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Sanderson Farms Inc (NASDAQ:SAFM)
Q1 2020 Earnings Call
Feb 27, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Please standby we're about to begin. Good day and welcome to the Sanderson Farms Incorporated First Quarter 2020 conference call. [Operator Instructions]

I would like to turn the call over to Mr. Joe Sanderson. Please go ahead sir.

Joe F. Sanderson Jr. -- Chief Executive Officer, 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 $38.6 million or $1.76 per share for our first quarter of fiscal 2020. This compares to a net loss of $17.8 million or $0.82 per share for our first quarter of fiscal 2019. I will begin the call with comments about general market conditions and then turn the call over to Lampkin and Mike for a more detailed account 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, Chief Financial Officer, Chief Legal Officer and Board Member

Thank you Joe and good morning everyone. This morning's call will contain forward-looking statements about the business financial condition 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 on the company's quarterly report on Form 10-Q for the quarter ended January 31 2020 which was filed with the SEC this morning thank you Mike. The results for the first quarter reflect continued challenging market conditions for products produced for food service customers at our plants processing a larger bird demand for retail grocery store customers has remained stable and that's the ability is reflected an overall average chill pack prices there were slightly higher than during last year's first quarter. On the other hand market prices for boneless breast meat chicken tenders and boneless for food service customers were lower compared to last year's first quarter and in fact quoted boneless breast meat market prices fell to all time lows in January and remained there and to February those prices have moved higher over the past week however.

Cash market prices for corn were higher during the quarter compared to last year while soybean meal prices were lower. Our feed cost per pound of chicken process were higher by 1.5 duration per pound when compared to chicken cost when compared to the first fiscal quarter of 2019. Both corn and soybean balance table to our healthy as we head into the 2020 planting season but corn basis remains much higher than last year as a result we about little point basis past April while we have most of our soybean meal basis about for the full fiscal year. The next events that will impact grain markets on the South American harvest on the March the 31 planting intentions report. The South American harvest is progressing very well and expectations now are for good crops from the region and is 2020 agricultural outlook USDA estimated corn acres in 2020 will be 94 million acres versus 89.7 million acres last year and then acres planted in soybeans would be 85 million acres versus 76.1 million acres.

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

Last year it is not unusual for the USDA to significantly revise its outlook before the March 31 planing intentions report. So we will be watching for that report. We have priced our grain needs through March. Have substantially all our soy meal basis for the full fiscal year but have low corn basis price past April. Based on our calls through the first fiscal quarter and what we have priced so far when combined with prices we put of locked in for the balance of the year at yesterday's close our grain cost for fiscal 2020 would be flat with fiscal 2019 based on 2019 volumes. I've told our shareholders at our Annual Meeting two weeks ago. Then in addition to grain crops in South America and the planning intention of United States farmers we are focused on several things as we start fiscal 2020. We will of course watch chicken production numbers. The USDA is projecting that our industry will produce 4.3% more chicken during calendar 2020 than last year which will compete with more pork as well. According to USDA data food placements are higher by over 2% inflation months and egg sets and chicks paid are trending higher by 4% compared to last year. I have several reasons to remain optimistic about 2020 first we are operating well in all areas of our business. While our model of selling fresh chicken in market prices does not compete with commodity market prices are at historic lows. Both our live production in our processing divisions start the year very strong position.

Second I believe grain markets will at. Finally our market prices for boneless breast meat produced at our plants processing larger birds for food service customer remain under pressure and market conditions during our first fiscal quarter were very challenging. We continue to be positive about our opportunities in both domestic and export markets over the next year. With respect to domestic markets we expect to see continued favorable demand in retail grocery stores. Chicken remain favorable priced compared to other proteins and we believe that that dynamic will continue. We also believe we will see improved demand from food service customers supported by an increase in promotional activities a quick service restaurants projected. With respect to the export markets the outbreak of African swine fever and China has affected the worldwide significant protein deficit that should ultimately benefit both in markets in the United States. At the end of 2019 channel lifted nearly five year ban on the import of United States poultry and we resumed shipments to China almost immediately. Since the ban was lifted we have shipped all our customer orders for approximately 18 million pounds of chicken products including dark meat parts to China. This includes 137 loads of dark meat and 283 loads of chicken feed.

