Sanderson Farms, Inc.
Q1 2021 Earnings Call Transcript

Published: 26 Feb 2021

[Operator:]

Good day and welcome to Sanderson Farms, First Quarter 2021 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.

[Joe Sanderson:]

Thank you. Good morning, and welcome to the Sanderson Farms First Quarter Conference Call. This morning, we announced net income of $9.5 million or $0.42 per share for our first quarter of fiscal 2021. This compares to a net loss of $38.6 million or $1.76 per share for our first quarter of fiscal 2020.

[Mike Cockrell:]

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 annual report on Form 10-K for the fiscal year ended October 31, 2020, and 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 www.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 weather, 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 may be very different from a few days from now.

[Joe Sanderson:]

Thank you, Mike. Before addressing our first fiscal quarter results, I want to update you on the effect of the recent winter storms on our business. Our employees, managers, contractors and contract poultry producers in Texas, Louisiana and Mississippi have navigated a historic weather event over the past two weeks. They have shown resourcefulness and determination, and we are extremely grateful and proud for their efforts. Because of the record low temperatures, power failures, snow and ice and hazardous road conditions, we were unable to operate our processing plants, deliver day-old baby chicks to broiler farms on our regular schedule, pick up hatching eggs from breeder farms and place those eggs in our hatcheries or manufacture and deliver chicken feed to the farms of our contract poultry producer. Fortunately, none of our facilities were damaged, and our employees remained safe. And we returned to normal operations at all of our facilities on February 22, 2021, except the Hazlehurst, Mississippi processing plant which resumed normal operations on February 23, 2021. However, our live production supply chain experienced interruptions and losses similar to a hurricane. We lost 455,000 broilers in houses that lost power, water or feed, or that collapsed under the weight of snow and ice. We were forced to humanely euthanize 545,000 chicks in our Texas hatcheries and were unable to pick up and set 703,000 hatching eggs in our hatcheries.

[Lampkin Butts:]

Thank you, Joe, and good morning, everyone. Overall, realized prices for poultry products were higher by $0.0868 per pound or 13% during the first fiscal quarter of 2021 compared to our first fiscal quarter of last year. Overall, average prices for chill pack products reflected good demand during the quarter and averaged $0.041 per pound higher during the quarter compared to the first quarter of 2020. as a result of both price and mix improvements. Chill pack prices were higher by $0.015 per pound sequentially, again as a result of both price and mix improvement. Bulk leg quarter prices during our first fiscal quarter averaged $0.232 per pound compared to $0.315 per pound last year. Final numbers for calendar 2020 show the volume of all broiler meat exported was higher by 5.2% compared to 2019. The average quoted price for jumbo wings was higher during our first fiscal quarter compared to last year and reflected both a good Super Bowl season and the fact that wings and tenders remain very popular among food service customers and significant takeout in delivery sales, which has done well during the pandemic. Quoted prices for jumbo wings averaged $2.16 per pound during our first quarter of this year compared to $1.61 per pound during last year's first quarter sequentially.

[Mike Cockrell:]

Thank you, Lampkin. Net sales for the quarter totaled $909.3 million, and that's up from $823.1 million during the same quarter last year. Our net income of $0.42 per share during the quarter compares to a net loss of $1.76 per share during last year's first fiscal quarter. Our cost of sales of poultry products for the three months ended January 31 as compared to the same three months a year ago increased 3.4%. This increase is a result of an increase in the average cost of goods sold. Nonfeed related costs were higher by $20.1 million or $0.0251 per pound this quarter compared to last year's first quarter. Several factors contributed to this increase. First, lower-than-capacity volumes impacted cost per pound. We continue to operate our big bird plants below full capacity and will continue to do so until food service demand improves further, and that improvement appears sustainable. We lowered the target live weight at our Hazlehurst, Mississippi processing facility and our transporting product from that plant to our tray pack plants in order to meet demand from our retail grocery store customers.

[Operator:]

And the first question will come from Ben Bienvenu with Stephens Inc. Please go ahead.

[Ben Bienvenu:]

Hey, good morning everyone.

[Joe Sanderson:]

Morning Ben.

[Ben Bienvenu:]

I want to start first on the feed side of the equation. I thought your outlook for the $325 million higher, was a little bit better than the future script would suggest? And in the quarter, it looks like your feed conversion ratio was quite a bit better than what you're modeling. I suspect some of that was maybe just a function of a biological lag of the feed working its way through your system, but I wonder, has there been any change to the feed ration mix? Kind of what's going on there? And is the $325 million outlook for grain, that's just a function of the basis you've secured plus what the future script looks like now for the grain embedded in your cost?

