SANDERSON FARMS INC (Form: 10-Q, Received: 05/24/2007 08:01:33)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(MARK ONE)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-14977

Sanderson Farms, Inc.

(Exact name of registrant as specified in its charter)


Mississippi		64-0615843

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		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)

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer as defined in Rule 12b-2 of the Exchange Act.

Large Accelerated filer o Acclerated filer þ Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No þ

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS

DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Stock, $1 Per Share: Par Value shares 20,131,758 outstanding as of April 30, 2007.

INDEX

SANDERSON FARMS, INC. AND SUBSIDIARIES


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets—April 30, 2007 and October 31, 2006
Condensed consolidated statements of operations—Three and six months ended April 30, 2007 and 2006
Condensed consolidated statements of cash flows– Six months ended April 30, 2007 and 2006
Notes to condensed consolidated financial statements—April 30, 2007
Report of Independent Registered Public Accounting Firm
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits
SIGNATURES
Ex-10.2 Form of Agreement between Registrant and its Non-Employee Directors Who Particpate in its Management Share Purchase Plan, As Amended
Ex-10.3 Form of Agreement between Registrant and its Officers and Employees Who Participate in its Management Share Purchase Plan, As Amended
Ex-10.4 Form of Restricted Stock Agreement between the Registrant and its Non-Employee Directors Who Are Granted Restricted Stock, As Amended
Ex-15 Accountants' Letter
Ex-31.1 Section 302 Certification
Ex-31.2 Section 302 Certification
Ex-32.1 Section 906 Certification
Ex-32.2 Section 906 Certification

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	April 30,			October 31,
	2007			2006
	(Unaudited)			(Note 1)
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	14,554		$	7,396
Accounts receivable, net		61,912			40,930
Refundable income taxes		0			14,402
Inventories		115,497			96,490
Prepaid expenses and other current assets		15,581			13,179

Total current assets		207,544			172,397
Property, plant and equipment		636,627			573,422
Less accumulated depreciation		(275,840	)		(263,112	)

		360,787			310,310
Other assets		2,320			2,360

Total assets	$	570,651		$	485,067


Current liabilities:
Accounts payable and accrued expenses	$	65,863		$	55,081
Current maturities of long-term debt		4,440			4,433

Total current liabilities		70,303			59,514
Long-term debt, less current maturities		131,933			77,078
Claims payable		3,200			3,200
Deferred income taxes		14,830			16,935
Stockholders’ equity:
Preferred Stock:
Series A Junior Participating Preferred Stock, $100 par value: authorized 500,000 shares; none issued, Par value to be determined by the Board of Directors: authorized 4,500,000 shares; none issued
Common Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares – 20,131,758 and 20,094,571 at April 30, 2007 and October 31, 2006, respectively		20,132			20,095
Paid-in capital		20,045			17,181
Retained earnings		310,208			291,064

Total stockholders’ equity		350,385			328,340

Total liabilities and stockholders’ equity	$	570,651		$	485,067

See notes to condensed consolidated financial statements.

SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)


	Three Months Ended						Six Months Ended
	April 30,						April 30,
	2007			2006			2007			2006
Net sales	$	360,471		$	239,082		$	653,182		$	475,285
Cost and expenses:
Cost of sales		303,764			251,180			587,437			488,034
Selling, general and administrative		12,988			14,367			25,455			27,751

		316,752			265,547			612,892			515,785


OPERATING INCOME (LOSS)		43,719			(26,465	)		40,290			(40,500	)
Other income (expense):
Interest income		61			25			107			149
Interest expense		(1,266	)		(560	)		(2,486	)		(636	)
Other		7			15			11			54

		(1,198	)		(520	)		(2,368	)		(433	)

INCOME (LOSS) BEFORE INCOME TAXES		42,521			(26,985	)		37,922			(40,933	)
Income tax expense (benefit)		15,590			(10,336	)		13,840			(15,678	)

NET INCOME (LOSS)	$	26,931		$	(16,649	)	$	24,082		$	(25,255	)

Earnings (loss) per share:
Basic	$	1.34		$	(.83	)	$	1.20		$	(1.26	)

Diluted	$	1.33		$	(.83	)	$	1.19		$	(1.26	)

Dividends per share	$	.12		$	.12		$	.24		$	.24

Weighted average shares outstanding:
Basic		20,120			20,067			20,111			20,066

Diluted		20,267			20,067			20,223			20,066

See notes to condensed consolidated financial statements.

SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)


	Six Months Ended
	April 30,
	2007			2006
	(In thousands)
Operating activities
Net Income (loss)	$	24,082		$	(25,255	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		16,658			14,637
Non-cash stock compensation		1,665			1,459
Change in assets and liabilities:
Accounts receivable, net		(20,982	)		521
Receivable from insurance companies		0			9,058
Inventories		(19,007	)		(5,961	)
Other assets		11,905			(4,431	)
Accounts payable, accrued expenses and other liabilities		6,205			(30,361	)

Total adjustments		(3,556	)		(15,078	)

Net cash provided by (used in) operating activities		20,526			(40,333	)
Investing activities
Capital expenditures		(67,400	)		(46,807	)
Net proceeds from sale of property and equipment		401			674

Net cash used in investing activities		(66,999	)		(46,133	)
Financing activities
Principal payments on long-term debt		(138	)		(131	)
Net borrowings from revolving line of credit		55,000			10,000
Proceeds from long-term borrowings		0			50,000
Net proceeds from issuance of common stock (37,187 shares in 2007 and 30,769 shares in 2006)		905			648
Tax benefit on exercised stock options		331			27
Dividends paid		(2,467	)		(2,457	)

Net cash provided by financing activities		53,631			58,087

Net change in cash and cash equivalents		7,158			(28,379	)
Cash and cash equivalents at beginning of period		7,396			34,616

Cash and cash equivalents at end of period	$	14,554		$	6,237


Supplemental disclosure of non-cash financing activity:
Dividends payable	$	(2,471	)	$	(2,453	)

See notes to condensed consolidated financial statements.

SANDERSON FARMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 30, 2007

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the three and six months ended April 30, 2007 are not necessarily indicative of the results that may be expected for the year ending October 31, 2007.

The consolidated balance sheet at October 31, 2006 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended October 31, 2006.

The condensed consolidated statements of operations, for the three and six months ended April 30, 2006, include a reclassification of certain expenses to cost of sales from net sales, in order to conform with the classification in the current periods. The reclassification to cost of sales from net sales was $14.0 million and $28.1 million, respectively, during the three and six months ended April 30, 2006.

NOTE 2 — INVENTORIES

Inventories consisted of the following:


	April 30,		October 31,
	2007		2006
	(In thousands)
Live poultry-broilers and breeders	$	67,873	$	53,011
Feed, eggs and other		15,873		13,840
Processed poultry		18,845		18,102
Processed food		7,821		6,492
Packaging materials		5,085		5,045


	$	115,497	$	96,490

NOTE 3 — STOCK COMPENSATION PLANS

Refer to Note 9 of our October 31, 2006 audited financial statements for further information on our employee benefit plans and stock compensation plans. Total stock based compensation expense applicable to the Company’s restricted stock grants for the six months ended April 30, 2007 and April 30, 2006 was $1,665,000 and $1,459,000 respectively.

During the six months ended April 30, 2007, participants in the Company’s Management Share Purchase Plan purchased a total of 9,135 shares of restricted stock at an average price of $33.57 and the Company issued 2,253 matching restricted shares.

During the quarter ended April 30, 2007, the Company granted 15,000 shares of restricted stock to certain directors. The restricted stock had a grant date fair value of $33.70 per share and vests three years from the date of grant.

During the quarter ended January 31, 2007, the Company entered into performance share agreements that grant certain officers and key employees the right to receive a target number of 106,000 shares of the Company’s common stock, subject to the Company’s achievement of certain performance measures. The aggregate target number of shares specified in performance share agreements outstanding as of April 30, 2007 totaled 179,950. No compensation cost was recognized for performance shares during the three and six months ended April 30, 2007 because achievement of the applicable performance measures is not considered probable.

