult.
This summer and we think our soy processors.
To get that BARDA from farmers.
And our carryout on corn, and not nearly as tight engineered and onshore veins, but.
We will see the full impact of.
The higher.
Corn, and soy and second quarter right now, though the price.
Postal products.
And is taken care of that.
That higher feed cost.
And.
But second quarter.
And then.
We're not running and Texas were not running.
Our normal rash and right now we will be next week.
Back on our normal rash and next weekend and Texas.
Trying to get all of the farms filled up with feed right now so actually I believe we are running a single rack.
One ration or moving back on five bedroom, Okay, we know and it fade and five that we're back on fab.
And we ran one that for about 10 days.
And we're back on our regular rash and Charlotte.
We're going to have some.
Some performance issues and Texas for.
10 days and then they ought to get back to and this weather right now is a blessing follow and what we went through this 75 degree weather and.
And they will rejuvenate a little better I don't.
Did I answer your question Dan.
That's great. Thank you Joe.
And my second question is on also on the cost front, but on the non feed cost.
And you highlighted the increases for this quarter.
As we move through the year, what's your best outlook on how that might trend through the rest of the year.
And now if we go that path.
And if we stay at the at our rigs.
Reduced capacity ban I don't I think it's not going to change materially we'd been.
Getting a good many questions about free we.
And we don't anticipate our freight costs are going to go up significantly and the low single digits, maybe depending on.
Where we ultimately shipped the product of course, but we don't anticipate any issues there labor cost is going to be steady.
And then Joe just said, we take our plants back up to full volume.
And that will depend on what can we see at foodservice and free say foodservice picking up and.
We will definitely want and go back and that affects you twice and that'll affect you and plant costs and affect unit grower pay and the grower pay number and I'm on the life side is the big has been the big mover and.
And when we take the live weight down and Haynesville Hurst.
We continued to pay our growers as this day.
And we're growing big chickens, because you don't want to cut their pay and net net cost goes up and as long as we believe Haynesville force that way you're paying it all out of yours.
And because of the other people and go back to full production and growth.
And I will come back to normal.
Thank you Okay that makes sense understood. Thank you and best of luck. This spring.
Thank you.
The next question will come from Adam Samuelson with Goldman Sachs. Please go ahead.
Yes, Thank you and good morning, everyone.
Our net.
So I guess, maybe coming back to and you've talked about with and fonts to Ben.
With the poultry price taking care of the feed cost increase for the moment.
I mean, the movement and the cut out and perhaps mean and particularly as we're pretty.
Pretty remarkable for February over the last few weeks.
Trying to think about what kind of stigma and you think that's trending to the industry in terms of production.
And as had been fairly restrained over the course of the last three months to six months that had been had been down modestly pullet placements have been fairly under control, but with the cut out kind of at levels that normally we would be seeing and may and June.
With kind of a better from service demand potentially kind of still to come.
Think that there is we could be starting to see production and you back up or do you think the green costs, we'll we'll keep people restrained because of the working capital and <unk>.
Locations there thanks.
I don't know that tranche and any signals of anybody I'm, just giving you an opinion that centers from farms.
Okay.
And.
And.
It depends on what market segment share and.
And how the cost and.
Sales are affecting you.
It affects big bird, one way and affect retail one way and it depends on how much and.
And retail for example, it depends on how much of your product you have so what percentage you have sold.
Yeah.
And and right Paul.
You have.
$60, 55% to 60%.
Joe.
Customers. That's one thing if you had 35%.
Products sold out of your plant.
It's a totally different issue.
So that major shut and 65% and another for that show.
Not so good and.
And.
That doesn't work and so.
And then fast food is a totally different day.
<unk> and <unk>.
You know it.
And big bird to shine weighted and zone.
If you're flat price, if you went out and flat price.
And this year and a dollar or dollar and a nipple.
And now you're getting these great cash flow and 30 year your balance sheet tenure P&L.
Totally different ballgame for them.
And it depends on it's company specific.