[Joe Sanderson:]

There is two or three things. If you look at the first quarter, November, December, those were birds that were processed that ate much cheaper corn and soybean meal that we had priced in September and October at much lower prices. They also performed exceptionally well. They had great feed conversions. I mean, it's a good time to grow chickens and we didn't have any extraordinary weather events and it was a normal grow out period for us. Our feed cost per ton started going up really in January. We will see the full impact in the second quarter of – we also had price that basis through March and the basis started moving up in December and we were on a good side of the basis and we were on the good side of feed conversion and we went ahead and bought soy because when you look to carry out on soy, you get down to 120 million bushels of soy. You don't know where that's going to be, it's going to be very difficult this summer, we think, for soy processors to get that bought up from farmers. The carryout on the corn is not nearly as tight as it is on soybeans, but we will see the full impact of the higher corn and soy in the second quarter. Right now, though, the price on poultry products is taken care of that thick higher feed cost and – but second quarter, even we're not running in Texas, we're not running our normal ration right now, we will be next week. So we'll be back on our normal ration next week in Texas. We're trying to get all the farms filled up with feed right now. So actually, I believe we're running a single ration. One ration or we'll back on five ration.

[Lampkin Butts:]

We'll be back on five.

[Joe Sanderson:]

Okay. We normally we feed them five batches, we're back on five batches. We ran one batch for about 10 days and we're back on our regular ration. So that we're going to have some performance issues in Texas for 10 days and then they ought to get back to and this weather right now is a blessing following what we went through, this 75-degree weather, and they'll rejuvenate a little better. Did I answer your question, Ben?

[Ben Bienvenu:]

You did. That's great. Thank you Joe. My second question is also on the cost front, but on the nonfeed cost. You highlighted the increases for this quarter. As we move through the year, what's your best outlook on how that might trend through the rest of the year?

[Joe Sanderson:]

We'll go back to full capacity.

[Lampkin Butts:]

Yes, we stay at our reduced capacity, Ben, I think you'll – it's not going to change materially. We've been getting a good many questions about freight. We don't anticipate our freight costs are going to go up significantly in the low-single digits maybe, depending on where we ultimately ship the products, of course, but we don't anticipate any issues there. Labor cost is going to be steady. I miss, as Joe just said, we take our plants back up to full volume.

[Joe Sanderson:]

That will depend on what you see in food service and if we see food service picking up, then we will definitely want to go back. That affects you twice. It'll affect you in plant cost and it'll affect you in grower pay.

[Lampkin Butts:]

Yes and the grower pay number on the live side has been the big mover and when we take the live weight down in Hazlehurst, we continue to pay our growers as if they are growing big chickens because you don't want to cut their pay, and that cost goes up and as long as we leave Hazlehurst that way...

[Joe Sanderson:]

You're paying all the other growers.

[Lampkin Butts:]

That's right because of the other people.

[Joe Sanderson:]

If we go back to full production, that grower pay will come back to normal. Thank you Ben.

[Ben Bienvenu:]

Okay. That makes sense. Understood. Thank you and best of luck for spring.

[Joe Sanderson:]

Thank you.

[Operator:]

The next question will come from Adam Samuelson with Goldman Sachs. Please go ahead.

[Adam Samuelson:]

Yes, thank you. Good morning everyone.

[Joe Sanderson:]

Morning Adam.

[Adam Samuelson:]

So I guess, maybe coming back to, I think, you talked about with – in response to Ben with the poultry price taking care of the feed cost increase for the moment. I mean, the movement in the cutout in, breast meat, in particular has been pretty remarkable for February over the last few weeks. Just trying to think about what kind of signals you think that's sending to the industry in terms of production. Things have been fairly restrained over the course of the last three to six months. Egg sets have been down modestly. Pullet pricings have been fairly under control, but with the cutout kind of at levels that normally we would be seeing in May and June, with kind of better food service demand potentially kind of still to come. Do you think that there's – we could be starting to see production inch back up? Or do you think the grain cost will keep people restrained because of the working capital implications there? Thanks.