NOTE 4 — EARNINGS PER SHARE

Basic net income (loss) per share was calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share was calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the period plus the dilutive effects of stock options and restricted stock

outstanding. Restricted stock and employee stock options representing 71,618 and 80,271 common shares for the three and six months ended April 30, 2006 were excluded from the calculation of diluted net loss per share for the periods because the effect was antidilutive. Restricted stock and employee stock options representing 146,668 and 111,969 common shares for the three and six months ended April 30, 2007 are included in the calculation of diluted net income per share, respectively.

NOTE 5 — NEW ACCOUNTING PRONOUNCEMENTS

In July 2006, the FASB issued Interpretation No. 48, Accounting for “Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.” Interpretation 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with Statement No. 109 and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Additionally, Interpretation No. 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Interpretation 48 is effective for fiscal years beginning after December 15, 2006, with early adoption permitted. The Company is currently evaluating the impact the adoption of Interpretation 48 will have on the Company’s consolidated financial position, results of operations and cash flows.

NOTE 6 — OTHER MATTERS

On June 6, 2006, Annie Collins, a former employee of the processing division subsidiary, on behalf of herself and as representative of “a class of individuals who are similarly situated and who have suffered the same or similar damages” filed a complaint against the Company’s processing and production subsidiaries in the United States District Court for the Eastern District of Louisiana.

Plaintiffs allege that the Company’s subsidiaries violated the Fair Labor Standards Act by failing to pay plaintiffs and other hourly employees for the time spent donning and doffing protective and sanitary clothing and performing other alleged compensable activities, and that “Sanderson automatically deducted thirty minutes from each worker’s workday for a meal break regardless of the actual time spent on break.” Plaintiffs also allege that they were not paid overtime wages at the legal rate. Plaintiffs seek unpaid wages, liquidated damages and injunctive relief.

On July 31, 2006, following various procedural motions, the Company filed its Answer to the plaintiffs’ Complaint.

On July 20, 2006, ten current and former employees of the processing division subsidiary filed an action nearly identical to the one described above. Approximately 3,700 individuals purportedly have given their consent to be a party plaintiff to this and the aforementioned actions. Since the filing of these two complaints, six other substantially similar lawsuits were filed in United States District Courts for the Jackson and Hattiesburg divisions of the Southern District of Mississippi. Unlike the two previous suits referenced above, these Complaints are specific to individual processing locations of the subsidiary Corporation.

On March 26, 2007, the parties filed a Joint Motion for Preliminary Approval of Collection Action Settlement and Appointment of Plaintiff’s Counsel as Class Counsel. On April 11, 2007, the Court denied the joint motion on two grounds: (1) The motion was premature because no motion to certify a collective action had been filed in the case, and (2) certain contingencies contained in the settlement agreement gave rise to concerns about whether the settlement agreement was in accordance with the Fair Labor Standards Act. The parties filed a Joint Motion for Reconsideration of this order of the Court, which was granted in part and denied in part by order dated May 3, 2007. In the order, the Court stated it would permit notice to the class to proceed. The Court also stated that if certain contingencies agreed to by the parties in the settlement agreement concerning class participation are met, it will consider the reasonableness of the proposed settlement at a fairness hearing. This hearing will take place after the August 1, 2007 deadline the Court has set for class members to opt in to the lawsuit. The parties have agreed to proceed in this manner, and the Court has authorized the distribution of notice to the class.

The Company is also involved in various other claims and litigation incidental to its business. Although the outcome of the matters referred to in the preceding sentence cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome should not have a material effect on the Company’s consolidated results of operation or financial position.