We continue to receive strong indications of interest for our products from buyers in China and we were pleased to see the recent announcement regarding the reduction of tariffs on United States poultry which should further support our business. While corona virus is currently disrupting the markets. Depression demand and negatively affecting shipping logistics and slowing Chinese economic growth rate we believe demand for protein from China is strong and we expect to benefit in 2020 from the return to an open market. Finally we will focus our efforts on our growth operations in Tyler will reach near full production by August of 2020 and we are seeking a new site for our next plant.

At this point I will turn the call over to Lampkin for more detailed discussion That is chicken markets and our operations during the quarter.

Lampkin Butts -- President, Chief Operating Officer and Board Member

Thank you. Joe. Good morning everyone. Overall market prices for poultry products were higher by 2.58 cents per pound or 4% during the quarter when compared to our third quarter last year. Overall average market prices for products reflected good demand during the quarter and averaged just under a penny higher per pound during the quarter compared to the first quarter of fiscal 2019 based on mix improvements. prices were lower by quarter of a cent per pound sequentially again mostly only on these. prices during our first quarter average $31.5 per pound compared to $25.7 cents per pound last year.

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

Final number for calendar 2019. So the volume of all role at least explore in those higher by one half of one percent compared to 2018. The average quoted market price for jumbo wings was higher during our first quarter compared to last year and reflected a good. Jumbo wing prices averaged $1.61 per pound during the first quarter this year compared to $1.56 per pound during last year's fourth quarter. Boneless breast prices averaged $0.92 during this year's first quarter compared to $0.95 a pound last year. We sold 1.15 billion pounds of poultry products during the first quarter and 8.2% increase from the 1.06 billion pounds so during last year's first quarter. Our process now we're up from 1.06 million to 1.17 billion pounds that is 3 3% higher than our guidance for pounds processed during the first quarter as both the number of head processed during the quarter and lab weights were higher than our estimates. We expect to process approximately 1.23 billion pounds during our second quarter up from 1.08 billion pound processed during last year's second quarter.

We expect to process approximately 1.29 billion pounds in Q3 and 1.27 billion thousand in Q4. Prepared chicken sales were if you want by six million there are six million or 10.5% on four million. So our average sales price per pound of prepared chicken was higher about $5.3 per pound of $2.9 per share. We remain focused on our operations during the quarter and we will maintain that focus as we move down toward full production in April. As Joe noted our big bird product mix is a challenge in the environment we faced in November through February but we will continue to look for efficiency improvements and do everything we can to meet our goal of performance at the top of the industry.

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

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

Thank you. Lampkin. Net sales for the quarter totaled $823.1 million and that's up from $743.4 million for the same quarter last year. Our net loss of $1.76 per share during the quarter compared to a net loss of $0.82 per share during last year's first quarter. Our cost of sales of poultry products for the first three months ended January the 31 as compared to the same pretty much a year ago increased 17.9%. This increase was a result of more pounds sold and an increase in the average cost of goods sold. Ramp-up inefficiencies at Tyler and additional cost inherent and the tray pack plant a ccounted for $1.2 per pound of our higher cost of goods sold compared to last year's first quarter. We expect to get three quarters of $0.1 of that back by September 2020 non-feed related COGS were higher by $74.3 million or $2.7 per pound compared to last year. Several factors contributed to this. First lower than capacity volumes impacted cost per pound. The Brazeau and McCowan plants were down a week during the quarter for the installation of new equipment. Labor costs were up $31.7 million or $1.67 per pound compared to last year and fixed costs were higher by $8 million or just under $1.05 per pound as we have begun depreciating some of the equipment we've been adding to the plants over the last year.

The change in benefit of the reversal of the fiscal year end adjustment was 2/3 of the higher in Q1 2019 in this year. Our feed cost per pound of poultry products processed were higher at $25.97 per pound compared to $24.44 per pound last year while our cost per pound of poultry products sold were higher by $5.5 per pound our sales price per pound of poultry products increased only 4% or $2.58 per pound compared to last year and this combination obviously resulted in lower operating margins during this year's first quarter. SG&A expenses for the first fiscal quarter of 2020 were $9 million lower than the same three months a year ago. This decrease compared to last year is the result of a $1.4 million reduction in trainee costs the elimination of 9.3 million in Tyler start-up cost and lower stock compensation expenses. These reductions were offset by higher legal and other expenses. We're modeling 50 million for SG&A expenses in Q2 50 million in Q3 and 52 million in Q4 and these estimates include no accrual for a potential ESOP contribution or bonus awards. We spent 71.2 million on capex during the first quarter and we've approved $203.8 million in capex for the 2020 fiscal year.