[Joe Sanderson:]

Adam, I'm not trying to send any signal to anybody. I'm just giving you opinion about Sanderson Farms. Adam, it depends on what market segments you're in, about how this cost and sales are affecting you. It affects big birds one way. It affects retail one way. It depends on how much – in retail, for example, it depends on how much of your product you have sold, what percentage you have sold and right farm. If you have 60% – 55% to 60% sold to customers, that's one thing. If you have 35% of your products sold out of your plant, that's a totally different issue. So that means you're selling 65% in another farm. That's not so good and that doesn't work and so – and then fast food is a totally different deal and big bird is the same way. It depends on if you flat price, if you went out flat price this year at $1 or $1.05 and now you're getting these grain costs flowing through your balance sheet and your P&L, it's totally different call game for them. So it depends on – it's company specific, depending on your product mix, your cost profile. It's different for every company.

[Adam Samuelson:]

Okay. No, point well taken, Joe and then maybe a follow-up, just thinking specifically about the wing market, which you know we're still coming – just coming out of football season. But there, I mean, price is at extremely high levels versus history and head numbers, at least for the next couple of months, look to be fairly steady. Any thoughts there about how we're seeing about wings into the spring? I think they can hold these levels Or is there some room for that to drift lower?

[Joe Sanderson:]

Yes. I would – if you look back historically, you get through March Madness, with exception of one year, I recall. I can't tell you what year it was. But if you get through, you get past March Madness, and then the demand for wings declines. There was one summer, and I don't remember when it was, but there was one summer that wings stayed high all through summer and it was in the last five years and I can't tell you what year it was. They never declined that year. But at this price level, I'm feeling like you're going to see a lot of boneless wings and other items come into play. We're in the $2.50s now, aren;t we?

[Mike Cockrell:]

$2.56.

[Joe Sanderson:]

$2.56. So we'll probably go through March in pretty good shape, but I would expect subsequent to that, you would see some demand falls, and – but there are just so many new wing customers out there that's what – everybody has wings on the menus and the wing – the primary wing stores are building 100 new restaurants a year and then a lot of other people may add wings to their menus and wings carry very – travel very well going through pick up, people who do well with pick up or delivery and so you've got ghost kitchens now that don't do anything but produce wings and so it's – that's what in my mind, what's boosted its price more than normal. But I would expect – if you look at historical patterns, after March Madness, the demand falls off some.

[Adam Samuelson:]

All right, great. I really appreciate that color. I'll pass it on. Thank you.

[Joe Sanderson:]

Thank you.

[Operator:]

The next question will come from Ken Goldman with JPMorgan. Please go ahead.

[Ken Goldman:]

Hi, good morning. Joe, I wanted to ask and it might be too early for this, but obviously, you were personally – not personally, the company was affected by the headwinds from last week, right, in terms of affecting your broiler houses and so forth, your ability to produce. But all in, you should see, I think, as an industry, some better pricing from this. So I'm just curious, a, how much do you expect or how long do you expect this to increase your prices for? And b, do you agree that net-net, the event as tragic as it was, should help your numbers at least for the next quarter? Or is that just too hard to say at this point?

[Joe Sanderson:]

I don't think that's going to happen. The chicken numbers are good because I think a couple of – three things have happened. There are tons of quick serve restaurants running chicken product features and I mean, they're all – and I think there's going to be more to come. The McDonald's thing is on now. Wendy's, Burger King, I don't remember who's testing something to...

[Mike Cockrell:]

Arby's, Taco Bell.

[Lampkin Butts:]

Taco Bell.

[Joe Sanderson:]

The Taco Bell. There's more to come with this. So I think that is – I think that's number one and I think the increase in the price of feed ingredients might be putting some pressure on some that might not be in the right product mix, that might not be a strong operator, that might be affecting some people. I don't – I think if you'll take – we don't know who all was affected like we were last week. We think everybody in Texas, maybe everybody in Arkansas, some in Mississippi for three, four days. I can't remember – when did we start running that back in...

[Mike Cockrell:]

One shift Thursday and then Laurel and McComb, both ran full Friday.

[Joe Sanderson:]

Friday, sorry.

[Mike Cockrell:]

And then everybody – Saturday, we'd have...

[Joe Sanderson:]

Yes, Mississippi was down 3.5, four days. So what's happening now, though, you've got four to five days' worth of chickens that are backed up. So everybody that as we're running every Saturday. We ran this past Saturday two shifts, and everybody was backed up. We're probably going to run another Saturday, right behind everybody else is too and so that's putting more product on the market. That is going to affect this market negatively and we will probably end up taking a Saturday off, so we don't work our people too many Saturdays in a row. I don't know if the others will or won't. But in a short term that will affect the market. We're putting too much product on the market short term. Now, long term, you go out through the quarter. We don't have a clue how this storm event affected other people. It's definitely going to take some production out away from us and that will probably – I mean, it's 1%, we don't know how that affected everybody else.

