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Edited Transcript of SAFM earnings conference call or presentation 28-May-20 3:00pm GMT

Q2 2020 Sanderson Farms Inc Earnings Call

LAUREL Jun 7, 2020 (Thomson StreetEvents) -- Edited Transcript of Sanderson Farms Inc earnings conference call or presentation Thursday, May 28, 2020 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* D. Michael Cockrell

Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director

* Joe F. Sanderson

Sanderson Farms, Inc. - Chairman & CEO

* Lampkin Butts

Sanderson Farms, Inc. - President & Director

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Conference Call Participants

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* Adam L. Samuelson

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Benjamin M. Theurer

Barclays Bank PLC, Research Division - Head of the Mexico Equity Research & Director

* Benjamin Shelton Bienvenu

Stephens Inc., Research Division - MD

* Heather Lynn Jones

Heather Jones Research LLC - Founder

* Jacob Samuel Nivasch

Crédit Suisse AG, Research Division - Research Analyst

* Kenneth B. Goldman

JP Morgan Chase & Co, Research Division - Senior Analyst

* Kenneth Bryan Zaslow

BMO Capital Markets Equity Research - MD of Food & Agribusiness Research and Food & Beverage Analyst

* Michael Leith Piken

Cleveland Research Company - Equity Analyst

* Peter Thomas Galbo

BofA Merrill Lynch, Research Division - Associate

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Presentation

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Operator [1]

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Good day. And welcome to the Sanderson Farms, Inc. Second 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.

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [2]

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Thank you. Good morning. And welcome to Sanderson Farms second quarter conference call. We published second quarter results this morning announcing net income of $6.1 million or $0.28 per share for our second fiscal quarter of 2020. This compares to net income of $40.6 million or $1.83 per share during last year's second quarter. Results for the quarter include the recognition of a $37.4 million net discrete income tax benefit related to the net operating loss carryback provisions of the CARES Act. Excluding this item, our net loss for the second fiscal quarter of 2020 was $3.1 million -- $31.3 million or $1.43 per share.

Before we begin, I will ask Mike to give the cautionary statement regarding forward-looking statements.

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [3]

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Thank you, Joe. And good morning to everyone. This morning's call will contain forward-looking statements about the business, financial condition and prospects of the company. The 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 most recent annual report on Form 10-K, our quarterly report on Form 10-Q filed this morning with the SEC and also in our press release that we published this morning. These documents are available on our website at sandersonfarms.com. You should not place undue reliance on forward-looking statements we make this morning. Each statement speaks only as of today, and we might not update or revise our forward-looking statements. External factors affecting our business such as feed grain costs, market prices for poultry meat, the health of the economy and, of course, the COVID-19 pandemic, among others, remain highly uncertain and volatile, and our view today might be very different from our view a few days from now.

As stated in our 10-Q this morning, the risks and uncertainties for our business created by the COVID-19 pandemic including continued or worsening absentee rates at our facilities, labor shortages, the possible closure of 1 or more of our facilities, and inability of our contract producers to manage their flocks, supply chain disruptions for feed grains, further changes in customer orders due to shifting consumer patterns, disruptions in logistics and the distribution change for our products, liquidity challenges, and a continuing or worsening decline in global commercial activity, among others.

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [4]

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Thank you, Mike. I would like to start, as I did on April 2 -- on our April 2 call by saying how especially proud I am of our employees, our contract producers and our customers and vendors and the communities and states in which we operate for their hard work, dedication and perseverance during this unprecedented crisis. Our employees and contract producers are coming to work every day to support our ability to produce and deliver safe, high-quality and affordable chicken products for consumers and our customers. Like all of us, they are dealing with uncertainty and anxiety, but they are coming to work. I'm very grateful for that. We're also grateful for all of the health care professionals, first responders and others on the front line of this crisis who are working tirelessly to protect public health. We express our sympathy to those who have been affected by COVID-19, including our employees and their families. I summarized for you on April 2 some of the actions we have taken in light of the current crisis to protect the health, safety and welfare of our employees, and I refer you back to those. We have provided more information about our actions in our 10-Q filed this morning. Those steps, which we developed and implemented using the Center for Disease Control guidelines and in consultation with local and state health authorities and experts in the field of infectious disease have evolved and will continue to evolve as we learn more about this virus and how to prevent its spread.

Our approach has been conservative, deliberate and based on the advice of medical professionals. We will continue to do everything possible to protect the health, safety and welfare of our employees, and that will remain our top priority as we navigate and manage through this pandemic. Our financial and operating results for the second quarter of fiscal 2020 reflect the impact of the extraordinary challenges caused by the COVID-19 pandemic. The unprecedented social and economic impact of the virus and the related government actions to contain the spread materially affected our business, including our labor force, our sales, operations and production levels. The volatility caused by this event is probably best illustrated by the range of market prices this spring for boneless breast meat produced at our plants that target food service customers. Quoted market prices for boneless breast meat moved seasonally higher in late February and reached to $1.35 per pound during the fourth week of March. Less than 1 month later, the quoted market price was at a historic low of $0.74 per pound with some realized prices below $0.50 per pound. However, prices trended higher at the end of April as certain parts of the country began to relax restrictions put in place to mitigate the spread of the virus and as red meat production came under pressure. That trend continued into May and the quoted market price for boneless breast reached to $1.58 per pound in mid-May. Then, as distributors and foodservice establishments refilled their inventories, prices moved lower again.

The current quoted market price for boneless breast today is $1.31 per pound. Our average sales price per pound of fresh and frozen poultry decreased 8.3% during the second quarter of this fiscal year compared to the same period last year and was lower by 2.5% through the first half of this fiscal year compared to the first half of last year. Demand for our products shifted among our customer base during the quarter, as orders from food service customers declined dramatically due to shelter-at-home orders and widespread closures of restaurants and other venues where food is consumed away from home. At the same time, orders from our retail grocery store customers surged. We were able to shift production from our food service program into our retail program to some extent, and overall, we processed 4.2% fewer pounds during the quarter than we expected to produce when we announced our first quarter results on February 27.

