8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 27, 2007

SANDERSON FARMS, INC.

(Exact name of registrant as specified in its charter)

Mississippi	1-14977	64-0615843
(State or other jurisdiction	(Commission File Number)	(I.R.S. Employer
of incorporation)		Identification No.)

127 Flynt Road
Laurel, Mississippi	39443
(Address of principal executive offices)	(Zip Code)

(601) 649-4030

(Registrant’s telephone number, including area code)

Not applicable.
(Former name or former address, if changed since last report)

     Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

     o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.02 Results of Operations and Financial Condition.
	Item 9.01 Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
EX-99.1 PRESS RELEASE 02/27/07
EX-99.2 TRANSCRIPT OF CONFERENCE CALL 02/27/07

Section 2 — Financial Information

Item 2.02 Results of Operations and Financial Condition.

On February 27, 2007, the Registrant issued a press release announcing its earnings for its fiscal quarter ended January 31, 2007. The press release is furnished herewith as Exhibit 99.1. Also on February 27, 2007, the Registrant held a conference call to discuss its earnings for its fiscal quarter ended January 31, 2007. A transcript of the conference call is furnished herewith as Exhibit 99.2. The information in the press release and transcript is not to be considered “filed” for purposes of the Securities Exchange Act of 1934.

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(c) The following exhibits are filed with this Current Report:

Exhibit No.		Description
	99.1	Press release of Sanderson Farms, Inc. dated February 27, 2007
	99.2	Transcript of conference call held by Sanderson Farms, Inc. on February 27, 2007

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

SANDERSON FARMS, INC.
(Registrant)

Date: March 2, 2007	By:	/s/ D. Michael Cockrell
		D. Michael Cockrell
		Treasurer and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.		Description
	99.1	Press release of Sanderson Farms, Inc. dated February 27, 2007
	99.2	Transcript of conference call held by Sanderson Farms, Inc. on February 27, 2007

EX-99.1

Exhibit 99.1

Contact:	Mike Cockrell
	Treasurer & Chief Financial Officer
	(601) 649-4030

SANDERSON FARMS, INC. REPORTS
RESULTS FOR FIRST QUARTER OF FISCAL 2007

LAUREL, Miss. (February 27, 2007) — Sanderson Farms, Inc. (NASDAQ: SAFM) today reported results for the first fiscal quarter ended January 31, 2007.

     Net sales for the first quarter of fiscal 2007 were $292.7 million compared with $236.2 million for the same period a year ago. For the quarter, the net loss was $2.8 million, or $0.14 per diluted share, compared with the net loss of $8.6 million, or $0.43 per diluted share, for the first quarter of fiscal 2006. Operating income for the first quarter of fiscal 2006 was reduced by incurred but unrecognized lost profits and expenses of approximately $3.0 million related to losses sustained as a result of Hurricane Katrina.

     “The results for the first quarter of fiscal 2007 showed improvement over the same period last year, although we still faced a challenging poultry market, particularly in the first half of the period,” said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc. “Market prices were soft at the beginning of the quarter, but began to improve in December and have continued to trend higher through February. Overall, poultry prices were higher than the same period a year ago. However, we continue to see higher and more volatile prices for corn and soybean meal, our primary feed ingredients, and the significantly higher costs affected our profitability during the quarter.”

     According to Sanderson, overall market prices for poultry products improved steadily during the first quarter of fiscal 2007. While a simple average of the Georgia dock price for whole chickens was approximately 1.7% lower in the Company’s first fiscal quarter compared with the same period in 2006, the Georgia Dock price for the week of February 26, 2007, was 75 cents per pound, versus 69 cents per pound for the same week a year ago. Bulk leg quarter prices were higher by 21.4% during the quarter compared with last year’s first quarter, reflecting year-over-year improvement in the export markets. Export demand during the first quarter of fiscal 2006 was negatively impacted by Avian Influenza concerns, and these concerns have not been a factor so far this year. Boneless breast meat prices during the quarter were approximately 12.9% higher than the prior-year period. Wing prices averaged $1.07 per pound during the first quarter of fiscal 2007, compared with the average of $0.87 per pound during the first quarter of fiscal 2006. At the same time, costs for corn and soybean meal, the Company’s primary feed ingredients, increased 57.4% and 0.1%, respectively, compared with the first quarter a year ago.

