Sanderson Farms Inc (SAFM) Q1 2019 Earnings Conference Call Transcript

SAFM earnings call for the period ending January 31, 2019.

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Feb 26, 2019 at 7:20PM
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Sanderson Farms Inc  (NASDAQ:SAFM)
Q1 2019 Earnings Conference Call
Feb. 26, 2019, 11:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Good day, and welcome to Sanderson Farms, Inc. First Quarter Fiscal 2019 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 F. Sanderson -- Chief Executive Officer and Chairman of the Board

Thank you. Good morning, and welcome to Sanderson Farms' first quarter conference call. This morning, we announced a net loss of $17.8 million or $0.82 per share for our first quarter of fiscal 2019. This compares to net income of $51.2 million or $2.24 per share for our first quarter of fiscal 2018. Net income for last year's quarter reflected a one-time non-cash income tax benefit of $37.5 million from a one-time adjustment to a deferred tax liability on our balance sheet required as a result of the December 2017 federal tax reform legislation.

I will begin the call with comments about general market conditions and grain cost and then turn the call over to Lampkin and Mike for a more detailed count of the quarter. Before we make any further comments, I will ask Mike to give the cautionary statement regarding forward-looking statements.

Mike Cockrell -- Treasurer and Chief Financial Officer

Thank you, Joe, and good morning, everyone. This morning's call will contain forward-looking statements about the business, financial conditions and prospects of the Company. Examples of forward-looking statements include statements regarding supply and demand factors, future grain and chicken market prices, economic conditions, production levels and our future growth plans.

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 and in the Company's quarterly report on Form 10-Q filed with the SEC earlier this morning in connection with our first fiscal quarter ended January 31, 2019.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Thank you, Mike. Results for the first quarter reflect continued challenging market conditions for products produced for food service customers at our plants processing at larger bird. Demand from retail grocery store customers has remained stable and that stability is reflected in overall average chill pack prices that were 1.4% higher than during last year's first quarter. On the other hand, market prices for boneless breast meat sold to food service customers were lower compared to last year's first quarter. And in fact failed to all time lows in November and December and remained relatively weak through January. The balanced market began to improve in January and continued to strengthen in February.

Cash market prices for corn were slightly higher during the quarter compared to last year, while soybean meal prices were lower. Our feed cost per pound of chicken process were flat when compared to the first quarter of 2018. Both corn and soybean balance tables are healthy as we head into the 2019 planting season, especially soybeans, but market prices have been supported by uncertainties related to trade and potential exports. The next advance in the grain markets that we will watch is the South American harvest and the March 29 planting intentions report. The South American harvest is progressing well and expectations now are for good crop from that region. At its 2019 agricultural outlet -- outlook for last week, the USDA estimated corn acres in 2019 will be 92 million acres versus 89.1 million last year.

And that acres planted in soybeans would be 85 million acres down from 89.2 (ph) acres last year. It is not unusual for the USDA to significantly revise its outlook before the March 29 planting intentions report. So we will be watching for that report. We haven't priced a significant portion of our grain needs for the fiscal year and remain relatively close to the market. Based on our cost, through the first fiscal quarter. And what we have priced so far when combined with prices we could of locked in for the balance of the year at yesterday's close, our grain costs for fiscal 2019 would be approximately $26.4 million less than during fiscal 2018 based on 2018 volumes.

At our shareholders meeting last week -- last meeting, week before last, I told our shareholders, we're focused on several things as we start 2019. As I just mentioned, we are watching the quality and the quantity of the South American crops and we'll be watching to March 29 planting intentions report. We will off course watch chicken production numbers and consumer spending behavior. The USDA is projecting that our industry will produce 1.6% more chicken during calendar 2019 and last year, which will compete with more beef and pork as well. According to USDA data, bullet placements have remained flat in recent months. Egg sets and chicks placed are trending higher by 1.5% compared to last year.

Finally, we'll focus our efforts on our growth, St. Pauls is now at full production and Tyler opened earlier this month on February the 4th. I remain cautious, but optimistic about 2019, I believe, grain markets will at worst be benign. The chill pack environment remains good and supply and demand for tray pack product seen balanced. Food service and export demand, again the wildcards for 2019.

The restaurant association restaurant performance index has shown some improvement in restaurant same-store sales. But as has been true for several quarters legacy food service establishments continued to struggle for traffic, while local chain concepts are doing better. Regardless of the markets, however, our plan for the balance of this year is to remain focused on what we can control, focused on our operations and let the markets take care of themselves.

At this point, I'll turn the call over to Lampkin for a more detailed discussion of the chicken markets and our operations during the quarter.

Lampkin Butts -- President and Chief Operating Officer

Thank you, Joe, and good morning, everyone. Overall market prices for poultry products were lower about 2.6% during the quarter when compared to our first quarter of last year. Overall average market prices for chill pack products reflected good demand during the quarter, and averaged almost $0.02 higher during the quarter compared to the first quarter of fiscal 2018 on mix improvements. Chill pack prices were higher by $0.0123 per pound sequentially again mostly on product mix. Both third quarter prices during our first quarter averaged $0.257 per pound compared to $0.336 per pound last year.

