Value Discipline: Sanderson Farms Announces New Capital Project

Value Discipline

A celebration of value thinking, a salute to common sense and straightforward logic. I hope to explore the logic of Wall Street recommendations in a value context. Many of these ideas are employed in my portfolios and those of my family, friends, and clients. Please bear in mind that ALL ideas, opinions, and/or forecasts are for informational or entertainment value ONLY and should NOT be construed as a recommendation to invest, trade, or speculate in the stock market.

Thursday, January 12, 2006

Sanderson Farms Announces New Capital Project

Sanderson (SAFM) announced today that it is building a large new Texas facility for big bird de-boning. The capacity is quite large, 1.2 million birds per week.

The end markets for big bird deboning (makes Sesame Street fans shudder!) is retail and food service. The dark meat is sold as frozen leg quarters for the export markets. White meat is sold as higher margin deboned breast meat and whole or cut chicken wings.

At this point, the firm has 2.35 million head per week of big bird deboning capacity, consequently a 50% capacity addition.

Obviously, the firm is less concerned about the chicken cycle than the Wall Street consensus.