(RTTNews) - Monday, KeyBanc Capital downgraded Sanderson Farms Inc. (SAFM: News ) shares to Hold from Buy. The brokerage lowered its 2009 fourth quarter EPS estimate by $0.16 to $1.22, and its 2010 estimate by $1.10 to $3.49.

Analyst Akshay Jagdale attributed the downgrade based on higher corn costs and continued demand weakness. While the analyst expected continued chicken demand weakness and declining breast meat prices as a result of the weak U.S. economy in note following SAFM's third quarter call, he also believed corn prices could fall by $0.40-0.60/bu in the months to come owing to a historically large corn crop.

The analyst thought such a decline in corn prices could lead to EPS upside in fiscal 2010. While the crop has been as large as the analyst expected, corn prices have nonetheless moved up by about $0.50/bu since the end of August owing to higher speculative buying.
Consequently, the analyst is increasing his corn price assumption for fiscal 2010 to $4.00 from $3.63, which decreases his fiscal 2010 gross margin estimate by 160 bps to 10.4% and his EPS estimate by $0.91.

Currently, SAFM is down $1.17 or 3.08% and trading at $36.83.

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by RTT Staff Writer

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