Final numbers for calendar 2018 showed the volume of all broader meet exported through November was higher by 3.3% compared to 2017. Average price for jumbo wings was lower during our first fiscal quarter compared to last year despite a strong Super Bowl season. Jumbo wing prices averaged $1.56 per pound during our first quarter of this year compared to $1.63 per pound during last year's first quarter. Boneless breast prices averaged $0.95 during this year's first quarter, compared to $1.03 last year. We sold 1.06 billion pounds of poultry products during the first quarter, a 3.7% decrease from 1.1 billion pounds sold during last year's first quarter. Our processed pounds were down from 1.1 billion (ph) to 1.063 billion pounds.

We expect to process approximately 1.094 billion during our second quarter, up slightly from 1.092 billion pounds processed during last year's second quarter. We expect to process just over 1.22 billion pounds in Q3 and 1.25 billion pounds in Q4. Prepared chicken sales were $57.7 million, up $17.2 million or 42.4% on 10.8 million more pounds sold. Our average sales price per pound of prepared chicken was lower by $0.134 per pound or 6.8%. We remain focused on our operations during the quarter and will be focused on getting the Tyler plant off to a good start. Our big bird product mix is a challenge in the environment we face, November through January, but we will continue to look for efficiency improvements and we'll do everything we can to meet our goal of performing at the top of our industry.

At this point, I'll turn the call over to Mike to discuss our financial statements.

Mike Cockrell -- Treasurer and Chief Financial Officer

Thank you. Lampkin. Net sales for the quarter totaled $743.4 million, down from $772 million for the same quarter of fiscal 2018. Our net loss of $0.82 per share during the quarter compares to net income of $2.24 per share during last year's quarter. Ad as Joe mentioned last year's number includes $37.5 million and a one-time income tax benefit resulting from the tax reform legislation.

Our cost of sales of poultry products for the three months ended January 31 as compared to a year ago decreased 1.3%. That decrease is all a result of the fewer pounds sold, partially offset by an increase in our average COGS. Non-fee related COGS were higher about $15 million or $0.022 per pound compared to last year's Q1. Several factors contributed to this increase. First, lower volumes impacted cost per pound. Hazlehurst was down a during the quarter as we moved live wage back to nine in a quarter per bird. Collins was down -- for a week for the installation of some new equipment and processing cost overall we higher by $0.014 per pound. Wages were up $2.4 million compared to last year. Cost associated with antimicrobial interventions in our plants were higher about $0.003 (ph) a pound or about 65%. And fixed costs were higher by $1.8 million as we begin depreciating equipment upgrades installed last year.

Rate was up $4.8 million or $0.005 a pound, but that increase is a function of a new revenue recognition standard that we adopted during the quarter. Actually freight was flat with a year ago. In Q1 last year freight build separately to customers was treated as a reduction in revenue in Q1 of '19, and going forward, the customers who we built directly for freight will be classifying that freight in cost of goods sold. Live cost were higher by just over $0.017 per pound as a result of higher chick costs (ph) and higher grower pay. Grower pay has been impacted by the move to tray pack sized birds Hazlehurst and Hammond.

Hazlehurst has returned to the larger bird and will be moving Hammond back this spring. Our feed cost per pound of poultry products processed was flat at $0.245 a pound, while our feed cost per pound of poultry products processed was flat, our sales price per pound for poultry products decreased 2.6% or $0.0173 per pound compared to last year and this combination obviously resulted in lower margins during this first year's quarter compared to a year ago. SG&A expenses for our first quarter of fiscal 2019 were $6 million higher than the same three months a year ago. This increase compared to last year is the result of $8.5 million in start-up cost in Tyler and $3 million in higher legal expenses, offset by lower marketing and stock compensation expenses. We are modeling $50 million for SG&A expenses in Q2; $50 million in Q3; and $52 million in Q4. These estimates, of course, include no accrual for potential ESOP contributions or bonus awards.

We spent $83.4 million on CapEx during the first quarter and have approved $230.6 million in CapEx for the 2019 fiscal year. That 2019 CapEx budget includes $30 million to finish up in Tyler.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

$39 million.

Mike Cockrell -- Treasurer and Chief Financial Officer

$39 million, thank you. And also it includes $7.7 million for progress payments on the new aircraft and $70.5 million for several large scale equipment upgrades at our older processing plants. Our depreciation and amortization during the first quarter totaled $29 million and we expect approximately $133 million for the full fiscal year.

And Kathy, that ends our prepared remarks. And you can open up the call for questions.


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Questions and Answers:

Operator

Thank you. (Operator Instructions) And we'll take our first question from Ken Goldman with JPMorgan.

Ken Goldman -- JPMorgan -- Analyst

Good morning, everyone.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Good morning, Ken.