Moving into our third fiscal quarter, we have reduced egg sets relative to our expectations, and we now expect to produce 5.9% fewer pounds during our third fiscal quarter than we projected in February as we shift production into our retail grocery store program and reduced production levels at our plants to process a larger bird for foodservice customers. Market prices for tray pack products sold at retail grocery store customers were steady during the quarter. But the surge in demand from our retail grocery store customers improved our product mix and volume. Realized prices for tray pack products improved just over $0.005 per pound sequentially. And we're up year-to-date just under $0.005 per pound compared to last year.

Export markets were soft during the quarter with the exception of China, and for much of the quarter, Mexico. Many of our regular export partners simply don't have the liquidity to purchase product. Now with the price of oil at historic lows, countries that depend on the oil markets to fund their economies can't afford to buy chicken. While volumes in China were strong during the quarter, China has little competition in the world market. So they have been able to buy product for relatively low prices. We have been discussing for 18 months the impact African swine fever might have on Chinese demand for protein, and that demand has materialized. Orders for products other than chicken paws have softened during May as Chinese consumers have been slow to return to restaurants and as the pipelines have been filled.

Prices paid for corn increased slightly during the quarter compared to last year, while soybean meal prices were lower during the quarter. The USDA updated its 2019-2020 grain balance sheets and published its first look at projected 2020-2021 crop balance sheets on May 12. That report confirmed the United States and the world have adequate supplies of feed grade. The 2019-2020 corn balance sheet remains quite healthy as the pandemic has negatively affected demand for grain, especially for corn used for ethanol. Estimated carryovers for the next year -- for this year remain above 2 billion bushels. For next year, the USDA assumed trend yields combined with 89.6 million harvested acres to get to an ending stock projection of 3.3 billion bushels at the end of 2021 marketing year. Soybeans are also well supplied. The ending stock estimate for 2019-2020 was close to trade estimates at almost 580 million bushels and that represents a near 15% stock-to-use ratio. For the 2020-2021 year, the stock-to-use ratio falls to 9.4%. But with 405 million bushel to carry into the next year, the soybean balance sheet is healthy. At the end of the day, of course, estimates for 2020-2021 do not mean much today. Weather, trade issues, the length of COVID-related economic slowdowns and other wildcards will affect these estimates in significant ways. The WASDE report was constructive, and absent the weather event this summer, we believe we will have an opportunity to price grain at levels below a year ago. So we remain patient. Given where futures prices closed yesterday on Chicago Board of Trade, had we priced our remaining needs through the end of the fiscal year at yesterday's close, cash corn and soybean meal prices during fiscal 2020 would be $49.1 million lower than a year ago. These numbers do not include the additional volume of grain we will need to purchase this year to feed the additional chickens we have on the ground in Tyler. These lower costs would translate into a decrease in feed cost of $0.69 per pound of chicken processed for the year compared to fiscal 2019. Feed cost per pound of chicken processed through the first half of the year averaged $0.2555 per pound. Had we priced our remaining needs yesterday, feed cost per pound would be approximately $0.2366 per pound in Q3 and $0.2325 per pound in Q4. In addition to our costs, we will be closely watching the chicken markets and production numbers. Weekly egg sets as reported by the USDA have trended significantly lower in recent weeks in response to demand destruction, particularly from foodservice customers caused by the COVID-19 crisis. Chick placement and hatch rates have also trended materially lower. We will continue to do our best to balance our supply with customers' demand.

Looking forward to the second half of the year, I continue to believe grain costs will be lower absent an unfavorable weather event. But chicken markets could be more volatile than we have ever seen. On one hand, we expect retail tray pack demand to remain strong as the country slowly recovers. Government restrictions imposed to control the spread of COVID-19 forced consumers to eat at home and caused the material shift in the way they spend food dollars. In addition, our experience in 2008 taught us that consumers cook more at home and eat out less during a recession and periods of high unemployment. So while quarantine restrictions force them feed at home, the shift could continue for some time as they choose to eat at home if the predictive recession materializes post COVID. On the other hand, the challenges to pork and beef production are well-known and at least over the short term, chicken will benefit from higher price and lower supplies of red meat in both retail grocery store market and the food service market. All that said, we cannot predict demand from our food service customers through the summer. Like many of you, we spent a lot of time reading and learning about what the post COVID foodservice world might look like. But this time, we don't know. Unfortunately, many family-owned restaurants and small chain concepts will not survive the pandemic. Exactly what the inventory of food service establishments will be over the short-term and medium-term is anyone's guess. Although in the long-term, I am confident American consumers will want to return to restaurants when it's safe to do so. Indeed, one recent survey found that 49% of Americans said going out to eat is the one thing they are most looking forward to following the pandemic, more than hanging out with family and friends. Among other questions that remain unanswerable at this time or how long it will take for the restaurant industry to recover and reveal and how long it will take consumers to become financially able and emotionally willing to return to crowded restaurants.

Following the Great Recession in 2008, it took several years for spending on food away from home to return to pre-recession level. As I described earlier, we have shifted and reduced production to at least the end of the fiscal year to reflect current market reality. However, our management team and Board of Directors will be very deliberate and measured as we consider any long-term structural changes to our product mix. One thing I can say for sure, however, is that our growth strategy hasn't changed. We will continue to grow the company. Exactly how that will look and what mix of products and markets we target might be different than what we were thinking 4 months ago, but we will grow the company. I'm pleased with first year's operations in Tyler, Texas. The successful start-up reflects the success of our training program, which prepares young managers to run new operations. Those young managers most likely didn't expect to be managing through a pandemic, but like the managers at our other operations, they have done very well. At this point, I'll turn the call over to Lampkin for a more detailed discussion of the market and our operations during the second quarter.