The fiscal 2020 capital budget currently includes 40 million for several large scale equipment upgrades at our processing plants in Bryan Texas McCollum Mississippi and multi-Georgia. We've also budgeted 15 million during fiscal 2020 for new hatchery under construction right now in Jones County Mississippi and that will replace the overall Mississippi hatchery. Our depreciation and amortization during the first quarter totaled 36.7 million and we expect approximately $154.6 million in depreciation for the full fiscal year and we share that is all of our prepared remarks and you can now open the call for questions.

Questions and Answers:

Operator

Thank you. The question and answer session will be conducted electronically. [Operator Instructions] and our first question today we'll hear from Heather Jones per heather Jones Research. Please go ahead.

Heather L. Jones -- Heather Jones Research -- Analyst

Good morning and I apologize for the background noise on the airport. Good morning. But I. Good morning. I wanted to to ask a quick question about on the cost using the pounds which you all are projecting for Q2 and given some of these conversions are over. How should we be thinking about non-feed cost per pound in Q2.

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

Yeah you're not the labor going anywhere you're going to get back the inefficiencies at Tyler three quarters of the cent pound you're going to get a little bit of that back in Q2 your volumes are going to be higher which are going to help you might model a penny lower but I wouldn't model any lower than that and then you're going to get some more back in Q3.

Heather L. Jones -- Heather Jones Research -- Analyst

Okay and then and then go one to China. So talking about the tariff reduction that they announced. Now my understanding is that the different distributors have to off of that and then they awarded it it's not like a blanket it's not like appointed labor is that is that correct.

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

That is correct there is we had published the list of things that they the tariff long completely the poultry was not all it but they allowed the importers to a flat with that tariff exemption which they've all once we deal with dollar.

Heather L. Jones -- Heather Jones Research -- Analyst

Yes. So the ones you deal with you sort of all the parcel waiver and they going. Okay. Okay sir. All right. Run 30% that still in place. Okay and given that waiver. I mean how competitive is US product into China right now. Well it's pricing in If exhaust the 30% is just going to be more that much better growth. Yeah. Yeah look I think lot of So this competing and then the final question is on the strength that we've seen in the market. Is that in your view is that mainly just seasonal strength to have you started to see any of the step in and buy for their anticipated needs like what do you think is driving this recent strength.

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

I think its several things. I think was the price of the bone right now I think it's about market share. We are exporting a good bit of boneless in the Mexico right now Brazil has no quota right now to ship any bones in the Mexico so and with our price the U.S. ship a good bit of boneless. We believe that for the processors are ban a good bit of boneless at these prices and fabricating and putting boneless away right now in anticipation of higher prices. We also believe without knowing that there may be some quick service restaurants putting some product up for features that are going to break in the spring. I think all those dynamics are ahead.

Heather L. Jones -- Heather Jones Research -- Analyst

Okay perfect. Thank you so much for the caller.

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

Thank you.

Operator

And next we'll move to Peter with Bank of America.

Peter -- Bank of America -- Analyst

Hey guys, good morning. Thanks. Thank you for taking the question. Joe there were some reports out this morning that some of the ports in China have actually started to lower the wait times to offload product from ships and I'm just wondering from any of the important you spoken to you just over the past couple of days. Have you heard about any incremental easing as people are returning to work that they're actually able to move more product through the ports in a more orderly fashion.

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

Well it's gotten better. I ask Anthony this morning he had not heard anything because that's all that I saw that same report Peter but I heard that from our guidance. I haven't heard it has been in the last couple of days. But I will say It's a little slower getting stuff out of the port that we had missed we haven't we've had everything we show the schedule extent we had four load diverted to a different ports in Korea everything else we've gotten any.

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

Yeah. But it's kind of without of all we shipped over there and we started shipping right at 1st December and we don't ahead four vessels that were diverted and we've probably I don't know how many landed but we got and they may go for more port in China to another port in China but we got all we've got now almost every one of our and it's kind of getting back getting slowly back to normal.

Peter -- Bank of America -- Analyst

Got it. No that's really helpful. And just a quick clarification on the tariff comments. Is it your understanding that the waiver as you're important apply for it would go to that 0% effective March 2nd similar to the other proteins that would just be helpful to clarify. Thanks.