And on your product mix.
And your cost per year.
Sure.
Profile.
And it's different for every company.
Okay.
Well point, well taken Joe and then maybe a follow up just thinking specifically about the wing market, which no were still coming just coming out of football season.
But there I mean prices at extremely high levels versus history and.
And had numbers at least from the next couple of months looks to be look to be fairly steady.
Any any thoughts there about how we should think about wings into the spring and.
If they can hold these levels or is there some relative to that to drift lower.
Yes, I would.
If you look back historically.
And you get sort of March madness, with exception of one year I recall I can't tell you what year it was.
And then you get through this past March madness.
And then and demand for Wang declines that was one summer and I don't remember when it was.
There was one summer that Wang state how for the summer.
And then and the last five years and I can't tell you what it was and then.
And they never and never declined and that year and.
This price level.
And like and obviously a lot of volume this way and then.
And the other items come into play where and at $2 50 as net ARPA.
256, So we'll probably go through March and pretty.
Pretty good shape and our.
Respect subsequent to that utilization.
And falls.
And.
But they.
And they're just so many new Wayne and customers out there.
And that's what everybody has waned on their menus.
And when the primary and when stores are.
Or are they owned and 100, new restaurants a year.
And then a lot of other people and Madam Wang and so their menu and weighted carrier.
Travel very well going through picked up and people that do well and was.
Pick up or delivery.
And so you've got all these ghost kitchens and don't do anything.
Haynesville produced wage.
And so it's.
That's what in my mind.
Posted just price.
More than normal.
But I would expect.
If you just look at historical patterns after March madness, and demand falls off.
Alright, great and I really appreciate that that color I'll pass it on and thank you.
Thank you.
The next question will come from Ken Goldman with Jpmorgan. Please go ahead.
Hi, good morning.
Joe I wanted to ask and it might be too early for this but.
Obviously.
We're personally not question, whether the company was affected by the headwinds.
Last week right in terms of affecting your boiler houses and so forth and ability to produce.
Yes.
Great.
And you should see I think as an industry some better pricing from this so I'm just curious how much do you expect.
And how long do you expect this to.
Increased prices for and B do you agree with that.
And that does.
And because it was should help your numbers at least for the next quarter or is that just too hard to say at this point.
Uh huh.
I don't think that's going to happen.
And the numbers.
And chicken numbers are good.
Because I think a couple of things are happening.
Uh huh.
And there is tons and quick serve restaurants running.
Chicken product features.
And I mean, there Oliver and I think theres going to be more tooth column.
And the Mcdonald's staying in zone now.
Wendy's Burger King and I don't remember who I.
And as test and jumped into it.
Our beef Taco Bell.
Taco Bell.
And theres more to come with this.
So I think that is.
I think that's number one.
And.
I think the increase and.
Hey.
Price and feed ingredients and.
As Mike Weil.
Putting some pressure on him.
Sorry.
That might not be and the right product mix and it might not be a strong operator.
That Mike.
Effect and some people.
Uh huh.
And now what.
I think if you take.
We don't know who all was affected like we were last week, we thank everybody and Texas, maybe everybody and Arkansas.
And Mississippi four.
Three or four days I can't well why don't we start run and Mac.
And Laurel one shift Thursday, and then Laurel and Macomb with both from a pool Friday Friday, and Saturday and then.
Saturday.
Mississippi was down et cetera.
As Joe.
And what's happening now though.
And you've got four to five days worth of Chicken and center back up so everybody. It was a run and every Saturday.
We ran this past Saturday to chef and everybody was back.
We're probably going to run another Saturday right behind everybody else it is too.
And so that's putting more product and the mark.
That is going to affect cash market negatively.
And we're probably and taken a Saturday out so we don't work on people too many strategies and growth.
I don't know if the others will and Walt.
But that is not and.
Short term that will affect the market.
We're not putting too much product and market sharp turn.
Long term you go out during the quarter, we don't have a clue.
This storm event.
And other people its day.