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Lampkin Butts, Sanderson Farms, Inc. - President & Director [5]

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Thank you, Joe. And good morning, everyone. As Joe mentioned, overall market prices for poultry products were lower during the quarter when compared to our second quarter last year. Realized prices for chicken products sold through retail grocery store customers increased on mix improvements compared to last year's second quarter as a result of the surge in demand from those customers. Realized tray pack pricing during the second quarter was flat compared to last year's second quarter, but was higher by over $0.005 per pound sequentially. Bulk leg quarter prices were lower for the quarter compared to last year's second quarter, averaging $0.314 per pound during our second quarter this year compared to $0.34 per pound last year. As Joe mentioned, export demand, with the exception of demand from China, has been under pressure as other countries deal with the pandemic, significantly lower oil prices and currency values. We began shipping to China in December after the poultry ban in China was lifted and have continued to ship heavy volume. Unit orders are expected to move lower as China seems to have refilled its pipeline, and consumer demand is still being impacted by restaurant closures and reduced consumer demand as they reopen their economy in China. Market prices for jumbo wings were also lower during our second fiscal quarter than last year's second quarter. Jumbo wings averaged $1.40 per pound. That's down 23.1% from the average of $1.82 per pound during last year's second quarter. As with boneless breast prices, demand and Urner Barry quote for jumbo wings trended higher in late April and into May as COVID-19-related restrictions began to ease. The current Urner Barry quote for jumbo wings is $1.58 per pound. Also, as Joe mentioned, the market price for boneless breast during our second quarter best demonstrates the volatility of this market. Our second quarter started on February 1 with a boneless quote of $0.87 per pound. By mid-March, the price was $1.35 before falling to a record low of $0.74 per pound on April 13. Prices then moved higher in late April and continued that trend in May.

Today, the Urner Barry quote for jumbo boneless is $1.31 per pound. Overall, market prices were lower on average by 18.2% when compared to the second quarter a year ago. The overall result of these market price changes was a decrease of $0.617 per pound, and our average sales price per pound of chicken sold compared to last year's second quarter. We sold 1.18 billion pounds of fresh and frozen poultry during the second quarter, an increase from the 1.051 billion pounds sold during last year's second quarter. We processed 1.181 billion pounds of dressed poultry during the quarter, up 9% from the 1.084 billion pounds we processed during last year's second quarter, but 52.3 million fewer pounds than we estimated in February. 41% of the pounds were processed at our tray pack plants, 59% at our big bird plants. We now expect to process approximately 4.783 billion pounds of fresh chicken this fiscal year, an increase of approximately 3.7% and compared to fiscal 2019, but 182 million fewer pounds than we previously expected and announced in February. We estimate we will process approximately 1.212 billion pounds in our third fiscal quarter and approximately 1.216 billion pounds during our fourth fiscal quarter. These estimates reflects our reductions in egg sets and the shift of live birds from our big bird program to our tray pack program and are all lower than our February estimates. The mix of pounds between our big bird and tray pack plants could shift depending on demand. Weather, bird performance and other factors could affect these estimates. We sold 48 million pounds of processed chicken at our prepared chicken plant through the first half of this year compared to 64.7 million pounds through the first half of last year. The average sales price through the first half of the year was higher by 1.7% compared to last year. Demand from our food service customers for prepared chicken was significantly affected by the pandemic in March and April, and we had several weeks when the plants operated only a few days. Orders have since improved as states have opened up, especially from customers with drive-through capability. And with those and orders from new customers, orders in May moved back to pre-COVID-19 levels.

At this point, I'll turn the call over to Mike.

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [6]

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Thank you, Lampkin. Net sales for the quarter of $844.7 million were flat with $845.2 million last year. And the slight change was the result of an increase in pounds sold offset by the lower selling price. The $91.5 million increase in our cost of sales during the quarter ended April 30 as compared to the same 3 months in fiscal 2019 is the result of higher nonfeed-related cost of goods sold and an increase in poultry pounds sold of 128.4 million pounds or 12.3%, partially offset by slightly lower feed cost per pound. Nonfeed-related COGS during Q2 were $0.429 per processed pound, $0.024 per pound or 6.1% higher than last year's second fiscal quarter. Labor costs made up most of that increase in nonfeed-related COGS. Recall that we increased hourly wages by $1 an hour across the board last June, which cost 88 points during the quarter compared to last year. And we increased hourly wages by another $0.45 per hour effective January 1, which cost an additional 34 points during the quarter compared to last year.

Together, COVID-related costs for the attendance bonus and quarantine pay cost 29 points during the quarter. The balance of the increase in nonfeed-related cost of goods includes increases in packaging, fixed costs and chick costs. We spent $8.4 million on direct COVID-related expenses during the second fiscal quarter. Of that total, $4.9 million is included in COGS and $3.5 million in SG&A. Cost of sales included $1.9 million for the attendance bonuses and $1.3 million on items and services such as masks, face shields, break dividers in break rooms, dividers in the processing plant, outdoor break areas, thermometers, temporary nurses and hand sanitation stations.

The SG&A includes the balance of the weekly deep cleaning sanitation efforts at all of our facilities as well as the purchase of some additional masks and other miscellaneous items. Looking ahead, we expect most of these additional expenses to continue at least through the end of the fiscal year. The attendance bonus is set to expire June 26 unless extended. That expense is approximately $1.7 million per month. We will also continue to provide PPE to our employees, and we'll continue deep cleaning all of our facilities each week, and we'll continue efforts to encourage social distancing at all of our facilities. We estimate these expenses will be approximately $14 million each during Q3 and Q4. And that assumes we continue everything we're doing today through the end of the fiscal year. Some COVID-related expenses are likely permanent as steps taken to protect the health, safety and welfare of our employees become best practice, masks and face shields, for example, protect not only against the COVID virus but against the common cold, the seasonal flu and other airborne viruses. The other significant COVID-related expenses relate to inefficiencies at our big bird plants caused by reduced volume and higher than normal absenteeism rates and over time at facilities that have run on weekends. We processed 73.6 million fewer pounds at our big bird plants during the second quarter compared to our expectations.