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Sanderson Farms Reports First Quarter 2007 Results
Page 2
February 27, 2007

     “We are pleased with our operating performance for the quarter as we resumed full production in January following the production cuts implemented for the second half of calendar 2006. Our volumes during the quarter were up significantly when compared to last year’s first quarter as a result of the additional production from Moultrie, Georgia, the conversion of our Collins, Mississippi plant to big bird deboning, and the absence this year of the effects of Hurricane Katrina. The construction of our Waco, Texas, facility is ahead of schedule and we expect to begin processing in the fourth fiscal quarter of 2007.

     “While all of these factors, along with the favorable trends in chicken prices, are positive indicators for our business going forward in fiscal 2007, we expect our feed costs will continue to rise,” Sanderson continued. “The demand for corn from ethanol producers is affecting market prices for corn and soybeans. However, we remain confident that the chicken and grain markets will strike a favorable balance over time.”

     Sanderson Farms will hold a conference call to discuss this press release today, February 27, 2007, at 10:00 a.m. Central, 11:00 a.m. Eastern. Investors will have the opportunity to listen to a live Internet broadcast of the conference call through the Company’s Web site at www.sandersonfarms.com or through www.earnings.com. To listen to the live call, please go to the Web site at least 15 minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, an Internet replay will be available shortly after the call and continue through March 6, 2007. Those without Internet access or who would rather listen by telephone can call (800) 475-3716, confirmation no. 2448722.

     Sanderson Farms, Inc. is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared food items. Its shares trade on the NASDAQ Stock Market, LLC under the symbol SAFM.

     This press release contains forward-looking statements based on management’s current views and assumptions. Actual results and events may differ. For a discussion of these matters, please refer to the “Cautionary Statement Regarding Risks and Uncertainties That May Affect Future Performance” in Item 7 of the Company’s 2006 Annual Report on Form 10-K and please refer to the cautionary statement found in Management’s Discussion and Analysis of Financial Condition and Results of Operations under the heading “General” in Part I, Item 2 of the Quarterly Report on Form 10-Q for the Company’s first quarter ended January 31, 2007.

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Sanderson Farms Reports First Quarter 2007 Results
Page 3
February 27, 2007

SANDERSON FARMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)

	Three Months Ended
	January 31,
	2007			2006
Net sales	$	292,711		$	236,203
Costs and expenses:
Cost of sales		283,673			236,854
Selling, general and administrative		12,467			13,384
		296,140			250,238
Operating loss		(3,429	)		(14,035	)
Other income (expense):
Interest income		46			124
Interest expense		(1,220	)		(76	)
Other		4			39
		(1,170	)		87
Loss before income taxes		(4,599	)		(13,948	)
Income tax benefit		(1,750	)		(5,342	)
Net loss	$	(2,849	)	$	(8,606	)
Basic loss per share	$	(0.14	)	$	(0.43	)
Diluted loss per share	$	(0.14	)	$	(0.43	)
Dividends per share	$	0.12		$	0.12
Weighted average shares outstanding:
Basic		20,103			20,064
Diluted		20,103			20,064

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Sanderson Farms Reports First Quarter 2007 Results
Page 4
February 27, 2007

SANDERSON FARMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)

	January 31,			October 31,
	2007			2006
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	906		$	7,396
Accounts receivable, net		53,170			40,930
Refundable income taxes		17,199			14,402
Inventories		104,632			96,490
Prepaid expenses and other current assets		16,429			13,179
Total current assets		192,336			172,397
Property, plant and equipment		605,353			573,422
Less accumulated depreciation		(270,236	)		(263,112	)
		335,117			310,310
Other assets		2,145			2,360
Total assets	$	529,598		$	485,067
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	48,148		$	31,514
Accrued expenses		23,550			23,567
Current maturities of long-term debt		4,440			4,433
Total current liabilities		76,138			59,514
Long-term debt, less current maturities		111,933			77,078
Claims payable		3,200			3,200
Deferred income taxes		13,930			16,935
Stockholders’ equity		324,397			328,340
Total liabilities and stockholders’ equity	$	529,598		$	485,067

-END-

EX-99.2

Exhibit 99.2

Final Transcript

Thomson StreetEvents^SM

Conference Call Transcript
SAFM — Q1 2007 Sanderson Farms Earnings Conference Call
Event Date/Time: Feb. 27. 2007 / 11:00AM ET

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Final Transcript

Feb. 27, 2007/11:00AM ET, SAFM — Q1 2007 Sanderson Farms Earnings Conference Call