[Ken Goldman:]

Understood, thank you very much.

[Joe Sanderson:]

Good. Thank you Ken.

[Operator:]

The next question will come from Ken Zaslow with Bank of Montreal. Please go ahead.

[Ken Zaslow:]

Hey, good morning everyone.

[Joe Sanderson:]

Good morning Ken.

[Ken Zaslow:]

Joe, you said poultry prices are taking care of higher feed costs. Can you go into some detail on how that's actually working, and just go there first.

[Joe Sanderson:]

I didn't understand.

[Mike Cockrell:]

Yes. Well, Ken, this is Mike. What he was making the observation that I made, and that is that if you look at our first quarter, cost per pound were up $0.024 per pound, but prices were up $0.087 per pound. Now we estimate that all-in for the year, we had priced all of our grain yesterday, our grain cost will be up $0.07 a pound, but you maintain this momentum in the chicken market, what Joe was saying was, you can take care of that feed and add to, like we did in the first quarter and we're not predicting that because we don't predict chicken markets. But...

[Joe Sanderson:]

Right now, it is.

[Mike Cockrell:]

Yes, strong chicken market can easily offset these higher costs.

[Joe Sanderson:]

If you look at $1.45 boneless and $1.80 something tender and $0.36 leg quarter and $0.80 boneless thigh meat, and let's say a $2 wing, if it softens and that's an if right now, that would work for us and the chill pack prices are up and we have some new customers coming on in March and so our mix is going to get even stronger than what it is. So...

[Ken Zaslow:]

So the higher feed cost is not big enough to really offset the strength in your market, that's basically what you're saying.

[Mike Cockrell:]

That's right, Ken.

[Ken Zaslow:]

That's great. The second question I had was, you said that you're getting new customers. Can you talk about the parameters of that? Is that like a 1% increase? Is that a 5%? What are you looking for in these new customers and how you gain them? Obviously, I don't want to talk too much about trade secrets or anything like that, but if you could give us some color on the strength of these new customers, that would be helpful.

[Joe Sanderson:]

Well, the chill pack is generally because of service level, somebody was probably not servicing them well and they actually came to us. We were already servicing several of their distribution centers and doing a good job doing it and then they offered us how many new ones?

[Mike Cockrell:]

We have four new houses.

[Joe Sanderson:]

Four new houses. And...

[Mike Cockrell:]

And 100 million pounds.

[Joe Sanderson:]

100 million pounds.

[Mike Cockrell:]

Which is about 10%, I think as what we've done packages.

[Lampkin Butts:]

Yes, you showed 274 million pounds.

[Joe Sanderson:]

And it's typically service level, that's normally what happens. If they know you and you've been taking good care of them, and that's normally how that comes about.

[Ken Zaslow:]

Okay and then just one last question is on the export market, you said legs are $0.36. How is that developing? Can you talk about where you're seeing that market develop? What are your volumes? Where do you see the industry volumes? And where is this going to go over the next six to twelve months?

[Lampkin Butts:]

Ken, the export market is surprisingly strong right now and of course, we have a window we see into March and April. I can't see beyond that. But for a number of reasons, when you look at March and April, it's going up. Prices are going up. We – November, we were in the early $0.20’s, and we've moved up well above that going into March and April. Some things that have happened, the cold storage inventories are in good shape and support pricing. The total number was down from January, it was down from December, down from a year ago, and that's the total and also leg quarter number. Cuba has gotten back in the market in a big way. Someway, I don't know how, they've got plenty of cash and they're in the market in a big way. Angola is buying more, and of course, that's tied to the price of oil. The value of the dollar works – supports exports right now and Mexico, demand for Mexico is still good and some of these countries' demand is a little better because they're recovering from the coronavirus. So we're bullish on exports right now.

[Joe Sanderson:]

April is going to be – right now, we believe April is going to be higher than March.

[Ken Zaslow:]

And similar for breast meat, I'm assuming, too, right? There's no reason that you wouldn't think that breast meats would continue to go higher through the summer at the very least, right?

[Lampkin Butts:]

Through the summer, I think that's realistic, with all the number of chicken sandwiches being marketed.