In addition, we reduced volume at Moultrie, Georgia facility for a period of time to manage high absenteeism at that facility, which impacted both volume and mix. We estimate these inefficiencies impacted nonfeed-related COGS $0.0144 per pound during the quarter. Relative to our expectations, we expect to process 80.7 million fewer big bird plant -- pounds during the third fiscal quarter than previously expected and 55.5 million fewer pounds at those plants during Q4. The reduced volumes will increase plant COGS at those plants, resulting in an increase in nonfeed-related COGS of $0.015 per pound on all pounds. The $7 million increase in SG&A expenses for the second fiscal quarter compared to last year reflect higher legal fees attributable primarily to litigation, higher administrative salaries and $3.5 million in COVID-related expenses. The COVID-related expenses booked to SG&A include the deep cleaning of all of our facilities on weekends. We expect SG&A of $57 million in Q3, and we're modeling $60 million in Q4. Based on where we are today, management does not believe it is probable the company will meet the $12.3 earnings per share target to reach the threshold requirement under the company's bonus award program and our estimates for Q3 and Q4 include no accruals for bonuses or the ESOP. The Coronavirus Aid, Relief, and Economic Security, or CARES Act, was enacted on March 27, 2020. Applicable generally accepted accounting principles require the effect from changes in tax law to be recognized in the period in which the new law is enacted, which for us is our second fiscal quarter. The most significant provision of the act that will affect us is a provision that created a 5-year carryback allowance for taxable net operating losses generated in tax years 2018 through 2020. While we were profitable during fiscal 2018 and 2019, we generated taxable operating losses as a result of being able to take advantage of accelerated depreciation rules applicable to our new facilities and other assets, including used during that period. The net benefit of this provision of $37.4 million was recognized during the quarter. We will apply for an accelerated refund and expect to receive a refund of approximately $84 million before the end of the fiscal year. This will further enhance our liquidity. Excluding this onetime discrete tax benefit, our effective tax rate during the quarter and the 6 months ended April 30, 2020, was 30.2% and 26.9%, respectively.

Our balance sheet and liquidity position are very strong. We ended the second fiscal quarter with $200 million drawn on our revolver and $61.3 million in cash. Our net debt-to-cap was 9.2%, and our total debt-to-cap was 12.7%. We had $776.9 million available to us under the revolver, and we are very comfortable with our balance sheet and the liquidity we have and believe that both are available to navigate us through this crisis. We now expect to spend approximately $216.8 million on CapEx during 2020. Of this total, we expect to spend $15 million to build new hatchery in Mississippi, $41.5 million on equipment upgrades, $11.5 million on trucks and trailers that in prior years would have been leased. The balance of $148.8 million is for regular maintenance. We intend to use cash on hand and cash flows from operations to fund our CapEx budget. Our depreciation and amortization during the first half of the fiscal year totaled $75.5 million, and we expect approximately $155 million for the full year. I do want to mention that Sanderson Farms has scheduled to host its annual investor conference in New Orleans this fall. The conference, if it happens live, which we hope, will open with dinner, Thursday night, October 15, and the conference will start at 8 a.m. Friday morning, October 16. The conference this year will be at The Windsor Court and dinner on Thursday night will be at the same place as always. We hope we are able to host the conference live and that many of you would join us in New Orleans for the conference. If we are unable to do so, we will host a virtual meeting. You'll find information regarding the conference on our website, and we'll add registration and hotel information soon. For now, though, please save that date for the conference. With that, Ashley, we are through with our prepared remarks, and you can open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will now take our first question from Ken Goldman of JPMorgan.

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Kenneth B. Goldman, JP Morgan Chase & Co, Research Division - Senior Analyst [2]

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I know it's probably too early to give us definitive numbers, but do you have an idea, at least looking into your third fiscal quarter, what the split between tray pack and big bird will be in terms of pounds? It sounds like you've made the decision to obviously shift some of that, but then Lampkin talked about how mix is still up in the air. So I was just wondering if you could try and pin me down a little bit on some of those numbers for our models?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [3]

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We think we're going to be about 58% big bird and 42% tray pack owned processed pounds, and we are currently transferring every week some pounds from the big bird plant to the tray pack plants to be packaged. So those are processed pounds. They're not packed pounds. So packed pounds are going to be a little -- and sold pounds are going to be a little bit higher than that. And we're also -- that include the Saturday runs.

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Lampkin Butts, Sanderson Farms, Inc. - President & Director [4]

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Yes.

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [5]

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So that's going to be 58-42. I would go with that.

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [6]

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And Lampkin said 1.287 billion pounds, 502.2 million of that is the tray pack, 785.3 million is big bird.

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Kenneth B. Goldman, JP Morgan Chase & Co, Research Division - Senior Analyst [7]

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Okay. And then Joe, what are you seeing right now, specifically in terms of sold versus packed.

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [8]

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Hold on one second, Ken. I misspoke.

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Kenneth B. Goldman, JP Morgan Chase & Co, Research Division - Senior Analyst [9]

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No problem.

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [10]

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Yes. That's the big bird pounds, 704.6 million and tray pack pounds, 507.2 million

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Kenneth B. Goldman, JP Morgan Chase & Co, Research Division - Senior Analyst [11]

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That's third quarter?

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [12]

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Yes, that's third quarter, for a total of 1.3 billion pounds. I was looking at the wrong line. I'm sorry.

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Kenneth B. Goldman, JP Morgan Chase & Co, Research Division - Senior Analyst [13]

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That's okay. Thank you for the correction. I appreciate that. And for a follow-up, so what are you seeing in boneless right now? Obviously, it's been trending downward in Urner Barry. Where do you expect those prices to bottom? And how far below the listed prices are you trading right now?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [14]

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The quote is $1.31. And the discount is down to $0.85 on spot loads. If you have excess loads, it's $0.85. It's really $0.85 to $0.90 and...

