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Sanderson Farms Inc (NASDAQ:SAFM)
Q2 2020 Earnings Call
May 28, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Sanderson Farms, Inc. Second Quarter 2020 Conference Call. [Operator Instructions] And 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 Jr. -- Chief Executive Officer, Chairman of the Board

Thank you. Good morning, and welcome to Sanderson Farms Second Quarter Conference Call. We published second quarter results this morning announcing net income of $6.1 million or $0.28 per share for our second fiscal quarter of 2020. This compares to net income of $40.6 million, or $1.83 per share, during last year's second quarter.

Results for the quarter include the recognition of a $37.4 million net discrete income tax benefit related to the net operating loss carryback provisions of the CARES Act. Excluding this item, our net loss for the second fiscal quarter of 2020 was $31.3 million or $1.43 per share. Before we begin, 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 to everyone. This morning's call will contain forward-looking statements about the business, financial condition and prospects of the Company. The actual performance of the Company could differ materially from that indicated by the forward-looking statements because of various risks and uncertainties.

These risks and uncertainties are described in our most recent Annual Report on Form 10-K, our Quarterly Report on Form 10-Q filed this morning with the SEC and also in our press release that we published this morning.

These documents are available on our website at sandersonfarms.com. You should not place undue reliance on forward-looking statements we make this morning. These statements speaks only as of today and we might not update or revise our forward-looking statements. External factors affecting our business such as feed grain cost, market prices for poultry meat, the health of the economy, and of course, the COVID-19 pandemic among others, remain highly uncertain and volatile, and our view today might be very different from our view a few days from now.

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

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

Thank you, Mike. I would like to start as I did on April 2nd -- on our April 2nd call by saying how especially proud I am of our employees, our contract producers and our customers and vendors, and the communities and states in which we operate for their hard work, dedication and perseverance during this unprecedented crisis.

Our employees and contract producers are coming to work every day to support our ability to produce and deliver safe, high-quality and affordable chicken products for consumers and our customers. Like all of us, they are dealing with uncertainty and anxiety, but they are coming to work, and I'm very grateful for that.

We are also grateful for all of the healthcare professionals, first responders, and others on the front line of this crisis, who are working tirelessly to protect public health. We express our sympathy to those who have been affected by COVID-19 including our employees and their families.

I summarized for you on April 2nd, some of the actions we have taken in light of the current crisis to protect the health, safety, and welfare of our employees, and I refer you back to those. We have provided more information about our actions in our 10-Q filed this morning, those steps which we developed and implemented using the Center for Disease Control guidelines and in consultation with local and state health authorities and experts in the field of infectious disease, have evolved and will continue to evolve as we learn more about this virus and how to prevent its spread.

Our approach has been conservative, deliberate and based on the advice of medical professionals. We will continue to do everything possible to protect the health, safety, and welfare of our employees, and that will remain our top priority as we navigate and manage through this pandemic. Our financial and operating results for the second quarter of fiscal 2020 reflect the impact of the extraordinary challenges caused by the COVID-19 pandemic.

The unprecedented social, and economic impact of the virus and the related government actions to contain the spread, materially affected our business, including our labor force, our sales, operations, and production levels. The volatility caused by this event is probably best illustrated by the range of market prices this spring [Phonetic] for boneless breast meat produced at our plants that target food service customers. Quoted market prices for boneless breast meat was seasonally higher in late February, and reached $1.35 per pound during the fourth week of March.

Less than one month later, the quoted market price was at an historic low of $0.74 per pound, with some realized prices below $0.50 per pound. However, prices trended higher at the end of April, as certain parts of the country began to relax restrictions put in place to mitigate the spread of the virus and as red meat production came under pressure. That trend continued into May and the quoted market price for boneless breast reached a $1.58 per pound in mid-May.

Then, as distributors and food service establishments rebuild their inventories, prices moved lower again. The current quoted market price for boneless breast today is $1.31 per pound. Our average sale of price per pound of fresh and frozen poultry decreased 8.3% during the second quarter of this fiscal year compared to the same period last year and was lower by 2.5% through the first half of this fiscal year, compared to the first half of last year.

Demand for our products shifted among our customer base during the quarter as orders from food service customers declined dramatically due to shelter-at-home orders and widespread closures of wet restaurants, and other venues where food is consumed away from home.

At the same time, orders from our retail grocery store customers surged. We were able to shift production from our food service program into our retail program to some extent, and overall, we processed 4.2% fewer pounds during the quarter than we expected to produce when we announced our first quarter results on February 27th.

Moving into our third fiscal quarter, we have reduced egg sets relative to our expectations, and we now expect to produce 5.9% fewer pounds during our third fiscal quarter than we projected in February, as we shift production into our retail grocery store program and reduce production levels at our plants that process a larger bird for food service customers.