The Company recognizes the costs of legal defense for the legal proceedings to which it is a party in the periods incurred. A determination of the amount of reserves required, if any, for these matters is made after considerable analysis of each individual case. Because the outcome of these cases cannot be determined with any certainty, no estimate of the possible loss or range of loss resulting from the cases can be made. At this time, the Company has not accrued any reserve for any of these matters. Future reserves may be required if losses are deemed probable due to changes in the Company’s assumptions, the effectiveness of legal strategies, or other factors beyond the Company’s control. Future results of operations may be materially affected by the creation of or changes to reserves or by accruals of losses to reflect any adverse determinations of these legal proceedings.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Sanderson Farms, Inc.

We have reviewed the condensed consolidated balance sheet of Sanderson Farms, Inc. and subsidiaries as of April 30, 2007, and the related condensed consolidated statements of operations for the three-month and six-month periods ended April 30, 2007 and 2006, and the condensed consolidated statements of cash flows for the six-month periods ended April 30, 2007 and 2006. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Sanderson Farms, Inc. and subsidiaries as of October 31, 2006, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended not presented herein, and in our report dated December 27, 2006, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of October 31, 2006, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Ernst & Young LLP

New Orleans, Louisiana
May 23, 2007

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The following Discussion and Analysis should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of the Company’s Annual Report on Form 10-K for its fiscal year ended October 31, 2006.

This Quarterly Report, and other periodic reports filed by the Company under the Securities Exchange Act of 1934, and other written or oral statements made by it or on its behalf, may include forward-looking statements, which are based on a number of assumptions about future events and are subject to various risks, uncertainties and other factors that may cause actual results to differ materially from the views, beliefs and estimates expressed in such statements. These risks, uncertainties and other factors include, but are not limited to the following:

(1) Changes in the market price for the Company’s finished products and feed grains, both of which may fluctuate substantially and exhibit cyclical characteristics typically associated with commodity markets.

(2) Changes in economic and business conditions, monetary and fiscal policies or the amount of growth, stagnation or recession in the global or U.S. economies, either of which may affect the value of inventories, the collectability of accounts receivable or the financial integrity of customers.

(3) Changes in the political or economic climate, trade policies, laws and regulations or the domestic poultry industry of countries to which the Company or other companies in the poultry industry ship product, and other changes that might limit the Company’s or the industry’s access to foreign markets.

(4) Changes in laws, regulations, and other activities in government agencies and similar organizations applicable to the Company and the poultry industry and changes in laws, regulations and other activities in government agencies and similar organizations related to food safety.

(5) Various inventory risks due to changes in market conditions.

(6) Changes in and effects of competition, which is significant in all markets in which the Company competes, and the effectiveness of marketing and advertising programs. The Company competes with regional and national firms, some of which have greater financial and marketing resources than the Company.

(7) Changes in accounting policies and practices adopted voluntarily by the Company or required to be adopted by accounting principles generally accepted in the United States.

(8) Disease outbreaks affecting the production performance and/or marketability of the Company’s poultry products.

(9) Changes in the availability and cost of labor and growers.

Readers are cautioned not to place undue reliance on forward-looking statements made by or on behalf of Sanderson Farms. Each such statement speaks only as of the day it was made. The Company undertakes no obligation to update or to revise any forward-looking statements. The factors described above cannot be controlled by the Company. When used in this quarterly report, the words “believes”, “estimates”, “plans”, “expects”, “should”, “outlook”, and “anticipates” and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements.

The Company’s poultry operations are integrated through its management of all functions relative to the production of its chicken products, including hatching egg production, hatching, feed manufacturing, raising chickens to marketable age (“grow out”), processing, and marketing. Consistent with the poultry industry, the Company’s profitability is substantially impacted by the market prices for its finished products and feed grains, both of which may fluctuate substantially and exhibit cyclical characteristics typically associated with commodity markets. Other costs, excluding feed grains, related to the profitability of the Company’s poultry operations, including hatching egg production, hatching, growing, and processing cost, are responsive to efficient cost containment programs and management practices.

The Company’s processed and prepared foods product line includes over 100 institutional and consumer packaged food items that it sells nationally and regionally, primarily to distributors, food service establishments and retailers. A majority of the prepared food items are made to the specifications of food service users.

