Sanderson Farms Inc (SAFM) Q1 2021 Earnings Call Transcript

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Sanderson Farms Inc (SAFM)
Q1 2021 Earnings Call
Feb 25, 2021, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to Sanderson Farms First Quarter 2021 Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Joe Sanderson. Please go ahead, sir.

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

Thank you. Good morning, and welcome to the Sanderson Farms First Quarter Conference Call. This morning, we announced net income of $9.5 million or $0.42 per share for our first quarter of fiscal 2021. This compares to a net loss of $38.6 million or $1.76 per share for our first quarter of fiscal 2020. I will begin the call with comments about the recent winter storms, general market conditions and grain cost 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'll 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 annual report on Form 10-K for the fiscal year ended October 31, 2020, and our quarterly report on Form 10-Q filed this morning with the SEC and also in our press release that we published this morning. These documents are available on our website at www.sandersonfarms.com. You should not place undue reliance on forward-looking statements we make this morning. Each statement speaks only as of today, and we might not update or revise our forward-looking statements. External factors affecting our business such as weather, feed grain costs, market prices for poultry meat, the health of the economy, and of course, the COVID-19 pandemic, among others remain highly uncertain and volatile, and our view today may be very different from a few days from now.

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

Thank you, Mike. Before addressing our first fiscal quarter results, I want to update you on the effect of the recent winter storms on our business. Our employees, managers, contractors and contract poultry producers in Texas, Louisiana and Mississippi have navigated a historic weather event over the past two weeks. They have shown resourcefulness and determination, and we are extremely grateful and proud for their efforts. Because of the record low temperatures, power failures, snow and ice and hazardous road conditions, we were unable to operate our processing plants, deliver baby -- day-old baby chicks to broiler farms on our regular schedule, pick up hatching eggs from breeder farms and place those eggs in our hatcheries or manufacture and deliver chicken feed to the farms of our contract poultry producer. Fortunately, none of our facilities were damaged, and our employees remained safe. And we returned to normal operations at all of our facilities on February 22, 2021, except the Hazlehurst, Mississippi processing plant which resumed normal operations on February 23, 2021. However, our live production supply chain experienced interruptions and losses similar to a hurricane. We lost 455,000 broilers in houses that lost power, water or feed, or that collapsed under the weight of snow and ice. We were forced to humanely euthanize 545,000 chicks in our Texas hatcheries and were unable to pick up and set 703,000 hatching eggs in our hatcheries. We deeply regret the losses incurred due to extraordinary circumstances beyond our control or our independent contract poultry producers' control. As a result of these interruptions, we will have approximately 1.6 million fewer chickens to process in market at our Mississippi, Louisiana, and Texas processing plants over the next 10 weeks.

Before the storm, we expected to process a 167 million head during our second fiscal quarter. So this represents just under 1% of our expected quarterly production. In addition to these bird losses, both breeder and broiler chickens exposed to extreme temperatures typically suffer some performance losses over their lives. While the company is insured for these events, it retained $2.75 million of the risk and is subject to a seven-day deductible under its business interruption coverage. We will work with our insured partners over the next few months to quantify these losses. I want to thank everyone associated with Sanderson Farms, their work over the past two weeks. While we have experienced managing through significant weather events, this one was unique. Working with utility providers, local authorities and the emergency management agencies, our employees and contract poultry producers were able to mitigate what could have been a much worse and more significant impact on our operations. I am very grateful for their efforts under extraordinarily difficult circumstances. I'll turn now to our first fiscal quarter results, which reflect continuing challenges presented by the COVID-19 pandemic and higher feed costs. However, we ended the quarter on a strong note, and are optimistic about the future for many reasons, including encouraging end market trends. Demand from retail grocery store customers remained strong, and that strength is reflected in overall average chill pack prices that were higher than during last year's first quarter. While market prices for boneless breast meat sold to food service customers remained under pressure during the first two months of the fiscal quarter, prices improved in January and February. Market prices for jumbo wings and chicken tenders showed relative strength throughout the quarter, reflecting both seasonal demand and the fact that those products are in relatively strong demand from food service customers with strong pick up and delivery platforms. Cash market prices for both corn and soybean meal were higher during our first fiscal quarter compared to last year.