CORPORATE PARTICIPANTS

Joe Sanderson
Sanderson Farms, Inc. — Chairman and CEO

Mike Cockrell
Sanderson Farms, Inc. — CFO

Lampkin Butts
Sanderson Farms, Inc. — President and COO

CONFERENCE CALL PARTICIPANTS

Farha Aslam
Stephens Inc — Analyst

Oliver Wood
Stifel Nicolaus — Analyst

John McMillan
Prudential — Analyst

Christine McCracken
Cleveland Research — Analyst

Nick Capuano
Imperial Capital — Analyst

John Kohler
Oppenheimer & Close — Analyst

PRESENTATION

Operator

Good day, everyone, and welcome to the Sanderson Farms, Inc. conference call. Today’s call is being recorded. For opening remarks and introductions, I would like to turn the call over to Chairman and Chief Executive Officer, Mr. Joe Sanderson.

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

Good morning and welcome to Sanderson Farms’ first-quarter conference call. With me on the call today are Lampkin Butts, our President and Chief Operating Officer, and Mike Cockrell, our Chief Financial Officer. We issued a news releases morning announcing a net loss of $2.8 million, or $0.14 per fully diluted share, for our first fiscal quarter of 2007. This compares to a net loss of $8.6 million, or $0.43 per share, during last year’s first quarter.

I will begin the call with some brief comments about general market conditions and the Company’s operations. I will 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 - Sanderson Farms, Inc. — CFO

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 our 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, and in the Company’s quarterly report on Form 10-Q, filed this morning with the SEC in connection with our first fiscal quarter that ended January 31, 2007.

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Feb. 27, 2007/11:00AM ET, SAFM — Q1 2007 Sanderson Farms Earnings Conference Call

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

Thank you, Mike. Our financial results for the first fiscal quarter reflect a difficult poultry market during the first half of the quarter, which was exacerbated by higher prices for corn. However, as you will hear from Lampkin, the markets for all parts of the chicken improved significantly beginning in December and continue to improve today. While overall market prices were higher during the quarter, the higher prices were a second-half-of-the-quarter event.

Furthermore, market prices for all parts of the chicken have improved significantly since December, and the prices for corn and soybean meal have risen as well. As we expected, the markets for both corn and soybean meal have remained high and volatile, and I expect that trend to continue at least through the 2007 crop year.

Corn fundamentals support the higher market prices for corn, with demand from ethanol producers growing and stretching corn supplies. The markets will be closely watching the March 30 planning intentions report to see how farmers are going to react to the higher prices caused by the increased demand. Regardless of that report, however, we believe the markets are going to remain on edge and react strongly to every real or rumored weather event that might have a bearing on the quality or quantity of this year’s corn crop. For this reason, we believe the risk of corn prices going even higher is greater than the possibility of prices going lower.

Those of you who have followed our company for sometime have heard us articulate our strategy for pricing our grain needs. We typically are aggressive in pricing our needs whenever the market price for corn or meal is trading in the bottom quartile of its historic range. The reason for this strategy is that when prices are in that range, the downside risk is very low, while the upside risk is greater. We believe it is prudent in that environment to remove the upside risk from the Company and its shareholders.

While current market conditions for corn are without precedent, and while market prices are clearly outside the range where we are normally aggressive pricing our needs, it appears to us that conditions are such that the risk of corn going higher is much greater than the risk of corn prices moving significantly lower. For this reason we have priced our corn needs through July, in order to remove from our company and its shareholders the risk of the corn markets rising higher during the historically-volatile growing season.

With respect to soybean meal, prices have moved up more in sympathy for corn than based on fundamentals. The USDA continues to report a record carryout of soybeans this year, and it appears the South American crop is going to be a record harvest. However, prices have moved up. Because the fundamentals will support a lower price we have not been as aggressive pricing our soybean meal needs as we have with corn. The bottom line continues to be that feed ingredient costs will be significantly higher during fiscal 2007 than during fiscal 2006.

In December we reported that had we priced our needs on that day, our cost would have been $100 million more this fiscal year than last fiscal year. Based on our costs through the first quarter, what we have priced so far and what we could price the balance for the year, that increase today is more in the range of $120 million to $125 million. While our costs will, clearly, be higher during this year, Lampkin will be describing very positive moves in chicken prices. Boneless breast market prices alone have increased over $0.51 a pound since December, which represents a 48% increase in that one very important market. Export demand has remained strong through January, and leg quarter prices have increased more than $0.10 a pound since December.

