Jefferies Remains Positive on Sanderson Farms (SAFM) Following Global Consumer Conference

Jefferies is maintaining its Buy rating and $55 price target on shares of Sanderson Farms (NASDAQ: SAFM) following its 2011 global consumer conference.

The company noted that industry production cuts arriving quicker than previously forecasted, with eggs set falling seven-consecutive weeks, including down 4 percent by June 18, and pullet placements falling 8 percent year-over-year in May.

SAFM anticipates material cuts to emerge after the Fourth of July holiday as most industry players have historically held off on cuts in mid-summer. The company also expects another wave of cuts, especially if breast price remain stubbornly low.

In April, Sanderson Farms reports that total chicken cold storage was up 18 percent and chicken breast storage was up 32 percent. If production cuts continue, cold storage levels should normalize in 3-6 months. SAFM has corn and soybean coverage through the end of July, but declined to comment on its contract situation beyond that.

An analyst at Jefferies comments, "We're sticking with our thesis that F1Q11 represented the margin trough point. We continue to think that chicken prices will slowly improve in 2H11 and we would be buyers of SAFM shares ahead of an improved pricing inflection point."

For more ratings news on Sanderson Farms click here and for the rating history of Sanderson Farms click here.

Shares of Sanderson Farms closed at $45.47 yesterday.

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