Soaring raw material costs could delay new US chicken plant
(Bloomberg) – The cost of raw materials is so high right now that the third-largest chicken producer in the United States is considering shelving plans to build a new processing plant – even as the company struggles to respond to the request.
Sanderson Farms Inc. is one of the first companies to report that it may halt expansion plans as the price of everything from lumber to steel skyrocketed, driving up construction costs.
“I need a factory to open next week, but now is not a good time to build,” said CEO Joe Sanderson. The company, which had planned to begin construction of a new facility in the first half of 2021, “will look very carefully” at construction costs given the raw materials market, he said.
Wood prices hit new highs in the past year before softening this week as many wood products quadrupled in value amid rising home construction and renovations. Steel prices have also reached all-time highs, with the national benchmark price rising nearly 50% this year.
“It’s more wood than steel and concrete,” Sanderson said Wednesday at the BMO Farm to Market virtual conference. “Steel and concrete are rising all the time. Each complex costs more than the last, but it’s wood right now, ”which makes the company think.
The timing is unfortunate, with the economic recovery also stimulating demand for chicken to the point that Sanderson can no longer take orders without expanding.
“We’re totally exhausted and people are calling us to service them and we can’t go into business anymore, and that’s not a good place,” Sanderson told the Goldman Sachs Global Staples Forum on Tuesday.
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