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

Well if approved we don't know about the approval yet but understanding it would happen quickly if the China approved.

Peter -- Bank of America -- Analyst

Got it OK. Okay that's helpful. Thank you guys.

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

Thank you.

Operator

Next I move to Ken Goldman with JP Morgan.

Ken Goldman -- JP Morgan -- Analyst

Hi thank you for the question. I have two quick ones. One what's your appetite for buying back stock at these levels and two is there any reason to expect earnings to be anything other than positive in the second quarter as you see it right now. I think Ken Zaslow asking these brief bottom line questions I'll still some of the standard. I gave you the first one. With that to be able to plan and then $70 to $75 dollars some group as where you batch rather than build the plant.

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

I think there is a target last time we looked at it and rather these prices you better I'll build a plant and what the second question.

Ken Goldman -- JP Morgan -- Analyst

To that point two we bought start by $800000 shares back and under the 100 we never borrowed money to buy back stock. I don't just a question $128 is kind of getting like up a little bit but we hadn't borrowed money to do that in the past and then the second question then in revenue or was the second hole profitability. Yeah you're making to predict

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

I mean we sell breast I said in the sense pound work I will observe this will you probably notice that we did not book a lower of cost or market entry at the end of the first fiscal quarter so we obviously think is going to be much improved but don't know that at March and April ago and yeah that's right which has got to improve dark meat is improving. March dark meat is going to be better than February the boneless has got to get 68 pound and we have seven plants deboning and doesn't matter of what we paid for corn when you sell boneless same research pound.

Ken Goldman -- JP Morgan -- Analyst

Understood. Thanks guys.

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

Thank you.

Operator

Next we'll move to Benjamin Theurer with Barclays.

Benjamin Theurer -- Barclays -- Analyst

Hey good morning Joe Lampkin Mike thank you to taking my question. So I wanted to follow up and put a little bit into perspective what you've been shipping to China. So you've mentioned in the press release and in your prepared remarks that you've had shipped approximately 18 million pounds. How has been the velocity of shipments over the call that last four to five weeks since a more severe Corona virus outbreaks in some of the delays in the offloading in China have you continue to ship have you slowed down shipments We as I remember you gave guidance last quarter call in December on your potential benefit from the chicken fleet sending shipping them over so just to understand if there is going to be a revision on that number because of lower levels of shipment.

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

No we continue to shift we haven't slowed down anything and as I mentioned earlier everything we've gotten over that has gotten into customers we have a slow down.

Benjamin Theurer -- Barclays -- Analyst

Okay and how is your progress on getting the quality of the cost because that was one of the discussions we had two months ago on the grade A where do you think your target is going to be have you started to further improve that work on that just to get a feel off what the potential volume could be.

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

Yes it's gotten better we've still got some work in but it's slowly gotten better in terms of the flat they in trying to pack them and cloud becoming out of the houses but it's not have been go where we long it across the board and I don't know we recalculated our with that power markets worth of what we've done so far market prices. We can recalculate that we haven't done. Today pre-tax is $65 to $70 million and if we could add $30 to $40 million to that. If we can get everything right to the cost coming out of the house and the grading in the plant we can add $30 to $40 million to that we believe.

Ken Goldman -- JP Morgan -- Analyst

Okay. Now that 65 to 70 is that for fiscal 2020 or is that an annualized figure. That's fiscal 2020.

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

Okay. annualized.

Benjamin Theurer -- Barclays -- Analyst

Okay perfect. Well thank you very much for that.

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

Thank you Benjamin.

Benjamin Theurer -- Barclays -- Analyst

Thanks.

Operator

Our next move on to Ben Bienvenu with Stephens.

Ben Bienvenu -- Stephens -- Analyst

Hey good morning.

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

Good morning Ben.

Ben Bienvenu -- Stephens -- Analyst

Mike I think you made some comments around McComb and process being down in the quarter for equipment upgrades. I think poultry is supposed to be down we can

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

It's done.

Ben Bienvenu -- Stephens -- Analyst

It's done OK. Are there any others scheduled for the maintenance upgrades or equipment upgrades.

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

We have to put some dark meat deboning but we have delayed primarily because of China business and so we don't have anything else scheduled right now.

Ben Bienvenu -- Stephens -- Analyst

All right and then Joe you mentioned it's been difficult the price you're corn basis any thoughts on when you think that improves and following the question that keep it simple. question.