Ken Goldman -- JPMorgan -- Analyst

I'm wondering, if I could ask some tough questions. First is on tray pack prices. I realize that there's different timing, different ways of pricing these contracts, but your tone on tray pack prices, at least what you're getting or seeing in the market, is better than what some of your competitors are seeing out there. Is there anything that you would suggest you're doing differently? Or is it more a question of timing or the structure of the contract that is leading you to be a little more positive out there than maybe the industry as a whole?

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

I don't have any way of knowing that. November and December, we're totally different than January. November and December, were sluggish. People were eating turkey and ham, we also had a normal seasonal cutbacks in place in November and December. January was an excellent month for demand, part of February was good. Second half of February was slow. March, we have a lot of ads for tray pack in March booked. But our tray pack has been good. All of 2018, and we expect it to be good in 2019. Now, we do have a new player coming on line, we have to get it. So, but I don't -- I have no clue about other people's chill pack experience.

Ken Goldman -- JPMorgan -- Analyst

Okay. Thanks for that.

Lampkin Butts -- President and Chief Operating Officer

Our price is where it feels.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Yeah.

Mike Cockrell -- Treasurer and Chief Financial Officer

Mix contributed to part of our increase too, Ken.

Lampkin Butts -- President and Chief Operating Officer

Our pure (ph) prices were actually down little bit, but mix offset it, more than offset it. More than offset.

Mike Cockrell -- Treasurer and Chief Financial Officer

Yeah.

Lampkin Butts -- President and Chief Operating Officer

Yeah.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Sequentially...

Ken Goldman -- JPMorgan -- Analyst

Can I ask...

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Go ahead. You know, sequentially prices were actually up, just a little plus our mix advantage, but year-over-year it is different. Go ahead, I'm sorry.

Ken Goldman -- JPMorgan -- Analyst

No, I apologize. Can you help me understand what that means in terms of mix? I think very often, we think of your tray pack business as very commodity-oriented, using -- so the same amount of...

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Probably that means you sold more boneless than you did drums and thighs.

Mike Cockrell -- Treasurer and Chief Financial Officer

And tenders.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

And more tenders. You probably sold more higher priced products, than you did the year before or the quarter before.

Lampkin Butts -- President and Chief Operating Officer

And it could be a higher percentage of products in trays for us both.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Tray pack plan.

Ken Goldman -- JPMorgan -- Analyst

Is that something that mix effect that we should be modeling in going forward for the rest of this fiscal year or is that too difficult?

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Not with the new plan coming on line. Particularly in the second half of the year. We just don't know -- we don't know, how and when that's going to get into loving hand.

Ken Goldman -- JPMorgan -- Analyst

Okay. One more for me if I can. Joe, you agreed last quarter, when a question was asked about the stock. The question -- asked that, roughly when the stock gets below $100, does it make sense for you to buy back some? And you said yes, how do you feel about...

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Ken, yes we did.

Ken Goldman -- JPMorgan -- Analyst

What's that?

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

And we did.

Ken Goldman -- JPMorgan -- Analyst

And you did, and you did. The stock's obviously rallied since then though, I was just hoping to get your latest thoughts on whether it's still a good use of capital at $117 (ph) versus $95 whatever it was at the time.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

I wouldn't think it would be. I mean, for me, I wouldn't borrow money to buy back stock. That's just, I'm a bit conservative about that. But $117, based on where our stock has been historically in the last year, knowing what our volume is now and going to be, $117 is an attractive price to me.

Ken Goldman -- JPMorgan -- Analyst

Thank you, Joe.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Thank you.

Mike Cockrell -- Treasurer and Chief Financial Officer

Thank you, Ken.

Operator

We'll take our next question from Jeremy Scott with Mizuho.

Jeremy Scott -- Mizuho Securities -- Analyst

Hey, good morning.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Good morning.

Jeremy Scott -- Mizuho Securities -- Analyst

Mike I appreciate all the details on the nonfeed COGS. One of the struggles in modeling tenders in the last couple of years has been at a persistent rate of that indirect inefficiencies associated with ramping up the plants. So it's a little difficult to take a toll on your organic cost basis when you incorporate labor, grower logistics that I think. So just wondering if you can unpack that nonfeed poultry COGS line a bit further, when you exclude the prepared food, that's about $0.34 a pound. What is that $0.34, would you consider to be non-productive costs associated with retailer wrap? What that means, labor and recruitment or the cost of switching your big bird plant to tray pack and that again. And what is the true underlying costs of the business? In other words, where is it going to settle when Tyler gets at the full speed?

Mike Cockrell -- Treasurer and Chief Financial Officer

Yeah, first of all, I appreciate your pain, Jeremy, and it has been more difficult to model over the last year just because there have been so many more moving pieces. I will tell you, we did some work on COGS this quarter and volume alone, and Lampkin mentioned our volume. We were down at two plants for a week each and just volume alone was a $0.0025 a pound. When you get that volume back, you get that $0.0025 back. And then our grower pay in Mississippi as Joe has been talking about frequently over the last year, when we took from big bird deboning down to trade pack sized, the live grow out and grower pay is up 66 points and you're going to move Hammond back to full production you going to get 40 of that back. You're not going to get all it, because back, which you're going to get two-thirds cost is higher by $0.0025 of a pound as well and...