I am pleased to report that construction of our Waco facility is actually ahead of schedule. We have breeder stock on the ground now, and we plan to begin processing in Waco during our fourth fiscal quarter, and we’ll reach full production in Waco during the fourth quarter of fiscal 2008. The additional production at Waco and the annualized pounds in Moultrie and Collins will allow the Company to continue its pattern of growth through 2009.

At this point I will turn the call over to Lampkin for a more detailed discussion of the market and our operations during the first quarter.

Lampkin Butts - Sanderson Farms, Inc. — President and COO

Thank you, Joe, and good morning to everyone. As Joe mentioned, overall market prices for poultry products were higher during the quarter when compared to our first quarter last year, and have improved significantly during December.

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Final Transcript

Feb. 27, 2007/11:00AM ET, SAFM — Q1 2007 Sanderson Farms Earnings Conference Call

While the average Georgia Dock price during our first quarter was slightly lower than last year’s first quarter, averaging $0.70 per pound during the quarter, compared to $0.7125 per pound average last year, the Georgia Dock price for the week of February 26, 2007 is $0.75 per pound, which compares to $0.69 per pound for the same week last year.

Bulk leg quarter prices were also higher for the quarter compared to last year’s first quarter, increasing more than 21%, reflecting strong export demand. Bulk leg quarter prices averaged $0.3144 per pound during our first quarter this year, compared to $0.2589 per pound during last year’s first quarter, or an increase of 21.44%. Leg quarters are currently trading for $0.41 per pound.

Prices for jumbo wings were strong during our first fiscal quarter, averaging $0.965 per pound, up 17.71% from the average of $0.82 during last yea’s first quarter. Wings have come down from their high of $1.22 per pound during Super Bowl week to $1.06 per pound today.

Boneless breast meat prices rose sharply during our first quarter, increasing by 12.87% when compared to the first quarter a year ago. Boneless breast meat averaged $1.23 per pound during the first quarter, and today the market for boneless is $1.57 per pound.

While chicken prices were higher during our first quarter when compared to last year’s first quarter, our costs for feed grains were much higher. The cost for corn delivered during the first quarter increased 57% compared to our first quarter last year. The average cost of feed in flocks sold increased 15.4% during the quarter over last year’s first quarter. Our operating performance during the quarter was strong, and our volume reflected the increase in live weights at our Collins, Mississippi plant implemented during last year’s second quarter, and the full production at Moultrie, which was achieved last fall.

While we processed fewer birds than full production during November and December as part of our cut in production implemented last May, those cuts have been restored. We sold 480 million pounds of poultry during the first quarter, a 24.4% increase from the 386 million pounds sold during last year’s first quarter. Production during last year’s first quarter was lower because of the hurricane as well. We continue to expect an increase of approximately 12% in pounds processed during fiscal 2007 compared to 2006. This increase will come as we annualize the Moultrie growth, annualize the increased live weights at Collins, and complete the Collins expansion in May.

Both our processing and our live grow-out divisions continue to compete well in the industry. However, we have many opportunities to improve items we can control and have identified opportunities in our plants, in the field and in sales that we will work to capture during fiscal 2007.

Performance at our prepared foods division improved during the first quarter. Volume was up at the plant, reflecting the new high-speed equipment we installed during last year’s first quarter, and sales growth at the plant.

Looking ahead, we remain confident that we will continue to improve our operating performance and sales execution, and I’m also looking forward to completing our new project in Texas. The new plant will provide an opportunity to continue the history of growth this company has experienced over the past years.

At this point I’ll turn the call over to Mike Cockrell, Chief Financial Officer.

Mike Cockrell - Sanderson Farms, Inc. — CFO

Thank you, Lampkin. Our financial results during the first fiscal quarter reflect the difficult market environment described by Joe and Lampkin during the first part of the quarter. Our net sales, however, totaled 292.7 million, and that is up from 236.2 million for the same quarter during fiscal 2006. The $0.14 per share loss during the quarter compares to a $0.43 per share loss during last year’s first quarter.

Our cost of sales for the three months ended January 31, 2007 as compared to the same three months last year increased 19.8%. The increase is a result of the 24.4% increase in pounds of poultry sold during the first quarter this year compared to last year, as well as the higher feed cost.

SG&A expenses for the first quarter of 2007 were down just under $1 million to $12.5 million when compared to $13.4 million last year. SG&A expenses going forward will trend up compared to a year ago, reflecting the administrative costs associated with the construction and startup of the new Texas facility. We expect startup costs related to Waco booked as SG&A expenses to total approximately $1.5 million during the second fiscal quarter and $2.3 million during our third fiscal quarter. These costs include training, salaries and related expenses that will not be booked as cost of goods sold until the plant begins operations during our fourth fiscal quarter.

