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Sanderson Farms And Cal-Maine - Sensitivity To Corn And Soybean Meal Pricing

Jul. 13, 2017 9:02 AM ETCALM, PPC, SAFM, TSN3 Comments
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  • This past week, an initial report was out illustrating a spike in both corn and soybean meal commodity prices; over the weekend prices peaked.
  • Naturally, companies exposed to these feed costs, notably Sanderson Farms and Cal-Maine, were negatively impacted.
  • Fortunately, the July 12th 2017/2018 annual report suggested that corn pricing may not rise as much based upon increased planted and harvesting areas.
  • For each company's respective business cycle, Cal-Maine stands to benefit the most in the event feed costs remain lower for longer.

Source: Google Images


Investors were provided two reports regarding corn and soybean meal pricing over the past week. On July 5th, Seeking Alpha announced that Bloomberg reported that soybean commodity prices had been up for seven straight days while corn prices were up for six straight days.

The focus of this article was on meat producers as Sanderson Farms (SAFM), Tyson Foods (TSN) and Pilgrim's Pride (PPC) were all down for the day. Despite meat producers being down, both Sanderson Farms and Cal-Maine Foods (CALM) did not witness significant weakening the following days as last week wrapped up.

The weekend of July 8th, corn prices finally generated a year-over-year (YoY) increase, the first of 2017. For East Iowa, low and high bid levels increased by 12 and 7 percent, respectively, from last year during the same week. In Chicago, bid levels were up 9 and 11.6 percent. On a week-over-week (WoW) basis, low and high bid levels were up from 6 to 8 percent.

For soybean meal, a similar WoW increase occurred with low and high bid levels increasing from 7 to 8 percent for both Iowa and Chicago. However, YoY prices for both regions remained down substantially from the previous year's week from -17.6 to -24.4 percent.

After the weekly data was digested for the remainder of 2016, corn prices were poised to potentially exceed last year's levels for July through December. For soybean meal, it was less clear whether the weekly increase would lead to an uptrend capable of exceeding last year's prices on a consistent basis over the same period.

Source: Yahoo! Finance

Regardless, both Sanderson Farms and Cal-Maine reacted strongly to the downside on Monday, July 10th, the trading day after the first weekend where corn prices were higher from last year. This occurred prior to July 12th, where the

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Investing can be very challenging, especially for those looking for growth opportunities. I like to consider aggressive growth opportunities, with my investments. These are the investments yielding the best returns.

Analyst’s Disclosure: I am/we are long CALM, SAFM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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