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

I don't know. We frankly we book yesterday we went out first of the week and so basis through July and it will still sky high and we just looked April and my thought is perhaps it might get better when the March 31 planting intentions come out and if it comes out was a big number 92 93 94 million acres that might break something to lose but it's not a mobile hand-mile. I have no need to go out and I mean the basis has had it has I've ever seen and in the East for constant an ideal it's got had but how they have they have a small crop variable how and Indiana. I understand that but not in the Midwest" I don't want external and Nebraska and I understand farmers being upset about prices in both the price zone Chicago Board they are the price has been low for them since 2012 and they're hurting and I got that but I'm sort of boneless breast for said central pound we feel they're paying I'd say I'm going to emphasize but I'm not going to pay but you have to sell it. Yeah.I still fair enough.

Ben Bienvenu -- Stephens -- Analyst

Thank you all.

Operator

That's a lot thank you Ban. and thank you and next we'll move to Robert Moskow with Credit Suisse.

Robert Moskow -- Credit Suisse -- Analyst

Hey guys thanks for the question. This is Jay Bosch on for Rob just a quick question on pricing I guess you mentioned that food service specifically quick serve demand should ramp up this year seeing some promos in the spring. Can you just provide some color on I guess how this would exactly benefit the overall chicken pricing environment considering and correctly from wrong but most of the quick-serve supplies are from smaller birds and it's a way smaller portion of total supply growth. So I guess what would happen with the bigger bird supplies and would that continue to pressure pricing I just trying to get some just some color on just the how pricing with improved some quick serve branded credit we see in the.

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

In the past we've seen the best market prices for boneless skinless breast breast sandwiches are move breast items featured heavily on television nationwide. We've seen that when McDonald's and Burger King and Wendy's and they're all promoting we see enough demand for boneless breast and I'm talking about part of a Jumbo plant that it moves the market and weigh those three I mentioned we don't sell any of them directly but when they thereby and sell on a lot of product to the restaurants the markets respond yet.

Robert Moskow -- Credit Suisse -- Analyst

Then you can take out of out of our plants out of a nine pound reporter found chicken and fabricate a four-ounce patient chicken out and that's what happens a lot of times. When there is not enough of the 7.5 pounds chicken or the uptake our our boneless and could that forward 4.5 pounds portion out of our bones.

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

We've seen some of that we've actually sold some the fabricators who have turned around and sold it to another fast food company that's got a really popular same right now. But even that rationally as a result of 6.5 to seven pound and they cut it and not.

Ken Goldman -- JP Morgan -- Analyst

Yeah. When they were very helpful thing.yeah helpful. Thank you. I just a follow-up just kind of an overall supply. Question is for the market. When should we expect to see the elevated supply levels going to taper off the 4% is kind of the high end of the range. Yes. Is it largely coming from capacity expansion and if so when should we see that expansion going to taper off. Just in terms of the from what you tell when should we see more balanced supply demand dynamics

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

I think point likely to happen is I think china and the China business and what we believe is going to happen in quick service restaurants is going to bail the industry up and 4% would be too much along with the pork and as too much protein but we're probably we do not get bailed out because the export market and because of the feature business that we think it's going to happen now when that export market disappears whenever that is and I don't know when that's going to be and when this future business disappears and I don't know when that's going to be and now that we meet then and you will go through a period of losses and when that happens that's 4% will disappear.There will be a time of challenge and that's when the 4% goes away but I think the industry get bailed out this year because of extraordinary circumstances in China and chicken challenge going to be a catalyst for early chicken sandwiches and I think events are going bailed by over industry out in 2020.

Robert Moskow -- Credit Suisse -- Analyst

Got it OK. I guess I was more focused on this specifically supplies in terms of is the 4%? Do you think is that largely the elevated number there? Is that largely coming from capacity expansion or is that just more utilization of existing so existing plants and I guess if there is some expansion when should we see then finally taper off if you have if you have any color very helpful. Thank you.

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

Well I think it's from expansion if you look at ship placement they and half it's run about eight million a week and half of that was announced that Sanderson COSCO we're in segments and our neighbor up in North Carolina. Right about half today you account and Cook and Wine and added line and that will account for about roughly about $4 million a week. All that put together roughly and then there is another $4 million that just showed up and I have date million a week and took placements and so that's people that have just either I didn't now so just showed up and people at a weighted a run their lines from 140 to 1.75 or added a land or something nobody knows about so that is the result of tremendous profitability in 2014 2015 2017 want to expand and that's what they did and so what's going to stop there is red ink and when that happens it will go away and when I think 2020 entry don't get bailed out maybe 2021 as well.