Jeremy Scott -- Mizuho Securities -- Analyst

We are doing some, you mentioned microbial...

Mike Cockrell -- Treasurer and Chief Financial Officer

Antimicrobial

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Expansion in our plants. You all know, the USDA a year, a year and a half ago started classify and plants based on their (inaudible) account. Well, all of our plant at that time were in category 3, while today there in category 1 or 2 and we think by March, they'll be all in one. To get to that, we spent a good bit of money on using, what's name the product?

Mike Cockrell -- Treasurer and Chief Financial Officer

(inaudible) Poutry leaded treatment

Lampkin Butts -- President and Chief Operating Officer

On the farms. And antimicrobial ranges in the plants, which we think will at least have of that will go away in the future. But that's part of, would never know about. And that between the two of those, that's $0.005 a pound. And then you guys -- the freight, I mentioned our freight was really flat for the quarter. Jeremy, we've heard some folks talking about how they were paying more, ours was flat, but we increased in the COGS by $0.005 a pound and that's going to be true going forward. That's just an accounting change to comply with the new revenue recognition standard we adopted this quarter.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

And also when you look forward in the second quarter. We're doing some equipment changes in our plants and we're going to have four plants down from two to five days and we're not going to have as much volume in the second quarter. We are in the third and forth, these equipment changes and for labor savings and some mix changes and mainly our big bird deboning plants. And...

Jeremy Scott -- Mizuho Securities -- Analyst

It sounds like there is at least $0.005 per pound that may come back online.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

$0.01 a pound.

Mike Cockrell -- Treasurer and Chief Financial Officer

Yeah. That's more like a $0.01 -- I would say $0.01 a pound, Jeremy.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

$0.01 a pound.

Jeremy Scott -- Mizuho Securities -- Analyst

Got it.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

In the third and fourth quarter.

Jeremy Scott -- Mizuho Securities -- Analyst

Right. And then just on, you talked about exports being a wild card, first can you speculate on what it might mean for margins if the paw (ph) trade to China where reestablished and then secondly, can you update us on your deboning investment, what that might be for your late quarter versus dark meat, mix?

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Well, it will come on gradually, it would mean more in 2020. It would mean $20 million, maybe this year and maybe $40 million in 2020, growth that time everything was implemented more of a 2020 story than a 2019.

Jeremy Scott -- Mizuho Securities -- Analyst

Got it. And then just maybe lastly, given early read on your 2020 CapEx just from a directional standpoint.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Well, you should be. You won't have any, Tyler. This, you won't have any aircraft be a $70 million spread out last year and this year for equipment upgrades, you won't have that. Our normal CapEx now is about $120 million and you add another $10 million to that for stuff that breaks during the year. I don't know what else will pop up for 2019, but that would somewhere around $130 million plus stuff, I don't know about it.

Jeremy Scott -- Mizuho Securities -- Analyst

All right. That makes sense Thanks, guys.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Thanks, Jeremy.

Operator

We'll take our next question from Ben Theurer with Barclays.

Benjamin Theurer -- Barclays -- Analyst

Hey, good morning.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Good morning, Ben.

Benjamin Theurer -- Barclays -- Analyst

So, actually my question is more on your expectation food service, retail, feature activity, I mean, obviously all the things...

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Ben, are you still there? Did Ben get cut-off? Okay. Maybe he will get back on (inaudible) answer ask the question.

Operator

We'll take our next question from Eric Larson with Buckingham Research Group.

Eric Larson -- Buckingham Research Group -- Analyst

Yeah. Hi, everyone. How are you doing?

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Doing well, how are you?

Mike Cockrell -- Treasurer and Chief Financial Officer

Doing well. Thank you.

Eric Larson -- Buckingham Research Group -- Analyst

I am good, thanks. Just a technical question. I was just what you guys were talking pretty quickly, what did you say that your second quarter production is targeted for?

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Our second quarter is targeted to be 1.093 billion pounds. This quarter, to put that in context was 1.063 billion and last year second quarter 1.091 (ph) billion. So, I'm sorry, did I say that wrong.

Mike Cockrell -- Treasurer and Chief Financial Officer

No.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Yeah. I said it right, 1.093 billion for Q2 this year.

Mike Cockrell -- Treasurer and Chief Financial Officer

That's right.

Eric Larson -- Buckingham Research Group -- Analyst

Okay, perfect. Thanks. And Joe, the other question I have here and I think we ask you every quarter this probably. We know what's going on with your capacity? Any industry news or anything you've heard how other capacity is either coming on or dragging order. Can you give us a feel on maybe the next 18 months of anything it was happened on industry capacity outside of what you folks are doing?