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Final Transcript

Feb. 27, 2007/11:00AM ET, SAFM — Q1 2007 Sanderson Farms Earnings Conference Call

Interest expense increased from 76,000 to 1.2 million during the quarter, reflecting higher outstanding debt, offset by the capitalization of $400,000 of interest to the cost of construction projects.

At the end of our first quarter, our balance sheet reflects stockholders equity of $324 million and net working capital of $116 million. The current ratio was 2.5 to 1, our debt totaled $116 million, and our debt to cap ratio was 26% as of January 31.

We spent $33.4 million on capital expenditures during the quarter out of our expected capital expenditures during the quarter, of which $26.2 million was related to Waco. We spent 2.5 million on dividends.

During fiscal 2007, we expect to spend approximately $102 million on capital projects, [which amount] includes $3.3 million in vehicle and other operating leases and 73.5 million for the new Waco complex and the Robertson County, Texas feed mill expansion.

Our depreciation and amortization during the first quarter totaled $8.3 million, and we continue to expect approximately $35 million in depreciation for fiscal 2007.

With that, we are completed with our prepared remarks for this morning, and we will now open up the call for a question-and-answer period.

QUESTION AND ANSWER

Operator

(OPERATOR INSTRUCTIONS). Farha Aslam, Stephens Inc.

Farha Aslam - Stephens Inc — Analyst

A couple questions. And I apologize; I missed the first part of your prepared statements. In terms of pricing for you guys, could you tell us overall what pricing was up for you year-over-year in the quarter?

Mike Cockrell - Sanderson Farms, Inc. — CFO

Overall, frankly, pricing per pound was flat versus a quarter a year ago, but there are a couple of things working in that number that I would point out to you.

First of all, if you take out export sales totally out of the mix for the quarter, pricing was up a little over 4% per pound. And you need to do that this year because last year’s first quarter was distorted slightly by hurricane-affected numbers. Last year’s — because we could not ship leg quarters during November and December because of hurricane interruptions, we had made some sales earlier in the year that were actually shipped during late December and January, and those sales were at prices well above what the market was at that time.

And this year, overall, our exports are up significantly versus the pounds we sold last year, but the price on those exports are down. For example, we averaged a little over $0.22 a pound on exported product this quarter, versus a year ago was a little over $0.33 a pound. So taking those export numbers out, our overall sales price per pound was actually up a little over 4 1/3 cents a pound.

Farha Aslam - Stephens Inc — Analyst

Could you talk about pricing going forward? What are you looking in terms of breast meat pricing — it’s had a really nice run — and leg quarter pricing out for a few months, in terms of what visibility you do have?

Lampkin Butts - Sanderson Farms, Inc. — President and COO

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Final Transcript

Feb. 27, 2007/11:00AM ET, SAFM — Q1 2007 Sanderson Farms Earnings Conference Call

As far as leg quarters go, I’ll tell you that the prices that we’ve been able to book for leg quarters going to the export market have gone up every month since November through March. I can’t really — I can’t say about prices beyond that, except I’ll tell you that the inventories — our reports are the inventories in Russia are still historically low, and the product still seems to be moving over there very well. So we’re optimistic that the March prices will — barring some unforeseen interruption, would continue to be good and maybe improve a little more.

Farha Aslam - Stephens Inc — Analyst

Do you think they’re going to hit a cap at around the $0.45 level or so? That’s historically where kind of Russia gets a little bit less aggressive.

Lampkin Butts - Sanderson Farms, Inc. — President and COO

Usually when they’re in the 40s, like you say, that’s been sort of the top side of the market. So they’re more cautious about buying at that point. I wouldn’t be surprised.

Farha Aslam - Stephens Inc — Analyst

And then, when you think about breast meat going into the summer, what are your thoughts there, particularly with your outlook on production?

Lampkin Butts - Sanderson Farms, Inc. — President and COO

Well, we — historically, we see better markets after Easter. We see better markets after Easter all the way through the summer. I think 2005, with boneless breasts, that didn’t happen. But we started out the year at $1.65, and the summer months were not higher than that. But historically they are.

We’re seeing — in February we have seen egg sets be 99% of a year ago, up to 100% of a year ago. So, as far as numbers of growers — numbers of eggs going into the hatcheries, that’s a few more than we saw in the fall. Whether or not that translates into more pounds will really depend on whether live weights are the same or less than a year ago. But I continue to think, looking at pullet placements and the price of grain, that there will be restraint. And I would think the market should be better after Easter.