Definitely don't take some production out away from us.
And that will probably and it's 1%.
Don't know how that affected everybody else.
Understood. Thank you very much.
And thank you again.
The next question will come from Ken Zaslow with Bank of Montreal. Please go ahead.
Hey, good morning, everyone.
Good morning, and.
Joe Joe You said poultry prices are taking care of higher feed costs can you go into some detail on how that's actually working.
And just.
And just go there first.
I didn't understand what Ken this is Mike.
What he was he was making the observation that I made and.
That is that if you look at our first quarter.
Cost per pound were up $2.04 per pound, but prices were up eight seven per pound.
And we estimate that all in for the year, we had priced all of our grain yesterday, our grain costs will be up seven.
Well if you maintain this and this momentum and the chicken market. What Joe was saying was you can take care of that fee and.
And add to and like we did and the first.
And we're not predicting that because we don't predict chicken markets, but.
And right now and he is so.
Strong chicken market can easily offset these higher costs.
Look at $1.45 borrowers and.
Dollars 80, something tender and.
36 inch leg quarter and.
And 80 boneless family.
And I say it $2 Wayne.
And if it softens.
And that's and if right now.
That will.
And I don't work for us and as Joe pack.
The chill pack prices are up and we have some new customers coming on in March.
And so our mix and if you don't get even stronger and and what it is.
So.
<unk>.
So the higher wood cost.
It's not big enough to really offset the strength and your market. So that's basically what you're saying.
Yes.
That's right Kevin.
That's great.
Second question I had was you said that you are getting new customers can you talk about the parameters of that is that like a 1% increase is at a 5%. What are you. What are you looking for and these new customers and and how you're gaining them, obviously I don't want to talk too much about.
And trade secrets or anything like that but if you could give us some color on the strength of these new customers that'd be helpful.
And I have to chill pack and generally causes surge level somebody.
Probably not servicing them well.
Well and.
They actually came to US we are already servicing.
Uh huh.
Several of them there.
Distribution centers.
And doing a good job doing it and then they offer and it.
And how many is and I'm in new England.
Well for new houses or new average and one.
And my son, and 100 million pounds, which is about 10%.
Okay.
Yes, So you show with 274 million pounds and.
And just typically.
Our service levels were not.
That's normally what happens.
If they know us and you.
And taking good care of them.
And and.
And that's normal.
How that comes about.
Okay and then just.
One last question is on the export market.
And you said, a laser and 36 cents per.
How is that developing and can you talk about.
We're seeing that market develop what are your volumes, what do you see the industry volume and Where's this going to go over the next six to 12 months.
Candidly the export market is surprisingly strong right now.
And of course, we have.
We have a window, we see end of March and April I can't see beyond that but from a number of reasons. When you look at March and April.
It's going up and prices are going up.
November we were and the early twenties.
And.
We moved up.
And well above that and going into March and April.
Yes.
Some things that have happened and the <unk>.
Storage inventories are.
And are in good shape and support pricing.
Total number was down from January was down from December down from a year ago and that's the total and also linked quarter number.
Cuba has gotten back in the market and a big way from.
Somewhere I don't know, how and that they've got plenty of cash and there are there and the.
Market and a big way.
And Golar is buying more and of course, that's tied to the price of oil.
Value of the dollar works.
Supports exports right now and Mexico and demand from Mexico is still good and.
And now some of these countries.
And there's a little better because we're recovering from the coronavirus. So we're bullish on exports right now.
And people just go away right now, we believe and I suppose it's going be higher than March.
Okay.
And similar for Braskem and I'm, assuming two rate. There's no reason that you wouldn't think that breast meat wood.
Continue to go higher through the summer at the very least right.
Through the summer, but I think that's realistic with all in with the <unk>.
Number of chicken sandwich has been marketed.
Sounds great Hey, Thanks, a lot guys and stay safe.
Thank you Ken.
Yes.
The next question will come from Vince <unk> with Barclays. Please go ahead.
Hey, good morning, guys.