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

You know, I don't visit with other people, I don't go to meetings anymore. I just, if you look at the pullet (ph) placements. And if you look at the egg sets and the chip placements. There is not any huge expansion coming on. You know that announced expansions you have a new plant coming online in North Carolina and our plant coming online in Texas. Those are, I think are up and running. And so you can -- you can add those to the and then there is an expansion in Alabama of an existing plant. And you can calculate and see what those are and compare that with the exits and chip placements. And that's about 1.5% and that's what you see out there. And that's kind of what USDA says and that's what to pull it, there, hence lock will produce. And I think that's what you're going to see and I don't think you'll see.

I just say that's what the numbers say. Those are public numbers that USDA publishers and I'm comfortable with that number. I think that's right. I don't think there's anything different, any surprises and then you should have Nebraska plant will come on at the end of this year, probably I guess and then there's another plant coming on maybe the end of this year first of next year. And Tennessee, that'll be a -- both of plants will be 2020, they won't do anything in 2019.

But, our plant and the expansion in Alabama and the turn of the North Carolina plant, though the North Carolina plant that was built to replace a plant that was burned, those are not new chickens. Those chickens have been being processed already. We processed in last year and they've been processed in other plants. So you got two plants this year and an expansion, you got two more plants coming only the end of this year or first of next year.

And then different markets, where tray pack and another one is big bird. And so that's what you have and it's about 1.5%, when they get up and running will be up in running meaningfully by the fall. We will have 900,000 birds and we will get full production in 2020 by March, probably. So, I don't think there's anything unknown about that, just look at you egg sets and chip placements and thereby USDA, they tell you what you got.

Eric Larson -- Buckingham Research Group -- Analyst

Perfect. Thank you for the color again Joe.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

You bet. Thank you.

Operator

And we will again take a question from Ben Theurer with Barclays.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Good.

Benjamin Theurer -- Barclays -- Analyst

Sorry guys.

Mike Cockrell -- Treasurer and Chief Financial Officer

Welcome back.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Welcome back.

Benjamin Theurer -- Barclays -- Analyst

Those expansive voice over IP technology not so fancy I guess. Now coming, so the question was with respect to --

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Yes, yes.

Benjamin Theurer -- Barclays -- Analyst

What you're seeing in terms of -- what are your expectation in terms of the feature activity both retail and food service? Have you seen some initial indication for a better demand environment remembering how weak 2018 just loss throughout the main summer seasons? So is there any leading indicators or some sort of approach you have seen by some of the food service guys and retailers that make you feel comfortable that, with the production growth that's coming in the industry as a whole you guys with Tyler that you're actually going to be able to place that product at a hopefully decent price, that will be my first question.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Yeah, thank you. You know, particularly at retail. We've had a much better start to the year than we had last year at grocery stores. Last year, we didn't have a good start in January and now we don't have January, half of February and March, we have a lot of retail edge with our chicken. Last year we got off to a slow start, with all beef and pork. And so we're optimistic that about the grocery stores. We do not have a great deal of visibility even at, particularly at the legacy fast food outlets. We do not sell them, and don't do business with them. So we don't see that. We know chicken tender prices are up, and they're holding own, which is a pretty good indicator at food service, and boneless breast prices have weakened in February, a bit. And that looks like things have settled down a little bit last, this week.

But we just don't have visibility into food service, like some other people do. But I don't right now, again we did that in January, food services plan in January. We think some of that had to do with, before the government shutdown, the supplemental nutrition payments or food stamps were mailed out early for February, they were mailed out in January, before the government shutdown. So there was some additional money in the economy. And that helped retail a good bit and made February last alone longer without money. That didn't have any effect on food service. But it did that to grocery store, the last two weeks of February we're pretty slow, but March looks like we have a lot of ads booked in March for retail. So I feel pretty good about retail grocery being better than it was in 2018.

Benjamin Theurer -- Barclays -- Analyst

Okay, perfect. And then one on the potential implications from African swine fever. I mean clearly, there's more and more news coming out about the issues in China and the potential limitations in pork and we know it's an important producer of pork but also an important consumer. So the question is, if some of that US pork could disappear somewhere else in the world, not necessarily China just somewhere have it disappear, is there's anything you can already somehow quantify what the implications could be, or how do you feel about the potential implications from a further ASF issue in China and the implications specifically on chicken in the US.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

It's hard for me to -- you think, if you lose protein, and it moves around that'd be positive, also be positive for showing. I mean for us. They don't have the animal units, they won't need the soy and so the demand for soy goes down and that would be beneficial for us as well. But if you guys didn't have a deal with China, the pork that move from the US to China, and it appears at a -- my read of the extension of the talks are the US and China doesn't have a deal. So that's what they had to expand the negotiations, why? I don't know. But for sure, they don't have a deal, that's why they had to extend the tariffs and I just think there's still wish and hope in both parties again a deal. But I don't know where the pork comes from, I guess, Europe and maybe South America. But I can't quantify that.