Market prices for tray pack products sold to retail grocery store customers were steady during the quarter, but the surge in demand from our retail grocery store customers improved our product mix and volume, realized prices for tray pack products improved just over $0.5 per pound sequentially, and were up year-to-date, just under $0.5 per pound compared to last year.

Export markets were soft during the quarter with the exception of China and for much of the quarter, Mexico. Many of our regular export partners simply don't have the liquidity to purchase product. Now with the price of oil at historic lows, countries that depend on the oil markets to fund their economies can't afford to buy chicken. While volumes in China were strong during the quarter, China has a little competition in the world market. So they have been able to buy our product for relatively low prices.

We have been discussing for 18 months, the impact African swine fever might have on Chinese demand for protein, and that demand has materialized. Orders for products, other than chicken products have softened during May as Chinese consumers have been slowly returning to restaurant and as the pipelines have been filled. Prices paid for corn increased slightly during the quarter compared to last year, while soybean meal prices were lower during the quarter.

The USDA updated its 2019/2020 grain balance sheets and published its first look at projected 2020/2021 crop balance sheets on May 12th. That report confirmed the United States and the world have adequate supplies of feed grain. The 2019/2020 corn balance sheet remains quite healthy, as the pandemic has negatively affected demand for grain, especially for corn used for ethanol. Estimated carryovers for the next year -- for this year, remain above 2 billion bushels.

For next year, the USDA assumed trend yields combined with 89.6 million harvested acres to get to an ending stock projection of 3.3 billion bushels at the end of the 2021 marketing year. Soybeans are also well supplied. The ending stock estimate for 2019/2020 was close to trade estimates at almost 518 million bushels, and that represents a near 15% stock-to-use ratio.

For the 2020/2021 year, the stocks to use ratio falls to 9.4%, but were 405 million bushels to carry into the next year. The soybean balance sheet is healthy. At the end of the day, of course, estimates for 2020/2021 do not mean much today. Weather, trade issues, the length of COVID-related economic slowdowns, and other wildcards will affect these estimates in significant ways.

The WASDE report was constructive, and absent of weather events this summer, we believe we will have an opportunity to price growing at levels below a year ago, so we remain patient. Given where futures prices closed yesterday on the Chicago Board of Trade, had we priced our remaining needs through the end of the fiscal year at yesterday's close, cash corn and soybean meal prices during fiscal 2020 would be $49.1 million lower than a year ago.

These numbers do not include the additional volume of grain we will need to purchase this year to feed the additional chickens we have on the ground in Tyler. These lower costs would translate into a decrease in feed cost of $0.69 per pound of chicken processed for the year compared to fiscal 2019. Feed cost per pound of chicken processed through the first half of the fiscal year averaged $0.2555 per pound. Had we priced our remaining needs yesterday, feed cost per pound would be approximately $0.2366 per pound in Q3 and $0.2325 per pound in Q4.

In addition to our cost, we will be closely watching the chicken markets and production numbers. Weekly egg sets as reported by the USDA had trended significantly lower in recent weeks in response to demand restructuring, particularly from food service customers caused by the COVID-19 prices. Chick placement and hatch rates have also traded materially lower. We will continue to do our best to balance our supply with customer's demand.

Looking forward to second half of the year, I continue to believe grain cost will be lower, absent an unfavorable weather event. The chicken markets could be more volatile than we have ever seen. On one hand, we expect retail tray pack demand to remain strong as the country slowly recovers. Government restrictions imposed to control the spread of COVID-19 forced consumers to eat at home and caused the material shift in the way they spend food dollars.

In addition, our experience in 2008 taught us that consumers cook more at home and eat out less during the recession and periods of high unemployment. So while quarantine restrictions forced them to eat at home, the shift could continue for some time as they choose to eat at home, as predicted recession materializes post COVID.

On the other hand, the challenges to pork and beef production are well known and at least over the short term, chicken will benefit from higher price and lower supplies of red meat in both retail and grocery store market and the food service market. All that said, we cannot predict demand from our food service customers during the summer. Like many of you, we spend a lot of time reading and learning about what the post COVID food service world might look like. But this time, we don't know. Unfortunately, many family owned restaurants and small chain concepts will not survive the pandemic. Exactly what the inventory of food service establishments will be over the short-term and medium term is anyone's guess.

Although in the long term, I'm confident American consumers will want to return to restaurants when it is safe to do so. Indeed, one recent survey found that 49% of Americans said going out to eat is the one thing they are most looking forward to following the pandemic, more than hanging out with family and friends.

Among other questions that remain unanswerable at this time are, how long it will take for the restaurant industry to recover and rebuild, and how long it will take consumers to become financially able and emotionally willing to return to crowded restaurants. Following the Great Recession in 2008, it took several years for spending on food away from home to return to pre-recession levels.