On January 12, 2006, the Company announced that sites in Waco and McLennan County, Texas had been selected for the construction of a new poultry complex, consisting of a processing plant, hatchery and wastewater treatment facility. The plant is expected to begin operations during the Company’s fourth fiscal quarter of 2007, and at full production will process approximately 1.2 million head of chickens per week.

On April 27, 2007, the Company amended its revolving credit facility to, among other things, change the covenant requiring a minimum debt to total capitalization ratio to 55% during fiscal 2008 and 2009, increase the available credit to $225.0 million from $200.0 million and extend the expiration date until April 1, 2012. As of April 30, 2007, the Company was in compliance with all covenants and had $145.0 million available to borrow under the revolving credit facility.

EXECUTIVE OVERVIEW OF RESULTS

The Company’s financial results for the three and six months ended April 30, 2007 reflect significant improvement in market prices for the Company’s poultry products and improved efficiencies at the Company’s poultry complexes in South Georgia and Collins, Mississippi. The improvement in the first half of fiscal 2007 over the first half of fiscal 2006 is also the result of the negative impact during the first quarter of fiscal 2006 on the Company’s Mississippi and Louisiana poultry operations due to the effects of Hurricane Katrina. The South Georgia complex reported a significant increase in the volume of poultry products sold during the three and six months ended April 30, 2007 as compared to the same periods of fiscal 2006 due to the start-up of operations during fiscal 2006. The Collins, Mississippi processing facility also increased the pounds of poultry products sold as a result of the conversion of the plant in the first quarter of fiscal 2006 to the big bird deboning market from the chill pack market. That facility was down for one week during the first quarter of fiscal 2006 to allow for the installation of certain equipment required for the conversion of the facility to the big bird deboning market. The effect of the improvements in market prices for the Company’s poultry products and increased efficiencies were partially offset by an increase in the cost of feed grains during the first half of fiscal 2007 as compared to the first half of fiscal 2006. The market price for corn, which has been higher in part because of increased demand from ethanol producers, is expected to remain high and volatile at least through the end of the Company’s 2007 fiscal year and into next year. The Company expects its feed grain costs to be approximately $113 million higher in fiscal 2007 than fiscal 2006.

RESULTS OF OPERATIONS

Net sales for the second quarter of fiscal 2007 were $360.5 million as compared to $239.1 million for the second quarter of fiscal 2006, an increase of $121.4 million or 50.8%. The increase in net sales during the second quarter of fiscal 2007 reflects a 9.7% increase in the pounds of poultry products sold and a 37.6% increase in the pounds of prepared food products sold. The additional pounds of poultry products sold can be attributed to the new complex in South Georgia, which began operations during the fourth quarter of fiscal 2005 and was increasing production during the first and second quarters of fiscal 2006, and increased pounds of products sold at the Collins, Mississippi processing plant. The Collins, Mississippi processing plant was converted to supply the big bird deboning market on the first shift during the first quarter of fiscal 2006 from the chill pack market. This resulted in a larger bird weight and increased pounds of product sold. Market prices for boneless breasts, tenders, wings and leg quarters were 49.2%, 86.3%, 47.8% and 125.3% higher during the second quarter of fiscal 2007 as compared to the second quarter of fiscal 2006, respectively. A simple average of the Georgia dock prices for whole birds also showed significant improvement, increasing by 11.9%. The improvement during the second fiscal quarter in the overall market prices for poultry products compared to last year’s second quarter reflects a comparative oversupply of poultry products during the second quarter of fiscal 2006 as compared to the second quarter of fiscal 2007 due to sluggish demand for poultry products in the domestic and export markets during 2006, which resulted in part from the appearance of the H5N1 strain of avian flu in certain countries of Asia and Europe. Net sales of prepared food products increased $12.6 million, or 45.2% during the three months ended April 30, 2007 as compared to the three months ended April 30, 2006 due primarily to an increase in sales of raw marinated poultry products.