Ken Goldman -- JP Morgan -- Analyst

Yeah OK. Yeah. Thank you very much. Appreciate. It

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

You bet.

Operator

And next we'll move to Eric Larson with Buckingham Research.

Eric Larson -- Buckingham Research -- Analyst

Yeah. Good good morning everyone and thanks for taking my call.

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

You there.

Eric Larson -- Buckingham Research -- Analyst

You know I saw a couple of things. I'm curious on the persistent increase in weights if the industry holding back a little bit Joe just hit feel for hoping that they get a perennial increase in price and and it's a little bit sort of inconsistent with what we hear that your quality of grain feed you want just not call is good this year. So you actually have to feed more grain so I guess could you talk about the persistent increase in weights that we've seen and what happens there.

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

Well we have had a very mild winter and our weights at our company got way out of land in January and so we had to run probably very Saturdays at big bird plants to get our weights back down to our target weight and our weights are back to normal and I believe we're at least a day younger might be two days younger right now than we were a year ago and on our big bird but our conversion rates are yes spectacular right now. I don't know what corn and soy I hadn't heard you manage having said on. Yeah I don't think our corn. Yeah. But I think the industry ran a lot. I think that's what happened in January to bounce back the industry had run a lot of Saturday's to get our weights down a little bit but the weights we see in indicate the industry has a heavier bird particularly in the big bird deboning region. Our segment definitely a bigger bird in that and that category.

Eric Larson -- Buckingham Research -- Analyst

Got it. Okay. Yeah. So maybe just the whole industry has experienced this kind of very mild winter and they're trying to do this catch up and stuff here as well when you kind of look at you've drifted up in boneless over the last 2-3 weeks a bit but you've drifted down in wings which is kind of counter seasonal because you're going into March madness and when you generally get that big wing demand and so we've seen a little bit of drop in I think in quarters and in wings recently and this is the weakness here near term is just maybe a blow off of people trying to catch up with weight for across the industry is that that possible.

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

Yes quarters are going up right now. By the way at March leg quarters are going be a very fortunate pound don't know about wings here they had made a move yet boneless and leg quarters though are both going up and we intend or anything that we think they bottomed out.

Eric Larson -- Buckingham Research -- Analyst

Got it.

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

We're a little too early for March Madness to hit the winning but it's common.

Eric Larson -- Buckingham Research -- Analyst

Yeah I would I would assume that you're probably getting pretty close to the actions you're only a couple Saturday Sundays away here from selection day and I would imagine you to tell you need a couple of weaker to get that but the final question that I have here and we get this cold storage data I'm not sure how relevant It is and I think you made a comment to me once that you thought that maybe also in pork that that there is a bunch of meat just going into in the cold storage is sitting in ports in New Orleans it's already sold for shipment but its getting caught up in up in this cold storage numbers is they may be distorting the numbers. How do you feel about. I mean is that makes sense and how should we think about that.

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

I think cold storage data is important and which I had bought that with me. First thing in a cold storage saying is look at last category what virtualized and I take that and almost half of that 950000 pounds one million billion whatever it is 950 million and we don't know. We think that is an error and I don't think anybody knows what that is.

Eric Larson -- Buckingham Research -- Analyst

When we see that total number run in that we think that's too much and it sort of matches up with the cold storage as we deal with they all busting. The total makes sense. I don't think that. I don't know if they report to categories right.

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

The breast meat too much but we pack beginning in November we packed frozen breast meat for one of our customers and every year when the market goes down to these levels the boneless breast meat or further processor but the boneless breast meat in the freezer that we will pull out in spring when bonus at 68 pounds and he will pull that out and when boneless breast meat goes to $20.30 he will pull it out and running and further processed so it doesn't surprise me and the quarters that involves but I think that is stage and go that I can understand breast meat and I understand the late quarters.

Eric Larson -- Buckingham Research -- Analyst

Okay.