Benjamin Theurer -- Barclays -- Analyst

Okay. All right. Thanks. Thanks on the soy stuff. Thanks. Have a good one. Thanks. I'll pass it on.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

You bet. You bet. Thank you.

Operator

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

Michael Piken -- Cleveland Research -- Analyst

Yeah. Hi. I was wondering if you could talk a little bit about the -- I know you guys made a decision to move off some of the antibiotics that have human use, but just the overall profitability of, I guess NAE chicken versus kind of traditional tray pack would be helpful.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

We have no intention of moving to NAE. Our customer base, that we -- we just, we don't feel like that's our market, and we'll leave that to others. And we don't for a lot of reasons, we don't think that's good for the animals. We don't -- we think it takes a -- uses a lot more resources, water and corn and say and lumber and had to bail more chicken houses. And we also think it's, you're running a risk of having more salmonella and bugs and everything else. And for us that's past we've chosen.

Mike Cockrell -- Treasurer and Chief Financial Officer

And Michael, we don't have any insight into what other people are making on that product.

Michael Piken -- Cleveland Research -- Analyst

Okay.

Mike Cockrell -- Treasurer and Chief Financial Officer

We did...

Michael Piken -- Cleveland Research -- Analyst

I mean, but you're not getting tax...

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

We think, expand further and it's a good thing for consumers to have a choice, and we don't, for us, it's just not past if we choose.

Michael Piken -- Cleveland Research -- Analyst

Got it. Okay, that's fair enough. I guess, shifting gears, could we get a little bit of an update on where we stand with, when bird weights might be able to start to back up. I know that we have a woody breast tissue and just how long is it years? Is it months before we might start to see the rate of weight start to go back up to historical levels.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

I think I've been wrong about this forever, you know. Sorry I'm the wrong person I guess. I think to bird weights came down in December because of profitability were challenging environment with prices, but I think bird weights but for us bird weights kind of hit a wall because of woody breast and also some customer concerns about wing counts and boxes and woody breast and things of that nature. You also have employee concerns about handling bigger chickens. And so we're pretty comfortable with our lab weights right now. We've tried bigger chickens and we think we're about right where we are for us. There are some people running some bigger birds than we're running, but we feel pretty good about where we are on our live weight. I don't know, I don't know, but we do a lot of. Go ahead, Lamp.

Lampkin Butts -- President and Chief Operating Officer

Well, I was just going to say, woody breast, two years ago, we were -- say, five or six years to fix that genetically. So, it's not over yet.

Michael Piken -- Cleveland Research -- Analyst

Okay, great. Thanks. I'll pass the line.

Lampkin Butts -- President and Chief Operating Officer

Thanks, Mike.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Thank you, Mike.

Operator

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

Adam Samuelson -- Goldman Sachs -- Analyst

Yes. Thanks. Good morning, everyone.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Good morning, Adam.

Adam Samuelson -- Goldman Sachs -- Analyst

I want to dig in, Joe, Lampkin, and Mike on the extra market a little bit more and just going off your earlier answer, it didn't sound like you have great hopes that if there is a trade deal that you're actually going to see a lot of fresh poultry move from the US to China, is that a fair characterization sound like you were talking mostly about the pause. And if we don't think that there's a big fresh poultry opportunity. Why?

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

I have no idea about that. I wouldn't comment, what I said was -- I was talking about the whole. I don't think the whole deal is -- I was talking about the whole trade, commenting on poultry at all. I don't know about poultry at all in -- I was talking about the whole negotiation, not about poultry in particular.

Mike Cockrell -- Treasurer and Chief Financial Officer

Which you know, historically, they have not been a big purchaser of chicken.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

No. I've said that, they've never -- they've never, when chicken in the past, when chicken got $0.25 a pound they quit that. We were always hopeful that someday they would become a major purchaser as their middle class expanded. But they've always been very protective of their local industry. And that's why I just recently I think, they're putting tariffs and protections against Brazilian poultry.

Mike Cockrell -- Treasurer and Chief Financial Officer

Right.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

They have put anti-dumping tariffs on Brazilian poultry, just in the last few months. And so I never ever thought I'm never believed that, but I wouldn't comment on that when I was talking about.

Adam Samuelson -- Goldman Sachs -- Analyst

Okay. I guess I interpreted, you talked about $20 million and $40 million, which I assumed was the par contribution.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Yeah.

Adam Samuelson -- Goldman Sachs -- Analyst

And you only polluted to that, specifically that was -- and that's specifically is it $20 million and then $40 million or is it 60 total in this phasing, getting that back or is it $40 million total $20 million extra -- or $20 million incremental next year.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

I wouldn't comment on that. He -- I thought he was asking me about dark meat. I thought he was talking about -- he was asking about linked quarters. It's about the same amount on both. If we got, if we were shipping powers into channel, it would be about $40 million based on current pricing, it's about $40 million pre-tax and --

Mike Cockrell -- Treasurer and Chief Financial Officer

For 12 months.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Yeah, over a 12-month period. Not if we started today. And then if we were to other project, we were contemplating he asked me about leg quarters and deboning, that's about $40 million project as well. But debt would be a 2020 story, more than it would be 2019 story.

