Construction of new poultry complexes has been central to Sanderson Farms’ growth strategy during recent years. However, current steel prices can be a deterrent to construction of new facilities, CEO Joe F. Sanderson Jr. said.
Speaking during the 2019 Baird Global Consumer, Technology & Services Conference on June 5, Sanderson was asked about the potential of new plant construction.
While the company does want to build a new plant, Sanderson said now is not the right time.
“You don’t want to do something right now because there is a tariff on steel coming into the country. Steel prices are high, and when you build a plant or hatchery, a feed mill has a lot of steel in it,” he said. “So it’s not a good time to site a plant today.”
‘Time to move back east’
Sanderson Farms’ newest plant is still ramping up production. The facility in Tyler, Texas, will reach 50 percent production before June is over, Sanderson said.
While Texas has served the company well, Sanderson added, “We just did Texas. It’s time to move back east.”
The Carolinas offer ideal locations because they offer the “best shot up the northeast corridor,” but one challenge of finding new sites is making sure there is an ample labor force. Because of the labor situation and the steel prices, it would be wise to not move with haste, he said.
“We are in no rush. I’m not going to make a mistake. We’ll be patient and while I’m ready and our balance sheet says go do it, we’re not going to force it when you can’t find that right place,” said Sanderson. “It will happen, but you can’t find it today.”
ASF and new poultry plant construction
Sanderson Farms also addressed new plant construction on May 30 during its quarterly earnings call. When asked if a global protein shortage due to the African swine fever (ASF) outbreak in China would warrant building a new poultry plant to fill that void, company leaders said it wouldn’t.
“You wouldn’t build a new plant because of a temporary issue with the export markets,” Sanderson Farms Chief Financial Officer Mike Cockrell said. “By the time we find a site and get it built, ASF may be in the rear-view window.”