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

As the category is the one nobody knows what it is that is the one that bothers me a little bit. I do think that is made as significant and it could be this other category that might be something that supposed to be Chicken wobbles of the got enough

Eric Larson -- Buckingham Research -- Analyst

Yeah that's very helpful. I mean I mean it's something like critical to slide pull it up what we are talking and about half of that increase in the last report was in that Other category. So if that's a mystery to it's certainly industry to us I think that's the one that is I don't know what that is. Got it OK. Yeah thanks guys I appreciate all the insight here.

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

You bet. Thank you.

Operator

Next we'll move to Mike Piken with Cleveland Research Company.

Mike Piken -- Cleveland Research Company -- Analyst

With that thanks guys. I am taking a longer term. Good morning. Taking a longer-term view. Do you guys think maybe the Corona virus create the situation in China where there more dependent on imported proteins and kind of be releasing.

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

I've seen that I've seen that theory bedded around you know at the end of the day it's unprecedented and by definition that means we don't know exactly how is going to play out but the theory is the province where they've had most of the problems and where the core team has been most severe is where a lot of chickens and other protein or processed and they have been able to get feed in there to feed the animals and what market is is going to be closed. Yeah I mean I think theoretically that makes sense but at the end of the day as wait and see what I'll get they want to do it they can go to commercial they can go a large-scale commercial chicken processor. Yes and so the lab birds. No they can you go to a commercial poultry industry in China over the long term. Yes that's a short-term they will have to import that could close the wet markets and go to commercial in commercial poultry industry but for the short term over the next three four five years but the problem they have as they had they been danger.

Mike Piken -- Cleveland Research Company -- Analyst

Thank you. The second one is you guys mentioned the new plant. I guess given the tightness and small bird and the relative strength in that category are you guys maybe be looking to add in the small bird category or how are you guys thinking. Where you guys want to add capacity many plan once you guys kind of choose location.

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

We would add either tray pack for big bird deboning we would not do small bird.

Mike Piken -- Cleveland Research Company -- Analyst

Enough thank you.

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

Absolutely. Thank you.

Mike Piken -- Cleveland Research Company -- Analyst

Thank you.

Operator

We'll hear from Adam Samuelson with Goldman Sachs next.

Adam Samuelson -- Goldman Sachs -- Analyst

Oh, yes thanks good morning everyone.

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

Good morning Adam.

Adam Samuelson -- Goldman Sachs -- Analyst

So it may be first Joe you alluded in one of the earlier questions to exports and QSRs bailing out the industry this year I mean just how do you frame what is bailing out just meeting avoiding losses or does bailing out in your mind mean prospects of above long-term average margins. I mean there is just a wide range of outcomes would have all pricing has been I think we have just narrow kind of what that could be.

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

I think that the China exports could probably take all of this 4% expansion in pounds and it's going to be dark meat primarily and I think they could take all of the expansion in pork and that taken those extra pounds of the market I want to get going going two things thanks to dark meat out of the U.S and it takes support that's going to have two ways it's going to have us at retail taking the port and is going to have push having the industry I'm talking about. But taking the dark meat. I also think I believe they're going to be features at QSR on chicken sandwiches. I think they have to get into the ballgame. I don't have any inside information on that but I think they cannot allow competitors and not not steel and let two people dominate the chicken sandwich segment the other players have to be relevant in there and so that's why I said what I do.

Adam Samuelson -- Goldman Sachs -- Analyst

Year OK. No that's very helpful color and then my second question was on the retail market and just how you've kind of alluded to a balanced kind of supply demand and pricing mostly on mix is up modestly but I'm just trying to get a sense as you look forward for the next kind of couple of months how kind of feature planning is going looking at the USDA data. Year-to-date. It seems like feature activity is pretty similar to last year. I'm wondering what you're seeing in engagement with retailers you think there is a pick-up coming that could could take some more breast meat off the market. Thank you.

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

Upgrade seasonally. I think we will get seasonally better demand and better feature activity in replay.

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

It hadn't been it has not been it has not been. Great tell you the truth. We got first to January like we always do right after Christmas but February has been pretty slow. If this pork gets exported like we think it will that's going to help us a great deal but hog prices are very cheap and it's hurting us with features that grocery stores right now. It has been very slow in February. Prices have held up but we are not yet in February. We're getting very little feature activity.

Adam Samuelson -- Goldman Sachs -- Analyst

Okay. I know that color. If they at least will be better at least for asking. Okay. That color is super helpful. I'll pass it on. Thanks.

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

You bet. Thank you

Operator

And next we'll move to Ken Zaslow with Bank of Montreal.