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [15]

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$0.50 better.

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [16]

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It's $0.50 if you have excess loads. And there's not as many excess loads out there as there were back in April. There's some, but there's not as many today. Food service has -- regular food service business -- at one point when it was trading for $0.50, food service sales were running 35% to 40% of normal. And I would say today, they're running 75% to 80% of normal. So that's why you don't have as many spot loads to sell. And I'm not talking about just Sanderson, I'm talking about probably the industry. Don't have quite as many, and that's why the discounting isn't quite as heavy as it was back when bone was at $0.74. I would expect it to go down some more, but not anywhere near where it was back then. I would also note that the first week when the cutbacks hit is going to be the week of ending June 13, which is week after next. Now that's going to be -- that's for birds that are 49 days old. And then the next week and 2 weeks after that will be birds that would be of deboning size. So in the next 3 to 4 weeks, you're going to see fewer and fewer birds processed. And I do not have a -- I don't know if that's going to match up with demand or not. But it is certainly going to -- there are going to be much fewer pounds on the market when those cutbacks hit.

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Operator [17]

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We will now take our next question from Heather Jones of Heather Jones Research.

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Heather Lynn Jones, Heather Jones Research LLC - Founder [18]

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I have a clarification. So the pounds numbers you guys gave for Q3 between tray pack and big bird. Is that -- you mentioned the difference between sold pounds versus processed. So is that the pound -- is that the breakdown you're anticipating for sold pounds?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [19]

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No, that's the processed pounds. We're -- that does not include what we're -- that is processed at the big bird plant. And that includes Saturday runs where we're pulling birds out on Saturday and processing them. Wait, Heather, every other week we're in Texas, we are running Tyler and Brazos and taken some live birds out of Waco and Palestine and processing either 1 shift or 2 shifts, and that does -- and in Mississippi, we're tracking Collins birds. And Hammonds or Laurel and processing them in Macon. In North Carolina, we're taking St. Pauls birds and processing them in Kinston. We do that every other week so our employees don't work every weekend.

I can't do that in Moultrie because there's not a big bird plant near Moultrie. And we alternate them and the products also it's -- the demand in retail is good, but those numbers Mike gave you includes those Saturday runs.

In addition to that, we are -- this might not include this product, but it's not significant. We are taking anywhere from 20 to 24 loads a week out of big bird plant and transferring them to be tray packed at our tray pack plants every week. And that would be boneless thigh meat, drumsticks, those 2 products and they're trayed and chilled and pre-fried to go to tray pack customers. That's not a lot -- I mean, in the whole scheme of things, that's not a lot of volume.

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Heather Lynn Jones, Heather Jones Research LLC - Founder [20]

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Can you help us understand -- so you've got this positive mix shift going on from big bird to tray pack, but also within tray pack, like how much is making into a tray because you guys pricing was materially better than I was anticipating. I had tried to account for this positive shift, but didn't account for it well enough. So, like, how much are you guys put in a tray and -- versus what you did last year so that we could try to account for that better going forward?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [21]

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Well, you have to -- we normally take Tyler out of the equation. And our other plants, we normally get about 50% of our product in a tray. And so right now, we're getting about 55% to 60% of our product in a tray, including Tyler. And a lot of weeks, it's 60%. And another factor that's -- if price is going up, there are no ads, there are no features. It's all going out at regular price. We cannot support a feature. We don't have enough volume to support a feature. So everything -- you're getting 55% to 60% of your product in the tray, including Tyler, and none of it's going out at feature prices. So that's why you price went -- our prices with all of our customers almost are flat priced. So our prices are not rising, prices are stable, but you're going in a tray and you're not having any feature pricing. That's why the price goes up a little bit.

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [22]

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Yes. Heather, it's all -- and most of it, to Joe's point, it's almost all on mix. It's a mix improvement that's contributed to the increase in prices.

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [23]

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And no features.

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [24]

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Right.

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Heather Lynn Jones, Heather Jones Research LLC - Founder [25]

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And I know this fluctuates based on what the commodity market is doing. But just could you give us a rough number? So, like, if you were normally putting 50% in a tray and now a lot of weeks putting 60%, what is the price disparity? I mean, are we talking about -- on that 10%, we're talking about a price disparity of like $0.25 a pound? Like, could you give us a sense of what that delta is?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [26]

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The difference between a CVP boneless breast and a tray.

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Lampkin Butts, Sanderson Farms, Inc. - President & Director [27]

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It's huge. Right now at $0.70 a pound. For bones breast, it's a big number, $0.70 a pound. We got it. We have to get them on a tray to get that premium. If we pack in bulk, it's not worth much more than the bulk coming out of the jumbo plant. That would -- could be worth $0.85 a pound.

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Operator [28]

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We'll now take our next question from Ken Zaslow of Bank of Montreal.

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Kenneth Bryan Zaslow, BMO Capital Markets Equity Research - MD of Food & Agribusiness Research and Food & Beverage Analyst [29]

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How much of your product is typically featured? And how much of that featuring if it's all gone, how much is that headed and how long will it be before you have to feature again?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [30]

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We don't know -- we don't know the timing of that. It depends on how long this demand stays as strong at retail. Different customers have different ad volume, some customers that run a lot of high-level feature, they might be 50%. And then you have some others that are EDLP, every day low price, so they don't have features. We probably averaged 25%.

On a normal year, Ken, it's seasonal too. I mean, in the fall, you're running these specials as you can to get rid of it. October, November, December, you're running features every week. That's your low point.