As I described earlier, we have shifted and reduced production through at least the end of fiscal year to reflect current market realities. However, our management team and Board of Directors will be very deliberate and measured as we consider any long-term structural changes to our product mix. One thing I can say for sure however is that our growth strategy hasn't changed. We will continue to grow the Company. Exactly how that will look, and what mix of products and markets we target might be different than what we were thinking four months ago. But, we will grow the Company.

I'm pleased with the first year's operations in Tyler, Texas. The successful start-up reflects the success of our training program which prepares young managers to run new operations. Those young managers most likely didn't expect to be managing through a pandemic. But like the managers at our other operations, they have done very well.

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

Lampkin Butts -- President and Board Member

Thank you, Joe, and good morning everyone. As Joe mentioned, overall market prices for poultry products were lower during the quarter when compared to our second quarter last year. Realized prices for chicken products sold to retail grocery store customers increased on mix improvement compared to last year's second quarter, as a result of the surge in demand from those customers.

Realized pricing during the second quarter was flat compared to last year's second quarter, but was higher by over $0.005 per pound sequentially. Bulk leg quarter prices were lower for the quarter compared to last year's second quarter, averaging $0.314 per pound during our second quarter this year compared to $0.34 a pound last year.

As Joe mentioned, export demand with the exception of demand from China has been under pressure as other countries deal with the pandemic significantly lowered oil prices and currency values. We began shipping to China in December after the poultry ban in China was lifted, and have continued to ship heavy volumes. Given orders are expected to move slower as China seems to have refilled its pipeline, and consumer demand is still being impacted by restaurant closures and reduced consumer demand as they reopen their economy in China.

Market prices for jumbo wings were also lower during our second fiscal quarter than last year's second quarter. jumbo wings averaged $1.40 per pound, that's down 23.1% from the average of $1.82 per pound during last year's second quarter. As with bonus breast prices, demand and Urner Barry quote jumbo wings trended higher in late April and into May as COVID-19 related restrictions began to ease. The current Urner Barry quote for jumbo wings is $1.58 per pound.

Also, as Joe mentioned, the market price for boneless breast during our second quarter, best demonstrates the volatility of this market. Our second quarter started on February 1st with the boneless quote of $0.87 per pound. By mid-March, the price was $1.35 before falling to a record low of $0.74 per pound on April, the 13th.

Prices then moved higher in late April and continued that trend in May. Today, the Urner Barry quote for jumbo boneless is $1.31 per pound. Overall market prices were lower on average by 18.2% when compared to the second quarter a year ago. The overall result of these market price changes was a decrease of $0.0617 per pound in our average sales price per pound of chicken sold compared to last year's second quarter.

We sold 1.18 billion pounds of fresh and frozen poultry during the second quarter, an increase from the 1.051 billion pounds sold during last year's second quarter. We processed 1.181 billion pounds of breast poultry during the quarter, up 9% from the 1.084 billion pounds we processed during last year's second quarter; about 52.3 million fewer pounds than we estimated in February.

41% of the pounds were processed at our Tray pack plants, 59% at our big bird plants. We now expect to process approximately 4.783 billion pounds of fresh chicken this fiscal year, an increase of approximately 3.7% compared to fiscal 2019, but a 182 million fewer pounds than we previously expected and announced in February.

We estimate we will process approximately 1.212 billion pounds in our third fiscal quarter and approximately 1.216 billion pounds during our fourth fiscal quarter.

These estimates reflect our reductions in egg sets and the shift of live birds from our big bird program to our Tray pack program and our all lower than our February estimates. The mix of pounds between our big bird and tray pack plants could shift depending on demand. Weather, bird performance and other factors could affect these estimates.

We sold 48 million pounds of processed chicken in our prepared chicken plant, through the first half of this year compared to 64.7 million pounds through the first half of last year. Average sales price for the first half of the year was higher by 1.7% compared to last year. Demand from our food service customers for prepared chicken was significantly affected by the pandemic in March and April, and we had several weeks when the plant operated only a few days. Orders have since improved as states have opened up especially from customers with drive-through capabilities. And with those and orders from new customers, orders in May moved back to pre-COVID-19 levels.

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

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

Thank you, Lampkin. Net sales for the quarter of $844.7 million were flat with $845.2 million last year and the slight change was the result of an increase in pounds sold offset by the lower selling prices. The $91.5 million increase in our cost of sales during the quarter ended April 30, as compared to the same three months in fiscal 2019 is the result of higher non-feed related cost of goods sold, and an increase in poultry pound sold of 128.4 million pounds or 12.3%, partially offset by slightly lower feed cost per pound. Non-feed related cost during Q2 were $0.429 per processed pound $0.024 per pound or 6.1% higher than last year's second fiscal quarter.