Farha Aslam - Stephens Inc — Analyst

My final question, and then I’ll pass it on. Could you just share with us some details regarding your grain positions? Have you hedged that soy meal exposure, and kind of what are you looking for overall grain costs to be up year-over-year?

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

I don’t know if you heard; we have priced our corn through July. And we have not been as aggressive pricing meal, because we believe meal might be overvalued a bit right now. We don’t — we think the market is going to be very volatile, particularly for corn during the planning and the growing season. Had we priced everything today, our overall cost would be up $120 million to $125 million for the year.

Farha Aslam - Stephens Inc — Analyst

And that’s on flat volume, not on the higher volume? Right?

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

That’s on the higher volume.

Farha Aslam - Stephens Inc — Analyst

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Final Transcript

Feb. 27, 2007/11:00AM ET, SAFM — Q1 2007 Sanderson Farms Earnings Conference Call

On the higher volume, including —

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

I’m sorry. That is based on ‘06 volume.

Farha Aslam - Stephens Inc — Analyst

‘06 volume. And would you expect volume to be up in ‘07 for the full year now?

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

Yes. 12%.

Lampkin Butts - Sanderson Farms, Inc. — President and COO

12%.

Farha Aslam - Stephens Inc — Analyst

12% for the full year. Great. Thank you very much.

Operator

(OPERATOR INSTRUCTIONS). Oliver Wood, Stifel Nicolaus.

Oliver Wood - Stifel Nicolaus — Analyst

Wondering — based on what prices have done recently, and including the impact of your hedge, is the business currently profitable? And if not, kind of how far out is profitability?

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

I would think — I would think that if you look at the three primary market segments — small bird and tray pack and big bird deboning — I would think most big bird deboners would — the market for their products has improved much more than the prices have improved on the Georgia Dock. So I would think most big bird deboners would be profitable right now, and I would think they would be more profitable than the other two market segments.

Oliver Wood - Stifel Nicolaus — Analyst

Looking at your balance sheet for a second, it looks like Sanderson has taken on about 100 million of debt over the last year. Given expansion plans and everything else, is there going to be any opportunity this year to pay that down at all, or is that more of a fiscal ‘08 event?

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

We would certainly hope we would pay some of it down this year. You know, I don’t know what the market is going to do, but we would certainly hope we — we’re going to spend a lot in this quarter and the third quarter. That’s where our major capital expenditures will take place,

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Final Transcript

Feb. 27, 2007/11:00AM ET, SAFM — Q1 2007 Sanderson Farms Earnings Conference Call

and that will slack off in the fourth quarter. And we would certainly hope to pay some down. But it’s — our cash — our outflow is going to increase in the second and the third quarter over the first quarter.

Mike Cockrell - Sanderson Farms, Inc. — CFO

However, you will notice we spent roughly a third of our capital budget during the first quarter. We’ll spend another third here in the second. And then it will, as Joe said, it will start trailing off after that.

Oliver Wood - Stifel Nicolaus — Analyst

So CapEx will be kind of lumpy.

Mike Cockrell - Sanderson Farms, Inc. — CFO

That’s right, it will be. But I would certainly — I agree with Joe; I’d certainly hope we have an opportunity this year.

Oliver Wood - Stifel Nicolaus — Analyst

Looking at my notes from last quarter, it seems that volume expectations have creeped up a little bit from the kind of 9% to 10% range to 12%. And then in the press release, you all also mentioned that Waco appears ahead of schedule. Is there any chance we could see production out of Waco in the third quarter?

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

No.

Operator

John McMillan, Prudential.

John McMillan - Prudential — Analyst

Thanks for taking my question. I don’t follow your company as closely as other chicken ones, but I’m just trying to understand your increased production. It seems to me that prices have improved. But then, aren’t you kind of raining on the parade by increasing production, which will cause pricing to go down? Am I missing that? Am I missing something here?

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

John, the reason for our increase in volume was mainly two projects that were started two years ago. We increased the live weight at our Collins, Mississippi plant. And that decision was made when we announced the Moultrie, Georgia plant, which opened — which was three years ago. And then we — the other source of those pounds is the annualization of the Moultrie, Georgia facility, which we announced in January of ‘05, I believe.

John McMillan - Prudential — Analyst

That’s fair.

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

That’s where it came from. It was decisions we made a long time ago.