Our feed cost per pound of chicken processed were higher by 13% per pound when compared to the first fiscal quarter of 2020. Lower supply estimates and strong export demand have driven both corn and soybean market prices significantly higher since August. The USDA's estimated supply relative to demand in both corn and soybeans are very tight as we move into the 2021 planting season. As we said at our annual meeting last week, we are focused on several things that could affect markets as we move -- as we start fiscal 2021. The upcoming South American harvest and the USDA's March 31 Planting Intentions report, along with, of course, chicken production numbers. The South American crop was late getting planted in hot dry weather during their growing season affected the crop. While timely arrival of late rains stabilized the Brazilian crop, the harvest has been slowed by wet weather. The USDA held South American production estimate steady in its February report. At its 2021 Agricultural Outlet Forum last week, the USDA estimated corn acres planted in the United States in 2021 will be 92 million acres versus 90.8 million acres last year. And that acres planted in soybeans would be 90 million acres, up 6.9 million acres from 83.1 million acres last year. It is not unusual for the USDA to significantly revise its outlook before the March 31 Planting Intentions report. So we will be watching for that report. While we have priced most of our corn basis through July and our soy meal basis through the end of the fiscal year, we have priced none of our grain past March. Based on our costs through the first fiscal quarter and what we have priced so far, when combined with prices we could have locked in for the balance of the fiscal year at yesterday's close, our grain cost for fiscal 2021 would be $325.4 million higher than during fiscal 2020 based on 2020 volumes.

The USDA is projecting that our industry will produce 1.5% or 1% more chicken during 2021 than last year. Chicken will compete with slightly more beef and pork as USDA estimates both pork and beef will be up by 1.4% during 2021 compared to 2020. According to USDA data, pullet placements during calendar 2020 were 1% higher than 2019 and have been below year ago numbers for the past two months. Egg sets and chick placements have trended lower during the past six weeks by 1.5% compared to last year. Looking ahead, we have many reasons to remain optimistic about fiscal 2021. First, we are operating well in all areas of our business and our live production and processing division started the year in very strong positions. Second, market prices for boneless breast meat produced at our processing -- at our plant processing large birds for food service customers improved significantly in January and continue to improve this month. We attribute much of that improvement to demand from quick serve food service restaurants, promoting new chicken products. And we believe food service demand will improve even more when consumers return to restaurants in greater numbers once the COVID-19 vaccines are more widely distributed and we move into the spring and summer's warmer weather. We also expect continued strong demand from our retail grocery store customers as American consumers continue to cook many, if not most of their meals at home. Export demand has also strengthened in recent months, due, we believe, to improve crude oil prices, favorable currency valuations and more liquidity.

As you may know, I received a COVID vaccine in January and February, and our company is providing educational material and training videos explaining the importance of the vaccine in protecting the health of our employees and their families. As more vaccines become available, we are hopeful that our employees will be able to be vaccinated in the coming weeks and months. Safety of our workers is paramount in our ongoing success. We are working with healthcare professionals and appropriate government agencies in the states in which we operate to make arrangements to vaccinate our employees on-site at our locations. We were able this month to offer vaccines on-site at our Mississippi locations to all employees over the age of 64. 75% of those eligible accepted the vaccine. Finally, our balance sheet is healthy. Our workforce is strong. Our sales team has picked up several new customers over the past few months, and we are continuing due diligence on the site for our new poultry complex. To sum up, we are well positioned to continue executing our organic growth strategy and create value for all of our stakeholders, particularly as market conditions stabilize. At this point, I'll turn the call over to Lampkin for a more detailed discussion of the chicken market and our operations during the quarter.

Lampkin Butts -- President and Board Member

Thank you, Joe, and good morning, everyone. Overall, realized prices for poultry products were higher by $0.0868 per pound or 13% during the first fiscal quarter of 2021 compared to our first fiscal quarter of last year. Overall, average prices for chill pack products reflected good demand during the quarter and averaged $0.041 per pound higher during the quarter compared to the first quarter of 2020 as a result of both price and mix improvements. Chill pack prices were higher by $0.015 per pound sequentially, again, as a result of both price and mix improvement. Bulk leg quarter prices during our first fiscal quarter averaged $0.232 per pound compared to $0.315 per pound last year. Final numbers for calendar 2020 show the volume of all broiler meat exported was higher by 5.2% compared to 2019. The average quoted price for jumbo wings was higher during our first fiscal quarter compared to last year and reflected both a good Super Bowl season and the fact that wings and tenders remain very popular among food service customers and significant takeout in delivery sales, which has done well during the pandemic. Quoted prices for jumbo wings averaged $2.16 per pound during our first quarter of this year compared to $1.61 per pound during last year's first quarter sequentially. Boneless breast prices averaged $1.02 per pound during this year's first quarter compared to $0.92 per pound last year. We sold 1.15 billion pounds of poultry products during the first quarter, essentially flat with the pounds sold during last year's first quarter. Our process pounds were down from 1.17 billion to 1.15 billion. That is 2.5% higher than our guidance for pounds processed during the first quarter as the number of heads processed live weights and yields during the quarter were higher than our estimate.