Labor cost made up most of that increase in non-feed related costs. Recall that we increased hourly wages by an $1 an hour across the board last June, which cost 88 points during the quarter compared to last year, and we increased hourly wages by another $0.45 per hour, effective January 1, which caused an additional 34 points during the quarter compared to last year.

Together, COVID-related costs for the attendance bonus and quarantine pay caused 29 points during the quarter. The balance of the increase in non-feed related cost of goods includes increases in packaging, fixed cost and kit cost. We spent $8.4 million on direct COVID related expenses during the second fiscal quarter, of that total, $4.9 million is included in cost and $3.5 million in SG&A.

Cost of sales included $1.9 million for the attendance bonuses and $1.3 million on items and services such as masks, face shields, break dividers and break rooms, dividers in the processing plants, outdoor break areas, thermometers, temporary nurses and hand sanitation stations. The SG&A includes the balance of the weekly deep clean sanitation efforts at all of our facilities, as well as the purchase of some additional masks and other miscellaneous items.

Looking at here, we expect most of these additional expense to continue at least through the end of the fiscal year. The intended slowness is set to expire June 26th, unless extended. That extend is approximately $1.7 million per month. We will also continue to provide PPE to our employees, and will continue deep clean in all of our facility each week, and we'll continue efforts to encourage social distancing at all of our facilities.

We estimate these expenses would be approximately $14 million each during Q3 and Q4. That assumes we continue everything we're doing today through the end of the fiscal year. Some COVID-related expenses are likely permanent, as steps taken to protect the health, safety, and welfare of our employees become best practices; masks and face shields for example. Protect not only against the COVID virus, but against the common cold, treating of flu and other airborne viruses.

The other significant COVID-related expenses relate to inefficiencies at our big bird plants caused by reduced volume and higher than normal absenteeism rates and over time at facilities that have run on weekends. We processed 73.6 million fewer pounds at our big bird plants here in second quarter compared to our expectations.

In addition, we reduced volume at our Moultrie, Georgia facility for a period of time to manage high absenteeism at our facility, which impacted both volume and mix. We estimate these inefficiencies impacted non-feed related costs, $0.0144 [Phonetic] put on our plants during the quarter. Relative to our expectations, we expect to process 80.7 million fewer big bird plant pounds during the third fiscal quarter than previously expected and 55.5 million fewer pounds at those plants during Q4.

The reduced volume will increase plant cost of those plants, resulting in an increase in non-feed related cost of $0.015 per pound on all times. The $7 million increase in SG&A expenses for the second fiscal quarter compared to last year, reflect higher legal fees attributable primarily to litigation, higher administrative salaries and $3.5 million in COVID-related expenses.

The COVID-related expenses, booked to SG&A includes the deep clean of all of our facilities on weekends. We expect SG&A of $57 million in Q3, and we are modeling $60 million in Q4. Based on where we are today, management does not believe it is probable the Company will meet the $12.03 [Phonetic] earnings per share target to reach the threshold requirement under the Company's bonus award program and our estimate -- estimates for Q3 and Q4, include no accruals for bonuses for the ESOP.

The coronavirus a, released an economic security of CARES act which was enacted on March 27, 2020. Applicable Generally Accepted Accounting Principles require the effect from changes in actuals to be recognized in the period in which the new law is enacted, which for us was our second fiscal quarter.

The most significant provision in the Act that will affect us is a provision that created a five-year carry back allowance for taxable net operating losses generated in tax years 2018 or 2020. While we were profitable during fiscal 2018 and 2019, generated taxable operating losses as a result of being able to take advantage of accelerated depreciation bonus applicable to our new facilities and other assets including [Indecipherable] in that period.

The net benefit of this provision of $37.4 million were recognized during the quarter. We will apply for an accelerated refund and expect to receive a refund of approximately $84 million before the end of the fiscal year. This will further enhance our liquidity. Excluding this one-time discrete tax benefit, our effective tax rate during the quarter and the six months ended April 30, 2020 was 30.2% and 26.9% respectively.

Our balance sheet and liquidity position are very strong. We ended the second fiscal quarter with $200 million drawn on our revolver and $61.3 million in cash. Our net debt to cap was 9.2%, and our total debt-to-cap was 12.7%. We had $776.9 million available to us under the revolver, and we are very comfortable with our balance sheet and liquidity we have, and believe that both are available to navigate us through this crisis.