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Feb. 27, 2007/11:00AM ET, SAFM — Q1 2007 Sanderson Farms Earnings Conference Call

John McMillan - Prudential — Analyst

Are you surprised, nonetheless, that the industry hasn’t pulled back a little bit more?

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

No. Not really. The pullback that has taken place had the effect on the market that it needed to, particularly for big bird deboners. It appears to me the Georgia Dock is moving to catch up to that value per head. I don’t know about the small bird, but the increase in leg quarter prices and breast prices helps all the market segments.

Operator

Christine McCracken, Cleveland Research.

Christine McCracken - Cleveland Research — Analyst

It sounds like your outlook for exports is still pretty healthy, even at these levels. Wondering — we saw some news this week that there’s been a few spotty cases of AI in Russia. Have you had any reports yet as to if there’s been any response to that this time? Or do you think because they’re a little better informed now, we won’t see the demand change that we saw last time?

Lampkin Butts - Sanderson Farms, Inc. — President and COO

So far we have seen no reaction to that news about the AI in Russia. There have been a few — there have been some outbreaks in other countries; not nearly as many as we faced this time last year. But even the reaction to those has been less severe this year. There seems to be more consumer knowledge about the facts behind this. So, we’re in touch with different people in Europe and Russia that we trade with daily to see if the distributors or importers are seeing any reaction. So far, they have not.

There was some news yesterday that the country of Kazakhstan was not going to allow shipments from Russia into that country. And they’re landlocked, so it has to come in that way. So they have reacted not to U.S. poultry, but just to traffic through the country of Russia. But it’s not a big volume, not a country that imports a lot, and product will be diverted around that.

Christine McCracken - Cleveland Research — Analyst

Sounds good. And then, just in terms of your expansion plans, obviously, you’re well down the road on these plants. It sounds like they’re coming in a little sooner than you expected. One of the comments that I hear a lot from investors, or the expectation, I guess, from some of the chicken companies, is that banks are going to be the limiting factor on expansion. Since you guys are kind of in the process, I’m wondering, have you had any resistance from the banks to lend money to expand? We saw, I guess, some environmental challenges to some expansion. But thus far, I hadn’t really heard much about banks being the limiting factor. I’m wondering just what your experience was.

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

We have not had any resistance from our bank group. The bank group is financing the housing expansion in Texas, which is about 600 houses. And I will also tell you, report to you, that we’re almost complete with that, getting the grower contracts done. But we have had no resistance from bankers for our plans.

Christine McCracken - Cleveland Research — Analyst

Just in terms of the (indiscernible) transaction, and now that they’re kind of integrating that, I’m wondering, have you seen any change from them as a competitor, or are things pretty much status quo?

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Final Transcript

Feb. 27, 2007/11:00AM ET, SAFM — Q1 2007 Sanderson Farms Earnings Conference Call

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

Status quo.

Christine McCracken - Cleveland Research — Analyst

Good to hear. And just finally, on bird weights and your expectations around growth in the industry going forward, I think a lot of people were looking for maybe some drop in bird weights tied to the high cost of grain. But at the same time there are some dynamics in the industry, new genetics, and really the move toward big bird deboning, that seem to be running contrary to that. I’m wondering — how do you look at bird weights, and what is your expectation around growth in the industry from that perspective?

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

I think right now, we’ve had anecdotal information that some companies have reduced bird weights significantly, like from 7.5 pounds to 5.5 pounds. I do not have first-hand knowledge of that. But it feels like out in the marketplace that, particularly with one or two products, that live weights in some instances have been down.

Ours was — our live weights were purposely drawn down in November and December, and was part of our response to the lower markets. But I do — there is, obviously, a trend, a creeping trend in the big bird deboning sector, to a lesser extent in the tray pack sector, for increased bird weights. I don’t think that is happening today. But my guess is, when you get into spring — typically that occurs seasonally in the spring and in the fall, where you have ideal growing conditions. But right now, I have a feel that live weights may be smaller in the industry right now.

[And the anecdote] — what I was — chicken tenders have been very sensitive to demand for the last 60, 90 days, and have moved up in prize probably more than boneless breasts, maybe $0.70 a pound. And I think that had — a lot of that was because there were less loads of chicken tenders available because of reduction in live weights, as well as headcount.

Christine McCracken - Cleveland Research — Analyst

Have you seen any impact from the weather on weights at all, or is it (multiple speakers)

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

No. Not yet. It will start here in March. We’re in the 70s during the day now, and maybe down to 45 or 50 at night. And that’s pretty close to ideal. And that will creep northward. Probably Arkansas and North Carolina are not into ideal weather and growing conditions, but we are.

