Feed prices up, food margin will improve.

The main knock on Sanderson is that chickens eat corn, and corn prices are setting new highs. This seems the basis for the large short position in Sanderson -- a full 20% of its float, or nearly seven days' average share volume. Yet investment advisor Andrew Horowitz, author of the recent book The Disciplined Investor, notes that over time Sanderson shares and corn prices have been positively correlated, indicating an ability to pass through feed costs. Given that chicken is a cheaper protein to begin with, Sanderson should have some headroom on pricing. Merrill Lynch economists note that poultry prices have risen 8.3% at retail.

This all suggests that the poultry cycle has some distance to run before the next peak. At the top of the last cycle in 2004, Sanderson, with less production capacity, earned $4.58 and the stock hit 55. So a run back into the 40s hardly seems a stretch

short squeeze

bird flu scare is false

new

chart pattern indicating long term trend reversal

Sanderson Farms. Chicken processor. Average earnings estimate went from 2.16 to 2.25.

higher feed costs are underestimated by street - corn especially