Sanderson Farms (SAFM), the third largest chicken producer in the U.S., is detailing the toll a recent winter storm had on its facilities and poultry in the south. In its Q1 FY2021 10-Q, Sanderson revealed it lost approximately 1.6 million chicks and chickens as a result of the storm:

“We lost 455,000 broilers in houses that either lost water, power or feed, or collapsed under the weight of snow and ice. Because the hazardous road conditions prevented us from delivering day old chicks to broiler farms on our regular schedule, we were forced to humanely euthanize 545,000 chicks in our Texas hatcheries. We also were unable to pick up and place approximately 703,000 hatching eggs in our hatcheries on our normal schedule.”

The loss is approximately 1% of the chickens Sanderson had expected to process in the second quarter. The loss is relatively small compared to the overall annual broiler population of 9 billion. However, reduced supply comes just as demand is rising domestically and in export markets:

Domestic

“We believe the most recent improvement in the quoted market price is attributable, at least in part, to an increase in demand from quick-service restaurant chains that are featuring or planning to feature chicken products on their menus.”

Sanderson attributes domestic demand to pandemic related government restrictions being lifted and an increase in the number of people vaccinated against Covid-19.

Export Markets

“During the first two months of fiscal 2021, demand and pricing for products typically sold for export, such as leg quarters and drumsticks, remained soft; however, demand and pricing for those products improved significantly beginning in January 2021 and continuing into February.”

Sanderson cites higher crude oil prices and a weaker U.S. dollar which makes chicken cheaper to purchase in export markets.

As producers ramp production to meet demand, Sanderson suggests higher feed costs may pressure margins:

“Unfavorable growing conditions and weather events in certain areas of the United States during the late summer and fall of 2020 caused corn and soybean production in the United States to fall below levels that were originally estimated by the United States Department of Agriculture and other industry analysts. The production shortfall, combined with significant export demand, have contributed to current market prices for feed grains that are significantly higher than prices paid by the Company during fiscal 2020.”