Good morning.
So just quickly on the on the export side.
So there was news out.
And your administration continues to be very.
Demanding from the Chinese side to deliver on the phase one.
And <unk>.
What do you see on the export side to China, and how is demand here because I remember in the past you usually give some commentary on shipments over to China, and just to understand a little bit.
And some additional tailwind that might be coming as they have to fulfill what is part of phase one.
You know what we see from China is still very good.
We are we have not seen any indicate and we hear the.
We hear the.
Stuff and the news about the new administration and the relationship with China and.
So we're always sort of looking over our shoulder, but right now and our orders and our business there are normal.
And it is a problem in China now and it has to do with product is very slow getting into the country.
Because we're inspecting everything and they have and inspection system inspect and packaging for the coronavirus and its just.
Got containers back up and Scott Freezers, full, but it's that inspection and and not not demand and at least at this point.
Okay perfect. Thank you very much and then one more question can you elaborate a little bit what was behind that I think you've mentioned, 12% or something like that.
Higher SG&A versus wood you were initially guiding.
Look back from last quarter, you were actually guiding for each of the following quarters, a little lower level. So what's been driving it up as COVID-19 costs is it legal costs and that's not all seasonality you plan to travel what's what's the composition.
During the quarter, it was legal cost and and compared of course to last year's first quarter, you had no COVID-19 expenses versus our estimate just my bad.
Underestimated a couple of things and our estimate that we gave you in December.
And we're comfortable with the guidance that we've given you for the balance of the year.
Okay perfect well, thank you very much and Congress on the results.
The next question will come from Peter Galbo with Bank of America. Please go ahead.
Joe Lampkin and Mike Good morning, Thank you for taking the questions.
You bet.
Hi.
Joe I just wanted to ask on the retail side of the business.
3% kind of pricing growth year over year, just whether or not that's a good yardstick kind of use for the rest of the year given how those those are.
No.
Contracts are set.
Or maybe if there's even some upside if you were going to be taking on incremental business and and maybe improving the mix a little bit more.
The improved mix there would be that day.
It will be and of course yeah.
Uh huh.
And your price will go up.
Okay.
And you get in.
And what is that.
He is saying and the.
20, and first quarter of 'twenty, we were up.
What was it.
And that was mix and price can we expect that going forward.
And I don't know, how much I can't quantify that and others.
It'll go up Scott go up.
One thing is mix and.
And.
Another thing is we've been able as we've renegotiated new contracts, we've been able to.
Just from price increases, yes, that'll happen out here and the ear Jones contracts mature.
Okay.
I would expect at the end of the year.
And at the end of the year.
You'll see.
Price improvements from <unk>.
And.
And promo and from prices on individual items until late.
Uh huh.
Uh huh.
And our contracts are.
They don't all expire in January there.
January.
February and March may shop, and the.
Fall and.
And.
You'll get some price improvement.
Oh, Dear and the ear and.
And then when we bring on this new business in March.
Ah you're your mix will improve.
And so yoga and immediate kick out of that.
The other thing and.
And it's happening and I've tried this.
And on an individual basis.
We are mix is.
At the point, where we cannot support.
A lot of activity.
A high percentage of our tray pack show.
And we cannot support a lot of activity.
And.
So.
Normally we would if we were long bonus.
Instead of what we would normally sell.
Boneless or would be.
And I say.
$2 25, a pound, but when you go and I and you might shut at $4 55, a pound.
And 65, a pound on and off 75 pound, where they can run it for $1 90 net.
Well, we can't do that wood.
Cash we can't.
Joe features or right now.
Drumsticks and fast.
And that you might be selling for 85 cents per pound and no and I E.
Mike.
Does that 455, such where they can run them for 69.
We're not able to do that.
Okay and back to you.
Pricing.
Right right no that that that makes sense that makes sense and I guess just on the on the foodservice side, Joe I'm listening to some of your big customers they've talked about and in markets that are fully opened right.
And the south like Florida.