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Kenneth Bryan Zaslow, BMO Capital Markets Equity Research - MD of Food & Agribusiness Research and Food & Beverage Analyst [31]

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Okay. So that -- so assuming -- I mean, that is definitely an additive to pricing that maybe we don't see fully. Is that a fair way of saying it, if 50% of your price tends to be on pricing -- on feature, it's not -- that is definitely -- okay. I just want to -- in order of magnitude, it's 10%, 20%, like what type of featuring is it? Is it -- like I know for sure, it's been a big positive on the cereal side. Is it a material mover on the chicken side? Or is it less than other products? So how do I dimensionalize?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [32]

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It's not as material as the mix. Mix moving into 55% to 60% into trays is more material than not having features. Features are kind of built in. And now when you get into deep discounting in October, November and December, that's material. But it is not material in the spring and the summer. When you -- somebody wants to have an ad, that's not material.

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Kenneth Bryan Zaslow, BMO Capital Markets Equity Research - MD of Food & Agribusiness Research and Food & Beverage Analyst [33]

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And what are you hearing on the competitive protein side? Are you feeling like the competitive set -- is the availability of beef and pork is becoming a little bit more competitive, it's staying very tight or it's accelerated in terms of the challenges are still persistent. What are you hearing from your customers?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [34]

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Well, I just look at the numbers, and there's -- if you look at the numbers, there's still 100,000 head a day short processing hogs and there's still short processing beef. I think they've made some progress, but I kind of believe it's going to be a while before -- they were processing 495,000 head a day in hogs and they're right at 400,000 head a day now. And I think, I don't have that number on cattle. I just don't -- I don't know where they are on cattle, but we think they're 15% to 20% behind on processing of cattle. And I do not think for a lot of reasons they're going to get back to those normal levels for a while. And I think you're going to see (inaudible) slaughtered, you're going to see grass-fed steers and heifers for a while. And the prices at the grocery stores are very high on beef and pork. And I think that's going to be with us for a while. And I don't think all the chicken plants are back to full slaughter and product mix. They're getting close to slaughter, but they're not close to product mix. And with all the restaurants at running 50% capacity and some of the -- one of the biggest markets for food service is hotels.

And very few of the hotels are doing any kind of business. And nobody is traveling. And I think that's our third largest market segment. And schools, they're not open and that's a big market segment for us. And so I just -- it is for beef and pork as well. You asked me about beef and pork, that's what we think. And as long as that care is at -- money is available, and I think -- I don't think it's going to be anytime soon before their production is back where it was 3, 4 months ago.

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Kenneth Bryan Zaslow, BMO Capital Markets Equity Research - MD of Food & Agribusiness Research and Food & Beverage Analyst [35]

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And then my last question is, what do you think the industry expectations are? What are your expectations for industry production in chicken? Obviously, you just took down your numbers as well. How do you think that lays out for the remainder of the year? And I'll leave it there. And I really appreciate it.

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [36]

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Thank you, Ken. I just have no clue about what the industry is going to do. Because of what I just commented on about the various market segments that we sell to through our customers, the restaurants, the hotels, the schools, we have cut back because of that and because of the uncertainty of the fall and what Dr. Fauci said about another round of this perhaps in October, November. I have no idea of what anybody else is how they're evaluating their position.

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Operator [37]

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We will then take our next question from Peter Galbo of Bank of America.

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Peter Thomas Galbo, BofA Merrill Lynch, Research Division - Associate [38]

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Joe, I just wanted to get kind of your thoughts, obviously, you guys have had the production cutbacks. But in the past couple of weeks, of the egg set data, you've seen kind of a sequential reacceleration back to north of 230 million eggs. Just curious kind of how you can marry that against your comments to Ken's question that the industry isn't going to get -- kind of get ahead of itself by re-adding supply and maybe how we should think about that beyond the newest production cuts that have happened?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [39]

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Yes. I don't know what other people are thinking and what they're doing. That's still 9 million or 10 million eggs fewer than what they were placing. And I don't know what market segment that's in either. We really don't have access to that.

I think there was an initial knee-jerk reaction to what the market did in April, May. And then it went back up. Now it's coming back down. But for the reasons I've already said, we're going to at least do what we're doing right now, and we will evaluate it going forward. If you go back to 2008, and see what food service did and what the American consumer did, it was 2017, '18, '19, before they really started going back to eat -- out to eat. Unemployment had to drop, consumer they had to be confident again, you had to have disposable income and we don't see that right now, nobody sees that in the next couple of years. We have a lot to get corrected in the economy and Mike quoted 46% of people want to go out to eat. But what about the other 50%?

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [40]

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That wants to be their families and then go out.

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [41]

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Yes. Yes. So we -- that's a problem I have. It's not the 46%, it's the other 50%. And the restaurants that are open are 50% capacity. But if you look at the food service landscape, the Northeast is not open yet, really. And you have restaurants that are open are at 50% capacity. And then the West Coast is not really open yet. And so there's a lot of food service just not there. I mentioned the hotels, which is the third largest segment of food service. And so there's a lot of it not in play. So -- but I have no idea what other people are thinking and doing and about egg sets.

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Peter Thomas Galbo, BofA Merrill Lynch, Research Division - Associate [42]

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Got it. Okay. No, that's helpful. Mike, I was just looking for a little bit of clarification. I think you had said COVID would cost kind of in 3Q and 4Q would be about $0.015 per pound. Was that on a year-over-year basis versus 2Q? And then anything you can do to help us quantify just the impact from chicken paws in the second quarter as well?

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [43]

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Yes. Those -- that wasn't absolute costs, those were just inefficiencies that are bringing lower volume at the plant and that's versus last year. Yes, that's right. That's versus what we thought we were going to do on normal volume that we reported in February.

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [44]

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He asked about -- also asked about chicken paws in the second quarter. It was about what we showed you, $15 million.

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [45]

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Yes. $15 million in the second quarter.

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Operator [46]

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We'll now take our next question from Adam Samuelson of Goldman Sachs.