We expected to process approximately 1.18 billion pounds during our second fiscal quarter, flat with the pounds processed during last year's second quarter. We expect to process approximately 1.23 billion pounds in Q3 and 1.25 billion pounds in Q4. Our second quarter estimate is subject to change as we work through the live production issues in Texas and Mississippi caused by the winter storm. Heads processed this week were heavier than our target live weights and birds exposed to extreme temperatures could experience performance issues. If we meet these targets production during fiscal 2021 will be essentially flat to fiscal 2020 production. Prepared chicken sales were $39.1 million. That's down $12.5 million or 24.3%, on 6.1 million fewer pounds sold. Our average sales price per pound of prepared chicken was lower by $0.0446 per pound or 2.3%. At this point, I'll turn the call over to Mike to discuss our financial statements.

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

Thank you, Lampkin. Net sales for the quarter totaled $909.3 million, and that's up from $823.1 million during the same quarter last year. Our net income of $0.42 per share during the quarter compares to a net loss of $1.76 per share during last year's first fiscal quarter. Our cost of sales of poultry products for the three months ended January 31 as compared to the same three months a year ago increased 3.4%. This increase is a result of an increase in the average cost of goods sold. Nonfeed related costs were higher by $20.1 million or $0.0251 per pound this quarter compared to last year's first quarter. Several factors contributed to this increase. First, lower-than-capacity volumes impacted cost per pound. We continue to operate our big bird plants below full capacity and will continue to do so until food service demand improves further, and that improvement appears sustainable. We lowered the target live weight at our Hazlehurst, Mississippi processing facility and our transporting product from that plant to our tray pack plants in order to meet demand from our retail grocery store customers. The lower live weight increases both our live cost and processing cost at that plant. And nonfeed related costs at Hazlehurst were higher by just over $0.015 per pound as a result of the lower live weights. Labor costs across all of our processing facilities were up $6.7 million or $0.79 per pound when compared to last year's first fiscal quarter. Fixed costs were higher by $3.4 million or $0.0034 per pound as we began depreciating equipment upgrades installed last year.

Finally, COVID-19 related expenses booked as cost of goods sold totaled $5.3 million during the quarter compared to nothing last year. Our feed cost per pound of poultry products processed were higher at $0.2631 per pound compared to $0.2597 per pound last year. While our cost per pound of poultry products sold were higher by $0.024 per pound, our sales price per pound for poultry products increased 13% or $0.087 per pound compared to last year. This combination resulted in significantly higher operating margins during this year's first fiscal quarter compared to the same quarter a year ago. As Joe mentioned, had we priced all of our grain needs at yesterday's quotes on the Chicago Board of Trade, our grain cost during fiscal 2021 would be $325.4 million higher than 2020. Based on expected production, these higher costs, together with estimated basis costs would translate into feed cost per pound of poultry products processed of $0.3183 per pound in Q2, $0.3337 per pound in Q3 and $0.3301 per pound during our fourth fiscal quarter. I'll stress again that we have not priced any of our grain needs past March. So these numbers are subject to change as the grain markets change. SG&A expenses for the first fiscal quarter of 2021 were $7.1 million higher than the same three months a year ago, 12.8% higher than our estimate. This increase compared to last year is the result of $6.2 million in COVID-19 related expenses and higher legal expenses offset by a reduction in travel and entertainment, slightly lower advertising and marketing and slightly lower trainee expenses. We're modeling $58 million for SG&A in Q2, $59 million in Q3 and $61 million in the fourth quarter. These estimates include no accrual for a potential ESOP contribution or bonus awards. We've spent $36.9 million on capex during the first fiscal quarter and have approved $174 million in capex for the full 2021 fiscal year.