Adam Samuelson -- Goldman Sachs -- Analyst

Okay, that's helpful and then just more broadly on the export market. Just any color on how demand has shaped up early in the year, like quarters have come up a little bit, but not dramatically so. I'm just trying to get your view on how long that looks like from some of the key demand regions.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Yes. Ben (ph) positive over the last, really February and going into March, we were at the end of last year, we were $0.26 to $0.28 delivered pork. Our current pricing is $0.30 to $0.31 delivered to the port demand is good from Mexico and the Mexico is our best destination right now. Kazakhstan is also gotten a lot better,

Lampkin Butts -- President and Chief Operating Officer

It's up, that's 31 port. But that, not quite as good as many think. Let's move it up more than we thought we would.

Adam Samuelson -- Goldman Sachs -- Analyst

Okay, that's. I really Appreciate the color. I'll pass it on. Thanks.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Good. Thanks, Adam.

Mike Cockrell -- Treasurer and Chief Financial Officer

Thanks, Adam.

Operator

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

Ken Zaslow -- Bank of Montreal -- Analyst

Good morning, everyone.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Good Morning, Ken.

Ken Zaslow -- Bank of Montreal -- Analyst

Just touching in terms of the current Chicken environment, do you think it's sustainable throughout the year? And what do you think the key drivers would be to keep it at these levels. Is it a material improvement from two or three months ago?

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Two or three months ago, when you're talking about November and December, any things better than November and December, any month of the year is better than November and December. February is better than November and December and just the time year spring is better than November and December. You have to know Thanksgiving and Christmas are not for chicken and, but you head into the spring and as just better and grilling season July 4th, Memorial Day. That was not good last year. We had no features and food service, fewer features at retail. Absolutely fewer, no doubt about that. Absolutely, and we're not going to have as many features that we did in 2015, because there's more beef and pork, but maybe more than we had in 2018. And we did in January and, but we -- it will definitely be better than November and December. We don't have the visibility into the food service market at some of the other companies do, but we have pretty good visibility at retail and we know March is going to be, we're going to have a lot of hedge in March. I don't, we don't know beyond that, but January part of February and March is not as far as we know, but March we have a lot of that activity.

Ken Zaslow -- Bank of Montreal -- Analyst

And you think that the increase in the -- call it, flatness of the pellet (ph) is representative of the new capacity coming online.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

I do. I do. I know ours is in there, and I'm assuming others are in there as well. They have to be there, if they are processing. I mean, I think for the place, there always had been fairly accurate.

Ken Zaslow -- Bank of Montreal -- Analyst

Right. I appreciate it. Thank you, guys.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Good to talk to you. Thank you.

Mike Cockrell -- Treasurer and Chief Financial Officer

Thank you.

Operator

We'll take our next question from Akshay Jagdale and with Jefferies.

Akshay Jagdale -- Jefferies -- Analyst

Hey, good morning. Thanks for that.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Good morning.

Akshay Jagdale -- Jefferies -- Analyst

I wanted to ask about your revenue per pound performance this quarter relative to the commodity prices. So, first thing I'd note. So overall, just if you just take purely the Urner Barry prices and the EMI Index for the whole bird, you're going to get down 10%, 11% year-over-year you guys were down only 2% year-over-year. The freight issue is about 1.2. It's not a huge difference. So I was looking through your -- the numbers you gave us in your Q and the one thing I noticed, as you said jumbo wing prices were down only 5% according to Urner Barry. Can you clarify that? I mean, I don't, I see jumbo wing prices down 20%, 30% for the quarter. So maybe that's just, we can follow up on that offline. But high level though, it seems to me that your price realized for whole bird tray pack was better than what EMIs saying which was down like 5%. So that -- can you confirm that I'm thinking about that correctly and maybe you can help me understand like relative to spot or relative to the prices we see where you saw better realization. I know quarter to quarter this tends to be some differences. But I'm just trying to understand there was a pretty big difference this quarter.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

When the Georgia Dock went away and I have forgotten when that was now.

Mike Cockrell -- Treasurer and Chief Financial Officer

December '16.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

A year ago -- two years ago. We -- a lot of our contracts with our customers, became mainly flat contracts. Some of them are based of EMI -- I don't even...

Mike Cockrell -- Treasurer and Chief Financial Officer

Just features Urner Barry.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

From Urner Barry, but most of -- them, mainly flat price with the range and then perhaps a grain escalator, incase grain moves a lot, but they're really basically they don't change very much. And that's why -- now that is not true about food service. I'm talking about retail -- tray pack. And so they don't change a whole lot and they might get -- some of, they might have a different ad quote or there are some flexibility if they need an ad or we need an ad, but mainly the day to day price does not change a lot.