We're actually seeing growth on a year over year basis, maybe some of that is pent up demand.
Just curious if you're seeing that as well or.
And with the growth is it is it and independent of our people shifting for going out for the first time, they're ordering depot for chicken just help us understand kind of that dynamic and the independent channel.
Way before the snow and ice.
And you know we have a lot of.
A lot of foodservice and.
Madness and Texas.
Some and Arkansas.
Prior to the snow and ice.
We thought we were seeing a little bit of improvement.
And and.
And with volume and we are a little bit.
And then of course.
There was zero and.
And does and Michelle and wait.
And and.
In North, Louisiana, and Arkansas and Texas.
So we've kind of lost track of all that right now.
But we thought we were seeing a little bit of increase there is another thing.
And I'll give you a.
If you look at.
We look every day at the.
And number of ACH and teas and our plants.
And the Ah <unk> and a number of cases.
Covid related and absent plays and our plants and the states where we operate.
And you're on your part.
And on the news every day.
The number of cases nationwide.
All of those have been planning.
Four.
Past two weeks and our clients.
And as a matter of fact, and our plants are half from what they were and December.
And instead of having five or six or 700 people out.
Losses from Covid or college day, we're in close contact a member of their household.
Had COVID-19.
And that's under 300.
Like what it might be back in August or September.
Okay.
Cut in half and we don't have an explanation for that.
Wasn't the article and the Wall Street Journal and the last two or three days.
Uh huh.
About why perhaps.
But we know we can look at our numbers and in China that is affecting our standard.
If that is nationwide.
We're getting closer to the end.
And I'm not sure it's a resurgence because of these.
New variants.
But.
We were creeping back up a little bit.
Not back to not reach pandemic level, but improving yeah.
Got it okay. Thank you very much guidance.
Peter.
The next question will come from Michael Pike, and with Cleveland Research. Please go ahead.
Yes, hi.
Just wanted to touch based on first I know you guys talked about optimism towards some of the full service restaurants, and you've given in the past kind of day order pace of yes.
Some of those full service distributors and just wondering how that's trended and Mike December January and February.
What's the question right and it was and proven to Joe's point, who was improvement until last week last week was really really bad.
And it was half glass full yeah, some of our distributors were literally down 50%.
Compared to pre Covid.
Good day, and we're going to see as compared to last and if.
And if you could go back.
More than that compared to pre COVID-19.
If you look at.
And you look.
And maybe we could January 30th for example orders were flat with the year wood.
And with pre Covid.
There were seven 6% lower than next week last week, they were 50% lower because nobody could they couldn't get the product if they wanted it.
But some metal but it is cash.
And in the middle and the Black and good morning, and yes, but that's jetro, yeah, well do a lot of grocery stores restaurants, and others, yeah and they've been.
And they are up and the northeast and on the West coast, they're not in Texas and.
Oh yeah.
Okay. Yeah. That's helpful. And then I have another question just on the labor front.
I guess with your number plant absenteeism down does that mean youre able to produce as much to bone dark meat as you would like to at this point and how much do you think that's helping the leg quarter market versus the exports.
Yeah, I believe we're pretty much.
Everywhere, we have a plant or two and running high absent Ts not related to COVID-19.
Yes.
Yes.
We're having some having to do some hiring and Vance.
Uh huh.
But it's not related to COVID-19.
But we're day boning, and the dark meat and pretty much.
All we want to.
We have one shift and.
And our plants, it's a little short handed and.
But other than that.
We're fine and we're staffed pretty well everywhere.
Perfect and then I guess second part of the question was how much do you think that being able to sell that it's helping the leg quarter market versus just the improvement and exports.
I think substantially yes.
Yes.
Yes.
Okay. Thanks.
Thanks, Mike.
This concludes our question and answer session I would like to turn the conference back over to Joe Sanderson for any closing remarks. Please go ahead Sir.
Thank you. Thank you for spending time with us this morning, and well and Florida reporting ourself used throughout the year.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Okay.
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