Cargill and Continental Grain Company announced early Monday that they’re set to acquire Sanderson Farms for around $4.5 billion. Sanderson Farms will combine with Wayne Farms, a subsidiary of Continental Grain, to form a new, privately held poultry business.
The transaction is expected to close by the end of 2021 or early 2022 and, upon the completion, Sanderson Farms will become a private company.
And that new company will be well positioned to service customers across retail and foodservice, as demand for chicken products continues.
NEW COMPETITOR TO REPRESENT 15% OF CHICKEN PRODUCTION
Mississippi-based Sanderson is the country’s third-biggest chicken producer, with 13 poultry plants processing about 13.6 million chickens a week, reported The Wall Street Journal (Aug. 8). The company supplies grocery chains including Walmart and Albertsons as well as restaurant distributors such as Sysco and US Foods.
The merger with Wayne Farms would form a new competitor representing about 15% of U.S. chicken production, according to data from Watt Poultry USA. Currently, Tyson Foods Inc. leads the industry with about one-fifth of the market, and Pilgrim’s Pride Corp. represents about 16%.
OVERALL CHICKEN DEMAND INTENSIFYING
Surging demand for chicken products has boosted poultry prices as restaurants have reopened and launched new products like chicken sandwiches. Wholesale breast prices are around double what they were at the beginning of 2021, according to USDA data, while wing prices have hit records.
Sanderson’s sales for the quarter ended April 30 climbed by about one-third, and its profits jumped to $97 million. Cargill also saw positive results in its latest quarter, reporting its most profitable year in its 156-year history, reported Bloomberg (Aug. 6).
The company had almost $5 billion in net income during its 2021 fiscal year through the end of May, profiting from surging consumption of meat, corn, and soybeans, particularly from China.
Meanwhile, Tyson Foods beat earnings estimates in its latest quarter, reported Bloomberg (Aug. 9). The company reported adjusted third-quarter earnings per share of $2.70, compared to the average estimate for $1.63. However, Tyson expects high grain prices to result in lower chicken results in fiscal 2021.