Mike Cockrell -- Treasurer and Chief Financial Officer

And Akshay as I'd be honest, I don't look that EMI quote very often. I don't care, if don't use, but I will say sequentially, our pricing was flat. So if they're saying, down 5%, we absolutely realize more and overall again because of our mix, our tray pack pricing compared to last year's first quarter is up almost $0.02 a pound and sequentially one in a quarter or so -- so yes, we did realize better than what you're seeing in the EMI, that's the case.

Akshay Jagdale -- Jefferies -- Analyst

That's helpful. And what about wings. So, the Urner Barry wing, jumble or small wings, down anywhere from 20% to 30%, but in your Q you said you were maybe -- you were down only 5% or something, is that right or is that might be...

Lampkin Butts -- President and Chief Operating Officer

We compare it to $1.56.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Yeah, $1.56 -- first, we are looking at this first quarter versus a year ago, was a $1.63, a decrease of 7.76% or 4.7%.

Akshay Jagdale -- Jefferies -- Analyst

Okay. We will follow up offline. I'm seeing a $1.06, this -- but that, I mean, I'm just looking at Urner Barry quote, so we can follow on that offline.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

$1.06 million (ph).

Akshay Jagdale -- Jefferies -- Analyst

This quarter on average. No wings.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

That were...

Akshay Jagdale -- Jefferies -- Analyst

Yeah, we'll follow up offline. That's OK. So, just another question, just on demand. So you mentioned rightfully that there is low visibility in the food service channel. But before we get into that on the retail side. I mean, so when we saw prices really move up a lot over the last couple months, what we were hearing is the sort of the left over spot market loads were significantly reduced, right. So there is a whole bunch of breast meat that goes into food service and then there's leftover loads that's going into retail -- it seem like those -- very few of those in the market over the December, January time frame.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

January, primarily.

Akshay Jagdale -- Jefferies -- Analyst

Right. So did that reverse a little bit in February, what's driving the...

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

The last two weeks of February, all market slowed down. You had excess retail product, you had excess food service products and because we think those supplemental nutrition payments went out early in January and it was all spend. And the people run out of money in February. So, that we're not going to grocery stores. They didn't have money to go to the grocery stores, a certain percentage of the population that receives those food stamps. So, that 15th of February, retail grocery traffic was down. So we had two pretty good weeks, 10 days good and February, and then the market slowed down a good bit and so you had excess product at retail and the last two weeks of February, we're kind of like November and December. And it picked back up this week. You kind of get in first month...

Mike Cockrell -- Treasurer and Chief Financial Officer

First of the month. Yeah.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

March, should be a better month just seasonally.

Akshay Jagdale -- Jefferies -- Analyst

All right. And then, I know there's no visibility -- very low visibility for you and even your other larger competitors who have presumably more insights, they also have low visibility on the restaurant demand both from what -- what we have -- when we look back last year just talking to everyone in the industry, it seems like what happened is there's just a lot of burger promotions, there's a lot of beef out there in the market and that is all the volume went.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Yeah.

Akshay Jagdale -- Jefferies -- Analyst

So when you look at this year, there's still a lot of beef and pork actually on a per capita domestic availability basis. There is projected to be more protein beef and pork in the market than even last year. So, and it's a record level come -- over the last 30 years or something, so how do you think about that as a potential risk factor for demand for chicken.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

I think it could very well be a headwind as just -- I don't know if they are going do the exact same thing, that they did a year ago or if they want some variety. I don't think '19 is necessarily going to be exactly like '18, that started out last year with Wendy's advertising all fresh beef and then that change had no choice but to feature Hamburger, that couldn't let Wendy's run off and then it was -- hamburgers for everybody. And I think, we'll just keep running hamburger -- or I was going do something different. They have run some chicken sandwiches in last three months, and I'm very grateful for that. Although I don't sell them any. We've all had chicken sandwiches and except for the big ones, I don't think, they had one, have they? I know Burger King, and Wendy's have had chicken sandwiches -- McDonald's and I'm very grateful for that. We know there's going be beef and pork and we probably -- there's probably more than one year's worth.

Operator

And that concludes today's question-and-answer session. Mr. Sanderson at this time, I will turn the conference back to you for any additional or closing remarks.

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

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

Operator

That concludes today's presentation. Thank you for your participation. You may now disconnect.

Duration: 63 minutes

Call participants:

Joe F. Sanderson -- Chief Executive Officer and Chairman of the Board

Mike Cockrell -- Treasurer and Chief Financial Officer

Lampkin Butts -- President and Chief Operating Officer

Ken Goldman -- JPMorgan -- Analyst

Jeremy Scott -- Mizuho Securities -- Analyst

Benjamin Theurer -- Barclays -- Analyst

Eric Larson -- Buckingham Research Group -- Analyst

Michael Piken -- Cleveland Research -- Analyst

Adam Samuelson -- Goldman Sachs -- Analyst

Ken Zaslow -- Bank of Montreal -- Analyst

Akshay Jagdale -- Jefferies -- Analyst

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