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Surging Lumber Costs Are Derailing U.S. Chicken-Farm Expansion

imageCommodities1 hour ago (May 27, 2021 01:36PM ET)

(C) Reuters. Surging Lumber Costs Are Derailing U.S. Chicken-Farm Expansion

(Bloomberg) — Soaring costs for building materials and animal feed are prompting Sanderson Farms (NASDAQ:SAFM) Inc. to put off building a new chicken-processing plant even though poultry demand is on the rise.

With lumber prices tripling in the last 18 months, it’s too costly to build the over 400 chicken houses necessary to supply a new factory, according to Chief Executive Officer Joe Sanderson.

“My heart tells me to build a plant right now. My head tells me to be patient, so I’m going to be patient,” Sanderson said on an earnings call with analysts. “This is not a good time to build.”

The comments underscore how high lumber costs are rippling through supply chains, likely contributing to higher chicken prices ahead. Tariffs on steel imports and the highest grain prices in eight years also threaten profits of the new plant.

Sanderson hasn’t disclosed a location it intends to build a new plant that will cater to customers who sell chicken at retail, but the company says it has an ample pool of labor at the potential site.

In the short term, high chicken prices are brunting the costs of elevated feed prices, with Laurel, Mississippi-based Sanderson benefiting from a rebound in the food sector from the coronavirus pandemic.

READ MORE: Chicken Sandwich Boom Helps Sanderson Beat Feed Cost Spike

(C)2021 Bloomberg L.P.

Surging Lumber Costs Are Derailing U.S. Chicken-Farm Expansion

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