Ken Zaslow -- Bank of Montreal -- Analyst

Thanks. Good morning. Just a couple of questions follow-ups. More than anything else when you think about production levels. What is your full-year production and how do you think breakdown down between the first half so that the redemption levels first up versus second half.

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

Yeah, I think they going to be the same.

Ken Zaslow -- Bank of Montreal -- Analyst

Building that industry production? The industry production for the year what we are going to say is there is a lot more coming in the front half and then maybe slowdown but I don't know if you believe that or not. There is a couple of things out there.

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

If the industry as profitable which I think it will be you know say April May the breast prices in that quarter did work. We think they are going to and I think you will have the same. We will have this 4% increase all year.

Ken Zaslow -- Bank of Montreal -- Analyst

Okay. You keep I referred to the idea that you want to build more capacity that we've been a long-term thought. Recently that you said there has been labor constraints and the ability for you to get has that changed or do you feel the easing of that where there is a great problem that you will be able to seek plant?

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

Well we hadn't been able to plan this site with ample labor yet but there are 50 times we look for. One of the things you can do about locating a side I won't tell you every time. You could go back and look 10 years back and see what the unemployment rate was 10 years ago or 15 years ago and say what historically unemployment was and you might see what the labor was and anticipate that you're going to have a recession and looked at something in the past and not what it is today and today everything is hot it's a pistol but if you go back and look and see what it was 2007 which was a normal year and see what unemployment was then and labor availability was and look at that and that might give you some of there which could expect from the economy gets normal and there are other thing we look forward You can have well for facility and for our growers can drill wells. That's a couple of things we look for objectively assess 50 50 plus things on it but those are a couple of things.

Ken Zaslow -- Bank of Montreal -- Analyst

Great.

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

The right now. Right now you can find any place has plenty of labor yes would buy back yes sorry. Go ahead.

Ken Zaslow -- Bank of Montreal -- Analyst

Sir can you continue I. That's why I thought I'd just seem like your tone change that you will given where your stock prices. I think it was one of the first question that you would prefer to fill but your tone change where hey we're finding more opportunities to build but it doesn't seem like that has changed is that fair?

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

That's fair.Yeah we will have a new today.

Ken Zaslow -- Bank of Montreal -- Analyst

My last question is in terms of the logistics of getting product to China I think you made it pretty clear that you're still getting other do you think it's more of a desire and willingness for China to buy. What do you think it's more logistics. I guess I'm trying to think I think that's more of the question because it seems like is obviously there but what's going to give China the desire willingness to actually really change their direction is more political relationship with President Trump or how does that just I guess that's a pretty loaded question but is it more desire or logistic issues and what's going to change and I'll leave it there?

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

You mean do you mean to go ahead and start pull and product year?

Ken Zaslow -- Bank of Montreal -- Analyst

Yeah exactly really moving exports right. You actually we moved a little bit yes.

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

They need the protein right now they don't have the demand that they will because of the Corona virus and people are just now starting to move back around again. They've had restaurants. I mean they had local ordinances banning restaurants from opening I had needed protein over the last month because the corona viruses is going to groceries I mean their whole economy is disrupted once that settles down and they don't need more I know there is a big question mark about corona virus not just there but in other placestoo but what they're going to need it. They going to need more with in the year. I think that's.

Ken Zaslow -- Bank of Montreal -- Analyst

Thank you.

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

Yeah. Thank you Ken

Operator

And that will conclude the question-and-answer session. At this time I would like to turn the call back over to Mr Joe Sanderson for any additional or closing remarks.

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

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

Operator

[Operator Closing Remarks]

Duration: 64 minutes

Call participants:

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

Mike Cockrell -- Treasurer, Chief Financial Officer, Chief Legal Officer and Board Member

Lampkin Butts -- President, Chief Operating Officer and Board Member

Heather L. Jones -- Heather Jones Research -- Analyst

Peter -- Bank of America -- Analyst

Ken Goldman -- JP Morgan -- Analyst

Benjamin Theurer -- Barclays -- Analyst

Ben Bienvenu -- Stephens -- Analyst

Robert Moskow -- Credit Suisse -- Analyst

Eric Larson -- Buckingham Research -- Analyst

Mike Piken -- Cleveland Research Company -- Analyst

Adam Samuelson -- Goldman Sachs -- Analyst

Ken Zaslow -- Bank of Montreal -- Analyst

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