The fiscal 2021 capex budget currently includes $34.9 million for several large-scale equipment upgrades at our processing plants, $10.1 million to complete the new hatchery in Jones County, Mississippi, $116.2 million for maintenance and $12.4 million for rolling stock. Our depreciation and amortization during the first quarter totaled $40.6 million, and we expect approximately $172 million for the full fiscal year of 2021. During the quarter, we also declared $9.8 million in dividends. And Chuck, that completes our prepared remarks and you can open it up for questions.

Questions and Answers:

Operator

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

Benjamin Shelton Bienvenu -- Stephens -- Analyst

Hey, good morning everyone.

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

Morning Ben.

Benjamin Shelton Bienvenu -- Stephens -- Analyst

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

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

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

Lampkin Butts -- President and Board Member

We'll be back on five.

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

Okay. We normally we feed them five batches, we're back on five batches. We ran one batch for about 10 days and we're back on our regular ration. So that they'll -- we're going to have some performance issues in Texas for 10 days and then they ought to get back to and this weather right now is a blessing following what we went through, this 75-degree weather, and they'll rejuvenate a little better. I don't -- did I answer your question, Ben?

Benjamin Shelton Bienvenu -- Stephens -- Analyst

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

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

We'll go back to full capacity.

Lampkin Butts -- President and Board Member

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

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

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

Lampkin Butts -- President and Board Member

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

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

You're paying all the other growers.

Lampkin Butts -- President and Board Member

That's right because of the other people.

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

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

Benjamin Shelton Bienvenu -- Stephens -- Analyst

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

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

Thank you.

Operator

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

Please go ahead.

Adam L. Samuelson -- Goldman Sachs -- Analyst

Yes, thank you. Good morning everyone.

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

Morning Adam.

Adam L. Samuelson -- Goldman Sachs -- Analyst

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

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

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

Adam L. Samuelson -- Goldman Sachs -- Analyst

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

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

Yes. I would -- if you look back historically, you get through March madness, with exception of one year, I recall. I can't tell you what year it was. But if you get through, you get past March madness, and then the demand for wings declines. There was one summer, and I don't remember when it was, but there was one summer that wings stayed high all through summer and it was in the last five years and I can't tell you what year it was. They never declined that year. But at this price level, I'm feeling like you're going to see a lot of boneless wings and other items come into play. We're in the 250s now, aren;t we?

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

$2.56.

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

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

Adam L. Samuelson -- Goldman Sachs -- Analyst

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

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

Thank you.

Operator

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

Kenneth B. Goldman -- JPMorgan -- Analyst

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

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

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

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

Arby's, Taco Bell.

Lampkin Butts -- President and Board Member

Taco Bell.

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

The Taco Bell. There's more to come with this. So I think that is -- I think that's number one and I think the increase in the price of feed ingredients is -- might be putting some pressure on some that might not be in the right product mix, that might not be a strong operator that might be affecting some people. I don't -- I think if you'll take -- we don't know who all was affected like we were last week. We think everybody in Texas, maybe everybody in Arkansas, some in Mississippi for 3, four days. I can't remember -- when did we start running that back in...

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

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

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

Friday, sorry.

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

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

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

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

Kenneth B. Goldman -- JPMorgan -- Analyst

Understood, thank you very much.

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

Good. Thank you Ken.

Operator

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

Kenneth Bryan Zaslow -- BMO Capital -- Analyst

Hey, good morning everyone.

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

Morning Ken.

Kenneth Bryan Zaslow -- BMO Capital -- Analyst

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

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

I didn't understand.

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

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

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

Right now, it is.

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

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

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

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

Kenneth Bryan Zaslow -- BMO Capital -- Analyst

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

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

That's right, Ken.

Kenneth Bryan Zaslow -- BMO Capital -- Analyst

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

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

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

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

We have four new houses.

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

Four new houses. And...

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

And 100 million pounds.

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

100 million pounds.

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

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

Lampkin Butts -- President and Board Member

Yes, you showed 274 million pounds.

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

And it's typically service level, we're not -- that's normally what happens. If they know you and you've been taking good care of them, and that's normally how that comes about.

Kenneth Bryan Zaslow -- BMO Capital -- Analyst

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

Lampkin Butts -- President and Board Member

Ken, the export market is surprisingly strong right now and of course, we have a window we see into March and April. I can't see beyond that. But for a number of reasons, when you look at March and April, it's going up. Prices are going up. We -- November, we were in the early 20s, and we've moved up well above that going into March and April. Some things that have happened, the cold storage inventories are in good shape and support pricing. The total number was down from January, it was down from December, down from a year ago, and that's the total and also leg quarter number. Cuba has gotten back in the market in a big way. Someway, I don't know how, they've got plenty of cash and they're in the market in a big way. Angola is buying more, and of course, that's tied to the price of oil. The value of the dollar works -- supports exports right now and Mexico -- demand for Mexico is still good and some of these countries' demand is a little better because they're recovering from the coronavirus. So we're bullish on exports right now.