Christine McCracken - Cleveland Research — Analyst

I think a lot of people from the northern part of the United States would find that ideal as well. Thanks.

Operator

(OPERATOR INSTRUCTIONS). Nick Capuano, Imperial Capital.

Nick Capuano - Imperial Capital — Analyst

A quick question for you. Given the production cuts you’ve seen and the current pricing trends that you’re experiencing, if you could just give us an idea on your thoughts on what the — how the pricing — how you think the pricing might develop through the year. Do you think we can look back to the big run in pricing we had in 2004 as a potential for your — the potential progression for your composite pricing for the year?

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Final Transcript

Feb. 27, 2007/11:00AM ET, SAFM — Q1 2007 Sanderson Farms Earnings Conference Call

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

I do not think that. I do not think 2007 is going to be like 2004. We are — as Lampkin said, we’re optimistic that we will continue to see seasonal improvement in pricing. And one of the reasons for that is the export market, and it’s important to the domestic market that that volume of dark meat continue to be exported. That is going to be one of the supports for the domestic market. No increase in production, and expecting a 1.5% to 2% increase in demand domestically. And we would look for a normal market where prices would be a little bit higher in the summer than they are today.

Nick Capuano - Imperial Capital — Analyst

As you look at the — so you think the pricing progression, even with the production cuts, will follow a more normal pattern? I guess it’s kind of hard to figure out what’s normal, given the volatility of the last few years.

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

Yes. But a seasonal — historical seasonal pattern is what we think will happen. I wouldn’t be surprised to see, as Christine pointed out, weights maybe inch up a little bit in the springtime; then, depending on the heat in the summer, that may stabilize or come back down. And we don’t know what corn and soybean meal are going to do for the rest of the year. Obviously, we believe it’s going higher. If it goes higher, there will be less inclination to expand in the face of that.

Operator

(OPERATOR INSTRUCTIONS). Mark Close, Oppenheimer & Close.

John Kohler - Oppenheimer & Close — Analyst

Actually it’s [John Kohler] with Oppenheimer & Close. Quick question, and maybe this was already covered and I missed it. Last conference call, I believe, you had mentioned the increase in feed costs, assuming it would be $100 million, worked out to something in the neighborhood of $0.35. Is that — $0.07 a pound, I think it was.

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

I think it was $0.05.

John Kohler - Oppenheimer & Close — Analyst

$0.05 a pound; I’m sorry. And it was a seven-pound bird. That got you to roughly $0.35?

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

Yes.

John Kohler - Oppenheimer & Close — Analyst

And if you looked at the wing prices and leg quarter prices and so on, it would seem that we’re getting to the point here where the increase in prices, if they stay stable on a year-over-year — going forward from where they are now, that you could pretty much absorb the increased feed costs? Is that a fair assessment?

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

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Final Transcript

Feb. 27, 2007/11:00AM ET, SAFM — Q1 2007 Sanderson Farms Earnings Conference Call

I would think that is accurate.

John Kohler - Oppenheimer & Close — Analyst

So in order for profit to go up from this point on, we need additional increase in chicken prices.

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

You do. Because grain costs — grain costs in our second and third quarter will be higher than they were in our first quarter. So we haven’t seen all of the increase in live costs yet. But I think the return on, particularly on the big bird, but when you figure $0.50 a pound on 20% of the chicken, that pretty much covers — more than covers your increase in live cost.

John Kohler - Oppenheimer & Close — Analyst

Right. And you had a $0.20 increase in leg quarters, which is what? 17%?

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

We had $0.10 increase (multiple speakers)

Mike Cockrell - Sanderson Farms, Inc. — CFO

On average. It’s up that much now, John. But on average that was a $0.10 number.

John Kohler - Oppenheimer & Close — Analyst

Right. I was hoping that we could get that to stay the same for the rest of the year. Okay. I appreciate it.

Operator

(OPERATOR INSTRUCTIONS). Gentlemen, it appears there are no further questions at this time. I would like to turn the conference back over to you.

Joe Sanderson - Sanderson Farms, Inc. — Chairman and CEO

Thank you for spending time with us this morning. We look forward to reporting our results to you throughout the year. Thank you very much.

Operator

And that concludes today’s teleconference. Thank you for your participation. Have a good day.

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Final Transcript

     Feb. 27, 2007/11:00AM ET, SAFM — Q1 2007 Sanderson Farms Earnings Conference Call

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