We now expect to spend approximately $216.8 million on capex during 2020. Of this total, we expect to spend $15 million to build new factory in Mississippi, $41.5 million on equipment upgrades, $11.5 million on trucks and trailers that in prior year would have been leased. The balance of $148.8 million is for regular maintenance. We intend to use cash on hand and cash flows from operations to fund our capex [Technical Issues]. Our depreciation and amortization during the first half of the fiscal year, totaled $75.5 million and we expect approximately $155 million for the full year.

I do want to mention that Sanderson Farms will schedule the host of its annual investor conference in New Orleans this fall. The conference is that happens live which we hope will open with dinner Thursday night, October 15th and the conference should start at 8:00 AM Friday morning on October 16th. The conference this year will be at The Windsor Court and dinner on Thursday night will be at the same place as always. We hope we are able to host the conference live, and that many of you will join us in the lunch [Phonetic] and the call.

If we are unable to do so, we will host a virtual meeting. You'll find information regarding the conference on our website, and we'll add registration and hotel information soon. For now though, please save that date of the conference.

With that actually we are through with our prepared remarks and you can open the call for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions]. We will now take our first question from Ken Goldman of JP Morgan. Please go ahead.

Ken B. Goldman -- JP Morgan -- Analyst

Good morning, and thank you everybody for all the detail that you provided. It's very helpful. I appreciate it.

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

Good morning, Ken.

Ken B. Goldman -- JP Morgan -- Analyst

Good morning, Joe. Hope you and your loved ones are safe.

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

Thank you. I hope you're safe.

Ken B. Goldman -- JP Morgan -- Analyst

Yeah, we are so far, thank you for that. I know it's probably too early to give us definitive numbers, but do you have an idea at least looking into your third fiscal quarter, what the split between tray pack and big bird will be in terms of pounds? It sounds like you've made the decision to obviously shift some of that, but then Lampkin talked about how mix is still up in the air.

So I was just wondering if you could try and ping me down a little bit on some of those numbers for our models.

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

We think we're going to be about 58% big bird, and 42% tray pack-owned processed pound. And we are currently transferring every week some pounds from the big bird plant to the tray pack plans to be packaged to. So those are processed pounds, they are not pack pounds. So packed pounds are going be a little and sold pounds are going to be a little bit higher than that, and we're also -- that includes the Saturday runs. Yeah, so that's going to be 58%-42%. I would go with that. You know, and Lampkin said 1.287 billion pounds, 520.2 million of that is of tray pack, 785.3 million is big bird.

Ken B. Goldman -- JP Morgan -- Analyst

Okay, thank you for that. And then Joe what are you seeing right now, specifically in terms of [Speech Overlap]

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

Hold on one second, I'm just --

Ken B. Goldman -- JP Morgan -- Analyst

No problem.

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

Yeah. The big bird pounds 704.6 million and Tray pack pounds 507.2 million.

Lampkin Butts -- President and Board Member

That's third quarter.

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

Yeah. That's third quarter. For a total of 1.2 --

Ken B. Goldman -- JP Morgan -- Analyst

Thank you for that.

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

I was looking at the wrong line, I'm sorry.

Ken B. Goldman -- JP Morgan -- Analyst

That's OK. Thank you for the correction.

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

You bet.

Ken B. Goldman -- JP Morgan -- Analyst

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

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

The quote is $131 million, and the discount is down to $85 million on spot loads, if you add excess load, it's $85 million, it's really $85 million to $90 million and [Speech Overlap] it's $0.50 if you have excess loads, and there's not as many excess loads out there, as there were back in April, there is some, but there's not as many today.

Food service has -- regular food service business at one point when it was trading for $0.50 [Phonetic], food service sales were around 35% to 40% of normal. And I would say today, they're running 75% to 80% of normal. So that's why you don't have this many spot loads to sell. And I'm not talking about just Sanderson, I'm talking about, probably the industry.

Don't have quite as many, and that's why the discounting isn't quite as heavy as it was back when boneless hit $0.74, I would expect it to go down some more, but not anywhere near where it was back then. I would also note that the first week when the cutbacks hit, it is going to be the week ending June 13th which is week after next.

Now that's going to be a -- that's for birds that are 49 days old. And then the next week, and two weeks after that, will be birds that would be deboning size. So in the next three to four weeks, you're going to see fewer and fewer birds processed. And I do not have a -- I don't know if that's going to match up with demand or not. But it is certainly going to, there are going to be much fewer pounds on the market, when those cut backs hit.

Ken B. Goldman -- JP Morgan -- Analyst

Understood. Thank you very much.

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

Thank you, Ken. Stay safe.

Operator

We will now take our next question from Heather Jones of Heather Jones Research. Please go ahead, your line is open.

Heather Jones -- Heather Jones Research -- Analyst

Good morning. Thank you for taking the questions.

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

Good morning.