[Ken Zaslow:]

That's great. Hey, thanks a lot guys and stay safe.

[Lampkin Butts:]

Thank you Ken.

[Operator:]

The next question will come from Ben Theurer with Barclays. Please go ahead.

[Ben Theurer:]

Hey, good morning guys.

[Lampkin Butts:]

Good morning.

[Ben Theurer:]

So just to stick quickly on the export side. So there was just news out that the new administration continues to be very – well, demanding from the Chinese side to deliver on the Phase I pact and remember, obviously, there was a lot of support demand from China for certain pieces, particularly paws. So what do you see on the export side to China? How is demand there? Because I remember in the past, you usually gave some commentary on shipments over to China, just to understand a little bit if there's an additional tailwind that might be coming as they have to fulfill what's part of Phase I?

[Lampkin Butts:]

What we see from China is still very good. We have not seen any – we hear the stuff in the news about the new administration and relationship with China and so we're always sort of looking over our shoulder. But right now, in our orders and our business they are normal. There is a problem in China now and it has to do with product is very slow getting into the country because they're inspecting everything. They have an inspection system, inspecting packaging for the coronavirus and it's just – it's got containers backed up, it's got freezers full, but it's that inspection and not demand, at least at this point.

[Ben Theurer:]

Okay. Perfect, thank you very much and then one other question. Can you elaborate a little bit what was behind of that? I think you've mentioned 12% or something like that, higher SG&A versus what you were initially guiding? If I look back from last quarter, you were actually guiding for each of the following quarters a little lower level. So what's been driving this up? Is this COVID costs? Is it legal costs that's not offset enough? Do you plan to go travel? What's the composition?

[Mike Cockrell:]

Yes, during the quarter, it was legal costs and then compared, of course, to last year's first quarter, you had no COVID expenses. Versus our estimate, just not bad. I underestimated a couple of things in our estimates that we gave you in December, but we're comfortable with the guidance that we've given you for the balance of the year.

[Ben Theurer:]

Okay. Perfect. Well, thank you very much and congrats on the results.

[Operator:]

The next question will come from Peter Galbo with Bank of America. Please go ahead.

[Peter Galbo:]

Hey Joe, Lamp and Mike, good morning. Thank you for taking the questions.

[Lampkin Butts:]

You bet.

[Peter Galbo:]

Joe, I just wanted to ask on the retail side of the business, 3% kind of pricing growth year-over-year just whether or not that's a good yardstick kind of to be used for the rest of the year, given how those are – contracts are set? Or maybe if there's even some upside if you were going to be taking on incremental business and maybe improving the mix a little bit more?

[Lampkin Butts:]

I think the improved mix, there will be valued in that.

[Mike Cockrell:]

There will be in of course.

[Lampkin Butts:]

Yes.

[Mike Cockrell:]

Your price will go up, overall, you get in – is that what he's asking?

[Lampkin Butts:]

Yes, he's saying in 2020 – in first quarter 2020, we were up was it $0.03, so now as mix and price, can we expect that going forward? I don't know how much. I can't quantify that.

[Mike Cockrell:]

It will go up. It will go up.

[Lampkin Butts:]

It's going to go up. One thing is mix and another thing is we've been able – as we renegotiated new contracts, we've been able to...

[Mike Cockrell:]

Get some price increase.

[Lampkin Butts:]

Yes.

[Mike Cockrell:]

That happened all during the years of contract mature.

[Peter Galbo:]

Okay. So…

[Joe Sanderson:]

So I would expect at the end of the year, you'll see price improvements from mix improvement and some prices on individual items will be higher. Our contracts are – they don't all expire in January. They're January, February, March, May, some in the fall and you'll get some price improvement all during the year and then when we bring on this new business in March, your mix will improve and so you'll get an immediate kick out of that. The other thing that is happening, I've tried to explain on an individual basis. Our mix is at the point where we cannot support a lot of ad activity. We have a high percentage of our tray pack. So – and we cannot support a lot of ad activity and so normally, we would – if we were long boneless instead of what we would normally sell boneless order would be, let's say, $2.25 a pound. But when you go on ads, you might sell it for $1.55 a pound or $1.65 a pound or $1.75 a pound, where they can run it for $1.99. Well, we can't do that. We can't do featured support right now. Drumsticks or thighs that you might be selling for $0.85 a pound, on ads, you might do that for $0.55 a pound, where they could run them for $0.69. We're not able to do that. That will impact your pricing.