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

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

Kenneth Bryan Zaslow -- BMO Capital -- Analyst

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

Lampkin Butts -- President and Board Member

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

Kenneth Bryan Zaslow -- BMO Capital -- Analyst

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

Lampkin Butts -- President and Board Member

Thank you Ken.

Operator

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

Benjamin M. Theurer -- Barclays -- Analyst

Hey, good morning guys.

Lampkin Butts -- President and Board Member

Good morning.

Benjamin M. Theurer -- Barclays -- Analyst

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

Lampkin Butts -- President and Board Member

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

Benjamin M. Theurer -- Barclays -- Analyst

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

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

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

Benjamin M. Theurer -- Barclays -- Analyst

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

Operator

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

Peter Thomas Galbo -- Bank of America Securities -- Analyst

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

Lampkin Butts -- President and Board Member

You bet.

Peter Thomas Galbo -- Bank of America Securities -- Analyst

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

Lampkin Butts -- President and Board Member

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

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

There will be in of course.

Lampkin Butts -- President and Board Member

Yes.

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

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

Lampkin Butts -- President and Board Member

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

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

It will go up. It will go up.

Lampkin Butts -- President and Board Member

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

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

Get some price increase.

Lampkin Butts -- President and Board Member

Yes.

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

That happened all during the years of contract mature.

Peter Thomas Galbo -- Bank of America Securities -- Analyst

Okay. So --

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

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

Peter Thomas Galbo -- Bank of America Securities -- Analyst

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

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

We -- before the snow and ice, and you know we had a lot of food service business in Texas, some in Arkansas. But prior to the snow and Ice, we thought we were seeing a little bit of improvement and it was volume, and we -- a little bit and then course, there was 0 for -- and those, and Mississippi and Louisiana and North Louisiana and Arkansas and Texas. So we kind of lost track of all that right now, but we thought we were seeing a little bit of increase. There's another thing I'm going to give you -- if you all look at -- we look every day at the number of absentees in our plants and the number of cases of COVID-related absentees in our plants in the states where we operate and yes, you'll probably see on the news every day the number of cases nationwide. All of those have been declining for the past two weeks in our plants. As a matter of fact, in our plants, they are half of what they were in December. Instead of having 500 or 600 or 700 people out because of COVID or because they were in close contact or a member of their household had COVID, that's under 300 now, like it was, might be back in August or September. It's cut in half, and we don't have an explanation for that. There was an article in the Wall Street Journal in the last two or three days about quite perhaps but we know we can look at our numbers and say that is affecting us. If that is nationwide, we're getting closer to the end, unless there is a resurgence because of these new variants. But we were creeping back up a little bit.

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

Not back to pre-pandemic level, but improved.

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

Yes.

Peter Thomas Galbo -- Bank of America Securities -- Analyst

Got it,OK. Thanks very much guys.

Lampkin Butts -- President and Board Member

Thanks Peter.

Operator

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

Michael Leith Piken -- Cleveland -- Analyst

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

Lampkin Butts -- President and Board Member

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

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

It was half last week.

Lampkin Butts -- President and Board Member

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

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

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

Lampkin Butts -- President and Board Member

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

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

It was in the middle. Customer in the middle.

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

Yes, right.

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

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

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

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

Michael Leith Piken -- Cleveland -- Analyst

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

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

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

Michael Leith Piken -- Cleveland -- Analyst

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

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

I think substantially.

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

Yes. Yes.

Michael Leith Piken -- Cleveland -- Analyst

Okay, thanks.

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

Thanks Mike.

Operator

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

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

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

Operator

[Operator Closing Remarks]

Duration: 60 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

Benjamin Shelton Bienvenu -- Stephens -- Analyst

Adam L. Samuelson -- Goldman Sachs -- Analyst

Kenneth B. Goldman -- JPMorgan -- Analyst

Kenneth Bryan Zaslow -- BMO Capital -- Analyst

Benjamin M. Theurer -- Barclays -- Analyst

Peter Thomas Galbo -- Bank of America Securities -- Analyst

Michael Leith Piken -- Cleveland -- Analyst

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