Heather Jones -- Heather Jones Research -- Analyst

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

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

No, that's the processed pounds. We are -- and it does not include what we're -- and it's processed with the big bird clients. And that includes Saturday runs, where we're pulling birds out on Saturday and processing. Heather, every other week, we are in Texas, we are running Tyler and Brazos and taking some live birds out of of Waco and Palestine and processing either one shift or two shifts, and that does and in Mississippi we're taking Collins birds, and Hammond or Laurel and processing them in McComb and in North Carolina, we're taking St. Pauls birds and processing them in Kinston.

We do that every other week, so our employees don't work every weekend. I can't do that in Moultrie because there is not a big bird plant near Moultrie. And we alternate, and as the products also it's demand that -- retail is good. But those numbers Mike gave you includes those Saturday runs. In addition to that, we are -- this might not include this product, but it's not significant. We are taking anywhere from from 20 to 24 loads a week out of big bird plant and transferring them to be tray packed at our Tray pack plants every week. And that would be boneless thigh meat, drumsticks, [Speech Overlap] those two products and they are trayed and chilled and pre-priced to go to tray pack customers. That's not a lot -- I mean, the whole scheme of things, that's not a lot of volume [Phonetic].

Heather Jones -- Heather Jones Research -- Analyst

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

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

Well, you have to -- we normally take Tyler out of the equation. In our other plants we normally get about 50% of our product in a tray. And so, right now, we're getting about 55% to 60% of our product in a tray, including Tyler, and a lot of weeks it's 60%. And another factor that's -- if price is going up, there are no ads, there are no features. It's all going out at regular price. We cannot support a feature.

We don't have enough volume to support a feature. So everything -- you're getting 55% to 60% of your product in the tray, including Tyler and none of it's going out at feature prices. So that's why your price went -- our prices with all of our customers almost are flat priced. So our prices are not rising, prices are stable, but you're going in a tray and you're not having any feature pricing. That's why the price goes up a little bit.

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

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

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

And no features.

Heather Jones -- Heather Jones Research -- Analyst

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

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

The difference between a CVP boneless breast and a tray.

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

It's huge. Right now at $0.70 a pound. For bones breast, it's a big number $0.70 a pound.

Heather Jones -- Heather Jones Research -- Analyst

Okay. All right. I appreciate --

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

We got it. We have to get them on a tray to get that premium. If we pack in bulk, it's not worth much more than the bulk coming out of the jumbo plant. That would -- could be worth $0.85 a pound, yeah.

Heather Jones -- Heather Jones Research -- Analyst

Okay. Okay. Thank you so much.

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

Thank you, Heather.

Operator

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

Ken Zaslow -- Bank of Montreal -- Analyst

Hey, good morning, everyone.

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

Good morning, Ken.

Ken Zaslow -- Bank of Montreal -- Analyst

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

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

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

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

25%. You know, on a normal year, and it's seasonal too, I mean, in the fall you're running least [Phonetic] specials as you can to get rid of it.

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

Yeah. October, November, December we're running features every week. That's the low point.

Ken Zaslow -- Bank of Montreal -- Analyst

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

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

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

Ken Zaslow -- Bank of Montreal -- Analyst

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

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

Well, I just look at the numbers and there's -- if you look at the numbers there's still 100,000 head a day short processing hogs and there's still short processing beef. I think they've made some progress, but I kind of believe it's going to be a while before -- they were processing 495,000 head a day in hogs and they're right at 400,000 head a day now. And I think, I don't have that number on cattle. I just don't -- I don't know where they are on cattle, but we think they're 15% to 20% behind on processing of cattle.

And I do not think for a lot of reasons, they're going to get back to those normal levels for a while. And I think you don't see [Indecipherable] slaughtered, you're going to see grass-fed, steers and heifers for a while. And the prices at the grocery stores are very high on beef and pork. And I think that's going to be with us for a while. And I don't think all the chicken plants are back to full slaughter and product mix. They're getting close to slaughter, but they're not close to product mix. And with all the restaurants that's running at 50% capacity and some of the -- one of the biggest markets for food service is hotels.

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

Ken Zaslow -- Bank of Montreal -- Analyst

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

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

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

Ken Zaslow -- Bank of Montreal -- Analyst

Thank you. And stay safe to you and your families.

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

Thank you, Ken. You too.

Operator

We will now take our next question from Peter Galbo of Bank of America. Please go ahead.

Peter Galbo -- Bank of America Merrill Lynch -- Analyst

Hey, guys. Thank you for taking the question and hope all as well.

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

Thank you, Peter.