[Peter Galbo:]

Okay. Right, right. No, that makes sense. That makes sense and I guess just on the food service side, Joe, listening to some of your big customers, they've talked about end markets that are fully open, right, places – some places in the south, like Florida. They're actually seeing growth on a year-over-year basis, maybe some of that is pent-up demand. Just curious if you're seeing that as well or with the growth, is it in independence are people shifting or going out for the first time they're ordering beef over chicken? Just help us understand kind of that dynamic of the independent channel.

[Joe Sanderson:]

Before the snow and ice, and you know we had a lot of food service business in Texas, some in Arkansas. But prior to the snow and Ice, we thought we were seeing a little bit of improvement and it was volume, and a little bit and then course, there was zero for – and those, and Mississippi and Louisiana and North Louisiana and Arkansas and Texas. So we kind of lost track of all that right now, but we thought we were seeing a little bit of increase. There's another thing I'm going to give you – if you all look at – we look every day at the number of absentees in our plants and the number of cases of COVID-related absentees in our plants in the states where we operate and yes, you'll probably see on the news every day the number of cases nationwide. All of those have been declining for the past two weeks in our plants. As a matter of fact, in our plants, they are half of what they were in December. Instead of having 500 or 600 or 700 people out because of COVID or because they were in close contact or a member of their household had COVID, that's under 300 now, like it was, might be back in August or September. It's cut in half, and we don't have an explanation for that. There was an article in the Wall Street Journal in the last two or three days about quite perhaps but we know we can look at our numbers and say that is affecting us. If that is nationwide, we're getting closer to the end, unless there is a resurgence because of these new variants. But we were creeping back up a little bit.

[Mike Cockrell:]

Not back to pre-pandemic level, but improved.

[Joe Sanderson:]

Yes.

[Peter Galbo:]

Got it. Okay. Thanks very much guys.

[Lampkin Butts:]

Thanks Peter.

[Operator:]

The next question will come from Michael Piken with Cleveland Research. Please go ahead.

[Michael Piken:]

Yes, hi. I just wanted to touch base on, first, I know you guys talked about optimism toward some of the full-service restaurants. You've given in the past kind of the order pace of some of those full-service distributors, and just wondering how that's trended in like December, January and February.

[Lampkin Butts:]

What's the question like, it was improving, to Joe's point, it was improving until last week. Last week was really, really bad.

[Joe Sanderson:]

It was half last week.

[Lampkin Butts:]

Yes. Some of our distributors were literally down 50% compared to pre-COVID. Couldn't why we see those.

[Mike Cockrell:]

Compare it to the last, if you could go back more than that compared to pre-COVID.

[Lampkin Butts:]

If you look at January 30, for example, orders were flat with the year with pre-COVID. They were 7.6% lower than next week – last week, that was 50% lower because nobody could – they couldn't get the product if they wanted it.

[Mike Cockrell:]

It was in the middle. Customer in the middle.

[Joe Sanderson:]

Yes, right.

[Mike Cockrell:]

That's Jetro. They did a lot of grocery stores.

[Joe Sanderson:]

Yes, that's why they're up in the Northeast and on the West Coast. They're not in Texas and all of that.

[Michael Piken:]

Okay. Yes, that's helpful and then I had another question just on the labor front, I guess with your number of plant absenteeism down, does that mean you're able to produce as much deboned dark meat as you would like to at this point? And how much do you think that's helping the leg quarter market versus the exports?

[Joe Sanderson:]

Yes, we're pretty much everywhere. We have a plant or two that they're running high absentees, not related to COVID. We're having some – having to do some hiring events. But it's not related to COVID, but we're deboning the dark meat pretty much all we want to. We have one shift at a plant that's a little shorthanded and but other than that, we're fine. We're staffed pretty well everywhere.

[Michael Piken:]

Perfect and then I guess the second part of the question was how much do you think that being able to sell that is helping the leg quarter market versus just the improvement in exports?

[Joe Sanderson:]

I think substantially.

[Mike Cockrell:]

Yes. Yes.

[Michael Piken:]

Okay, thanks.

[Mike Cockrell:]

Thanks Mike.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Joe Sanderson for any closing remarks. Please go ahead, sir.

[Joe Sanderson:]

Thank you. Thank you for spending time with us this morning, and we look forward to reporting our results to you throughout the year.

[Operator:]

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.