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Adam L. Samuelson, Goldman Sachs Group Inc., Research Division - Equity Analyst [47]

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So a lot of ground has been covered. Maybe just on the export market, Joe, Lampkin and Mike. I think your comment was the order pace even from China has slowed down. So how do you help us frame the export market over the next couple of months and kind of the trajectory for regular pricing?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [48]

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Adam, I'm going to let Lampkin do this. But when we were with you 10 days ago, China had not slowed down. And I mean, it wasn't -- by Friday, after we spoke, we discovered that it had slowed down a bunch. And we have still not priced June. And -- but we don't think China is going to take very much product, if any, for June. I'll let Lampkin fill in the pieces. I just -- I didn't mean to mislead you about China. But at the time we were speaking, we thought China was going to be normal. And I'm going to let Lampkin fill in on the export market in general and China in particular.

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Lampkin Butts, Sanderson Farms, Inc. - President & Director [49]

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Yes. Adam, June is very -- for exports is very unsettled. And it's primarily because China is going to be out of the market in June, and Cuba. And then you still have some obstacles in other countries from coronavirus, currency and also cheap oil. We sold a lot of product in May for $0.214 going to different countries. We have priced a little bit in June at $0.25. So that's a little better than May, but it's not the $0.30 that we were hoping to get. We have booked some at $0.25. China is out because they bought so much product, so much on the way, so much have gotten there, and they were anticipating their economy reopening, which it has, but it's just -- the restaurants are not back to anything close to normal. So they've got huge inventories based on the current demand in China and they just don't need as much product. Hopefully, that will improve as the China economy and restaurants will do better. I'll just mention Mexico briefly, Mexico was sort of like the United States, Mexico for leg quarters, they need them for retail grocery stores, but they don't need them for restaurants.

We think Mexico will be in the mid-20s. We -- even with China close, we do expect to continue shipping chicken paws to China. We don't see that falling off. We made $15 million in the second quarter on paws sales. We're expecting to make $20 million in the third quarter and $20 million in the fourth quarter.

Yes, that's the difference in rendering versus packing and shipping to China. And even that causes cash flow problem.

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Adam L. Samuelson, Goldman Sachs Group Inc., Research Division - Equity Analyst [50]

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What about Kazakhstan?

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Lampkin Butts, Sanderson Farms, Inc. - President & Director [51]

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Market conditions in Kazakhstan are slowly improving. Some product is moving in, not back to normal, but it's getting better.

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [52]

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That's something else that changed a little bit since we talked 10 days ago. Kazakhstan, which was doing nothing is coming back a little bit.

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Lampkin Butts, Sanderson Farms, Inc. - President & Director [53]

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And then the other thing -- in June, you've also got, as Joe mentioned earlier, you get to the middle of June, your processed pounds are going to be less. So there'll be less product competing to export.

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Adam L. Samuelson, Goldman Sachs Group Inc., Research Division - Equity Analyst [54]

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Okay. That's very helpful color. And then just a little clarification question. As we think about '21, I think you've previously kind of articulated that pounds processed next year would be about 5.1 billion. And I believe that would reflect kind of full rate with Tyler at 100%. I mean, as you sit here today, is it reasonable, I think, especially the later part of calendar '20 that we might come in a little bit short of that, just given where the industry is sitting today and uncertainty on the demand environment?

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [55]

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We hadn't run a schedule on a -- you're right. I mean, we go back to full production everywhere in normal schedule, that's the 5.1 billion, and that is accurate. But we haven't made decisions and process schedule as I told you before.

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [56]

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Yes. I'd like to see something dramatic occur to...

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [57]

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Yes, that goes back to our normal mix as well, the 5.1 billion assumes that we can...

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [58]

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That -- you got see all your restaurants up and running and everything back to normal, vaccine or it would take something really good to get us back to our deboning plant.

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [59]

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Good question. We'll have some color around that in August. That's all I can say in that.

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Operator [60]

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We will now take our next question from Ben Theurer of Barclays.

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Benjamin M. Theurer, Barclays Bank PLC, Research Division - Head of the Mexico Equity Research & Director [61]

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Yes. One question and a quick follow-up. So you've mentioned that you've obviously been shifting a lot into retail from food service. Have you considered what -- considering some of your commentary you made about the slow recovery and the issues with hotels, schools and so on,

to potentially invest for further ability to shift from more from food beverage into retail? Or is that not something you've been considering right now?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [62]

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Are you talking about repurposing a plant?

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Benjamin M. Theurer, Barclays Bank PLC, Research Division - Head of the Mexico Equity Research & Director [63]

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Yes.

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [64]

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Yes. We are -- we have looked at 2 or 3 different scenarios about doing that. And we are still contemplating and looking at it. It's not an easy thing to do. Our plants are geographically located for the market the plants were built. Some of you have visited our plants, and there is a huge difference in a deboning plant and a tray pack plant. It's doable, but it's not ideal. But we are looking at that. The plants are built the way they are and where they are for marketing reasons. And if you take one of those plants and convert it, you're going to give up that marketing reason and that's the dilemma, and -- but we are looking at that very closely.

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Benjamin M. Theurer, Barclays Bank PLC, Research Division - Head of the Mexico Equity Research & Director [65]

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Okay. Perfect. And then actually, within that topic as a follow-up, within food service, prior to the outbreak and how does it currently stand, could you give us a breakdown what used to be hotels, what used to be schools, what used to be QSR and then maybe a bit more casual dining and how does that look today? And how do you think this is going to look further down the fiscal year, at least?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [66]

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Well, we don't know. We sell to a number of different food service distributors, broad line distributors and they, in turn, sell to all of those end users. And we do not know what their product mix was. I just know generally from market data that restaurants -- I can't remember the #2 segment, has changed and it has -- and a couple of them, hotel second, and then it was third and second and third, and then you got hospitals, cafeterias, nursing home, schools. Schools are bigger than nursing homes. But in every one of those, not -- and this is for our customer business. It'd be like Sysco, U.S. Foodservice, PFG, Reinhart, all of those people that we sell, their end customers or that market, that's their customers. And we -- I don't really -- I mean, we read it. I knew that hotels were one year, they're second. Next year, they're third. Restaurants are #1. And it's -- but I mean it's -- and hotels are not doing anything, not even open.