Peter Galbo -- Bank of America Merrill Lynch -- Analyst

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

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

Yeah, I don't know what other people are thinking and what they're doing. That's still 9 million or 10 million eggs fewer than what they were placing. And I don't know what market segment that's in either. We really don't have access to that. I think there is an initial knee-jerk reaction to what the market did in April/May. And then, it went back up. Now, it's coming back down. But for the reasons I've already said, we're going to at least do what we're doing right now. And we will evaluate it going forward. If you go back to 2008 and see what foodservice did and what the American consumer did, it was 2017, '18, '19 before they really started going back to [Indecipherable]. Unemployment had to drop. Consumer, they had to be confident. Again, you had to have disposable income, and we don't see that right now. Nobody sees that in the next couple of years. And we have a lot to get corrected in the economy, and Mike quoted 46% of people who want to go out to eat, what about the other 50%.

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

They want to be with their families.

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

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

Peter Galbo -- Bank of America Merrill Lynch -- Analyst

Got it. Okay. That's helpful. Mike, I was just looking for a little bit of clarification. I think you had said COVID would cost kind of in 3Q and 4Q would be about $0.015 per pound, was that on a year-over-year basis versus 2Q? And then anything you can do to help us quantify just the impact from chicken products in the second quarter as well? Thanks.

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

Yeah. Those -- that's wasn't absolute costs. Those were just inefficiencies of bringing lower volume at the plant, and that's versus last year. Yeah, that's right. That's versus what we thought we were going to do on normal volume that we reported in February. He asked about -- he also asked about chicken policy in the second quarter. $15 million in the second quarter.

Peter Galbo -- Bank of America Merrill Lynch -- Analyst

Got it. Okay. Thanks very much guys.

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

Thank you.

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

Peter, stay safe.

Operator

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

Adam Samuelson -- Goldman Sachs -- Analyst

Yes, thank you. Good morning, everyone.

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

Good morning, Adam.

Adam Samuelson -- Goldman Sachs -- Analyst

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

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

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

Lampkin Butts -- President and Board Member

Yeah. Adam, June is very -- for exports, it's very unsettled and it's primarily because China is going to be out of the market in June and Cuba. And then you still have some obstacles in other countries from coronavirus, currency and also cheap oil. We sold a lot of products in May for $0.21 going to different countries. We have priced a little bit in June at $0.25. So that's a little better than May. But it's not the $0.30 that we were hoping to get. We have books on the $0.25. China is out because they bought so much products, so much along the way, so much has gotten there and they were anticipating their economy reopening, which it has, but it's just the restaurants are not back for any staying close to normal. So they got huge inventories based on the current demand in China. They just don't need based on the each month price. Hopefully, that will improve as the China economy and restaurants do better.

I'll just mention Mexico briefly. Mexico was sort of like the United States. Mexico for leg quarters, they need them for retail grocery stores, but they don't need them for restaurants. We think Mexico will be in the mid-20s. We -- even if China slows, we do expect to continue shipping chicken policy to China. We don't see that falling off. We made $15 million in the second quarter on policy. We are expecting to make $20 million in the third quarter and $20 million in the fourth quarter. Yeah. that's the difference in rendering versus packing and shipping to China. [Indecipherable] cash flow problem. So Kazakhstan, market conditions in Kazakhstan are slowly improving. Some product is moving in, not back to normal, but it's getting better.

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

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

Lampkin Butts -- President and Board Member

In June, you've also got -- as Joe mentioned earlier, you get to the middle of June, you process pounds are going to be less, so there'll be less less product competing to export.

Adam Samuelson -- Goldman Sachs -- Analyst

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

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

We hadn't run a schedule. You're right. I mean, if we go back to full production everywhere normal schedule, that's the 5.1 billion and that is accurate, but we haven't made decisions and process schedule [Indecipherable].

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

Yeah, I'd like to see something dramatic occur to -- yeah, that goes back to our normal mix as well, 5.1 billion assumes...

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

Yes, that -- you see all your restaurants up and running and every time back to normal, vaccine or it would take something really good to get us back to our deboning plant. Good question, we will have some color around that and that's all I can tell you now.

Adam Samuelson -- Goldman Sachs -- Analyst

That's super helpful as well.

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

Thank you, Adam.

Operator

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

Benjamin Theurer -- Barclays -- Analyst

Yes. Good morning, Joe, Mike and Lampkin. I hope you're doing well.

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

Thank you, Ben.

Benjamin Theurer -- Barclays -- Analyst

Yeah. One question and a quick follow-up. So you mentioned that you've obviously been shifting a lot into retail from foodservice. Have you considered what considering some of your commentary you made about the slow recovery and the issues with hotels, schools and so on to potentially invest for further ability to shift from more from foodservice into retail or that's not something you've been considering right now?

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

Are you talking about repurposing a plant?

Benjamin Theurer -- Barclays -- Analyst

Yes.