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Operator [67]

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We'll now take our next question from Michael Piken of Cleveland Research.

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Michael Leith Piken, Cleveland Research Company - Equity Analyst [68]

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I just wanted to dig a little bit deeper in terms of the breeder flock. I know there's been a lot of cuts to exits. But how are you guys thinking about the breeder flock and in terms of not only potentially cutting production, but also the type of mix that you might have in terms of the (inaudible) flock?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [69]

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Well, we would not -- we never have reduced our breeder flock. We would sell -- we're selling hens early right now to keep our eggs the correct number, but we've always kept our breeder flock intact. And right now, we have seen -- if you look at USDA numbers, you haven't seen any change in breeders. The last USDA has revised, put in placements 2 of the last 4 placements. The January and March, they revised them downward. They had a pretty good number in April, we'll see if they revise it. But I think the industry might be putting out more breeders because of the mortality of the breeders and because of the mortality of the chicks. Pullet mortality is running very high, much higher than normal. And also mortality of the broilers is high. And the rate of late is very low. The hens are not producing very many eggs. It's -- I mean, I've never seen it this low. And I mean, I don't -- I think a couple of -- they're not using antibiotics on the pullets. And then the breeders they've gone to they're very difficult to manage. So they're not getting the eggs out of them. So I think part of the reason you see pullet placements elevated is to make up for the hatchability and the rate of laying.

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Michael Leith Piken, Cleveland Research Company - Equity Analyst [70]

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So I guess as a follow-up, if we could decipher, these lower hatchability rates, how much of this do you think is due to problems with the breeders versus just people breaking eggs because of market economics? If you can break those 2 things out. And then also, if they're making these transitions, do you expect the hatchability rates to improve, if we're going to be moving towards a younger breeder flock?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [71]

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So with the hatchability if they're looking for your quote breaking eggs and never put them in incubators, that's not going to show up into hatch, that's may be why. If you pull something out of the incubator maybe, but not -- the flock will never goes in because that would have nothing to do with it. And I think that would only happen in the first 3 weeks, I think people dump eggs the first 3 weeks and then after that they couldn't sell them. And that would have affected the hatch.

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D. Michael Cockrell, Sanderson Farms, Inc. - CFO, Chief Legal Officer, Treasurer & Director [72]

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I mean, if you look at the USDA data, the last 3 weeks it's been below 80%. And that's historically low, I think.

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [73]

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It is. And I'm not certain that's accurate. I don't know that that's accurate. I don't know why, but I don't believe that's accurate. But it's showing up in the difference between egg sets and chick placement. Chick placements are running as low as 5% -- 95% from a year ago for the last 6 weeks and egg sets are a little higher than that. The egg sets are still 10 million below what they were at their peak. Running 39 -- 239, 240 and 230 million in there. You just don't know what market segment that is. We don't know if it's big bird or it's certainly not a tray package, it's either quick-serve. I mean, smaller bird. And I have no idea how much volume is going through small bird.

I don't know if that's down some or if it's whole bird and parts or big bird.

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Operator [74]

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We will now take our next question from Ben Bienvenu of Stephens Inc.

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Benjamin Shelton Bienvenu, Stephens Inc., Research Division - MD [75]

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I want to -- just one quick one for me. Obviously, food service demand is kind of the key factor that you're monitoring with respect to your decision to reaccelerate production and shift your mix back to what would be normal distribution about your pound produced, but how much of the gating factor is labor still at this point and visibility into reduce absenteeism factors like that?

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [76]

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Labor is really not a big factor with us. We have days and weeks, a week where we have more absentees than normal, we're running about 600 absentees a day more than normal. We will have 100 to 125 infection cases that will be out. And then we normally have 2 to 4 people, maybe 5 that work in close proximity in that case it will be sent home with pay, both the infection and the people who work in close proximity to them are home with pay for 2 weeks. So we'll run 500 to 600 more absentees a day than normal with this coronavirus. We are also -- we're hiring about over 400 people a week. And so labor has -- other than those additional absentees, we're running all our plants full. We may not be able to run exactly the right product mix every day. But labor is not a huge issue with us.

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Operator [77]

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We will now take our final question from Robert Moskow of Crédit Suisse.

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Jacob Samuel Nivasch, Crédit Suisse AG, Research Division - Research Analyst [78]

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This is Jake Nivasch here. This is Jake on for Rob. Just a quick question on retail pricing. Is pricing at retail stickier than food service? I guess what percent of your retail business is based on market pricing, I'm just trying to figure out, I guess, if the shift to retail will make it tougher for the industry have tighten it's pricing as total production comes down? Or any help there? Appreciate it.

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [79]

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Sure. Our prices with our retail customers are mainly flat price for the year. And there are a few that could move, but it's out of probably 50 customers, they're probably 10% that could move -- make a bracket change, but the vast majority are flat price for the year and they do not change. With the Urner Barry, for example, all of the food service customers move with Urner Barry, but not the retail accounts. They're flat price and the only reason that retail pricing changes is with product mix and lack of feature prices. And right now, our product mix is better, and there is no feature pricing so that's why our -- right now, our retail pricing is a little bit better than normal.

Operator, is that the last question?

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Operator [80]

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Yes, there are no further questions. So I'd like to hand it back to you for closing remarks.

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Joe F. Sanderson, Sanderson Farms, Inc. - Chairman & CEO [81]

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Good. Thank you all for spending time with us this morning, and we'll look forward to reporting our third quarter results in August. Thank you and be safe.

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Operator [82]

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That concludes the call. Thank you for your participation. You may now disconnect.