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

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

Benjamin Theurer -- Barclays -- Analyst

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

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

Well, we don't know what -- we sell through a number of different foodservice distributor -- broadline distributors and they in turn sell to all of those end users. And we do not know what their product mix was. I just know generally from market data that restaurants, I can't remember the number two segment has changed and it has. Restaurants, a couple of them; hotels, second; and then it was third and second and third; then, you got hospitals, cafeterias, nursing homes, schools. Schools are bigger than nursing. But in every one of those, not -- this is for our customers' business. It has been like Sysco, US Foodservice, PFG, Reinhart, all of those people that we sell, their end customers are that market, that's their customers and we -- I don't really -- I mean we read it. I knew the hotels were with one year they're second, next year, they're third. Restaurants are number one. I mean it's read. Hotels are not doing anything, not even open.

Benjamin Theurer -- Barclays -- Analyst

Okay, perfect. Well, thank you very much and good luck.

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

Thank you very much.

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

Thank you. Stay safe, Ben, again.

Benjamin Theurer -- Barclays -- Analyst

Thanks.

Operator

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

Michael Piken -- Cleveland Research Company -- Analyst

Yeah. Hi, thanks for taking the question. I just wanted to dig a little bit deeper in terms of the breeder flock. I know there's been a lot of cuts to exits. But how are you guys thinking about the breeder flock in terms of not only potentially cutting production, but also the type of mix that you might have in terms of the breeding flock? Thanks.

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

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

Michael Piken -- Cleveland Research Company -- Analyst

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

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

The hatchability, they don't give -- if they look at their breaking eggs and never put them in incubators, that's not [Indecipherable]. If you pull something out of an incubator maybe, but not [Indecipherable]. The labor has nothing to do with it.

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

I think that will only happen in first three weeks. I think people don't dig the first three weeks and after that, they dig themselves. And that would have affected the hatch.

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

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

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

It is. And I'm not certain that's a factor. I don't know if that's accurate. I don't know why -- I don't believe that's accurate.

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

It's showing up in the difference between egg sets and chick placements. Chick placements are running 5% [Phonetic], 95% from a year ago for the last six weeks. Egg sets are little higher than that. The egg sets are still 10 million below that they were at the peak and were running 39 million [Phonetic], 239 million [Phonetic], 240 million [Phonetic] and 239 million [Phonetic] there. I just don't know what market segment that is. We don't know if it's big bird or -- it's certainly not tray package, be a quickserve, I mean small bird. And I have no idea how much volume is going through small bird. I don't know if that's down some or if it's [Indecipherable] or a big bird. Hope that helps Mike and being contiguous of it.

Michael Piken -- Cleveland Research Company -- Analyst

Thanks.

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

Thank you, Mike.

Operator

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

Ben Bienvenu -- Stephens Inc. -- Analyst

Hey, good morning. Thanks for taking my question.

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

Good morning, Ben.

Ben Bienvenu -- Stephens Inc. -- Analyst

I want to -- just one quick one from me, obviously foodservice demand is kind of the key factor that you're monitoring with respect to your decision to reaccelerate production and shift your mix back to what would be normal distribution of structure [Phonetic] pounds produced. How much of the gating factor is labor still at this point and visibility into reduced absenteeism factors like that?

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

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

Ben Bienvenu -- Stephens Inc. -- Analyst

Okay. Thanks. I wish you well and good luck to your summer.

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

Thank you, Ben.

Operator

We will now take our final question from Robert Moskow of Credit Suisse. Please go ahead.

Jacob Nivasch -- Credit Suisse -- Analyst

Hey guys. Good morning. This is Jacob Nivasch. Hey, good morning. This Jacob on for Robert. Hope you guys are well. Just a quick question on retail pricing. Is pricing of retail stickier than foodservice? I guess, what percent of your retail business is based on market pricing? I'm just trying to figure out, I guess, if the shift to retail will make it tougher for the industry to tighten its pricing as total production comes down? Any help there, I'd appreciate it. Thank you.

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

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

Jacob Nivasch -- Credit Suisse -- Analyst

Got it. Understood. Thank you.

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

Thank you very much. Operator, is that the last question?

Operator

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

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

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

Operator

[Operator Closing Remarks]

Duration: 92 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 and Board Member

Ken B. Goldman -- JP Morgan -- Analyst

Heather Jones -- Heather Jones Research -- Analyst

Ken Zaslow -- Bank of Montreal -- Analyst

Peter Galbo -- Bank of America Merrill Lynch -- Analyst

Adam Samuelson -- Goldman Sachs -- Analyst

Benjamin Theurer -- Barclays -- Analyst

Michael Piken -- Cleveland Research Company -- Analyst

Ben Bienvenu -- Stephens Inc. -- Analyst

Jacob Nivasch -- Credit Suisse -- Analyst

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