Net sales for the first six months of fiscal 2007 were $653.2 million as compared to $475.3 million for the first six months of fiscal 2006, an increase of $177.9 million or 37.4%. The increase in net sales during the first six months of fiscal 2007 reflects a 16.7% increase in the pounds of poultry products sold and a 29.9% increase in the pounds of prepared food products sold. The additional pounds of poultry products sold can be attributed to the new complex in South Georgia, which began operations during the fourth quarter of fiscal 2005 and was increasing production during the first quarter of fiscal 2006, and increased pounds of products sold at the Collins, Mississippi processing plant, which was down for one week during the first quarter of fiscal 2006 to allow for the conversion to serve the big bird market from the chill pack market. The Company also sold fewer pounds during the first quarter of fiscal 2006 due to the destruction of inventories during Hurricane Katrina that would have been available for sale during the first quarter of fiscal 2006. Market prices for boneless breasts, tenders, wings and leg quarters were 31.0%, 51.0%, 36.1% and 64.5% higher during the first half of fiscal 2007 as compared to the first half of fiscal 2006, respectively, while a simple average of the

Georgia dock prices for whole birds increased 4.6%. As discussed above, the improvement in the overall market prices for poultry products resulted from a comparative oversupply of poultry products during the first six months of fiscal 2006 as compared to the first six months of fiscal 2007 due to sluggish demand for poultry products in the domestic and export markets, which resulted in part from the appearance of the H5N1 strain of avian flu in certain countries of Asia and Europe. Net sales of prepared food products increased $18.8 million, or 32.6% during the first half of fiscal 2007.

Cost of sales for the second quarter of fiscal 2007 were $303.8 million, an increase of $52.6 million, or 20.9% as compared to the same three months ended April 30, 2006. Cost of sales of the Company’s poultry products increased $38.6 million, or 17.1%. The increase in the cost of sales of the Company’s poultry products resulted from an increase in the pounds of poultry products sold of 9.7% and an increase in the average cost of feed in flocks sold of 31.1%. These increases were partially offset by increased efficiencies at the Company’s facilities in South Georgia and Collins, Mississippi during the second quarter of fiscal 2007 as compared to the second quarter of fiscal 2006. A simple average of the Company’s cost of corn and soybean meal during the second quarter of fiscal 2007 as compared to the second quarter during fiscal 2006 reflects an increase of 66.4% and 17.5%, respectively. The Company’s cost of sales was also higher during the quarter due to an increase in the pounds of prepared food products sold of 37.6%. The Company’s prepared food products have a higher average cost of sales per pound than the Company’s poultry products. Cost of sales of prepared food products increased $14.0 million or 55.1%.

Cost of sales for the six months ended April 30, 2007 were $587.4 million, an increase of $99.4 million, or 20.4% as compared to the same six months ended April 30, 2006. Cost of sales of the Company’s poultry products increased $81.2 million, or 18.6%. The increase in the cost of sales of the Company’s poultry products resulted from an increase in the pounds of poultry products sold of 16.7% and an increase in the average cost of feed in flocks sold of 23.3%. These increases were partially offset by increased efficiencies at the Company’s facilities in South Georgia and Collins, Mississippi during the first half of 2007 and the negative impact of Hurricane Katrina of $3.0 million on the Company’s Mississippi and Louisiana operations during the first quarter of fiscal 2006. In addition, the impact of Hurricane Katrina resulted in fewer pounds sold during the first quarter of fiscal 2006. As previously mentioned, the Company’s cost of sales was negatively impacted by an increase in the cost of feed grains during the first six months of fiscal 2007 as compared to the same period during fiscal 2006. A simple average of the Company’s cost of corn and soybean meal during the first six months of fiscal 2007 as compared to the first six months during fiscal 2006 reflects an increase of 61.9% and 8.5%, respectively. The Company’s cost of sales was also higher during the first half of fiscal 2007 and compared to the same quarter period during fiscal 2006 due to an increase in the pounds of prepared food products sold of 29.9%. Cost of sales of prepared food products increased $18.2 million or 34.7%.

Selling, general and administrative costs for the three and six months ended April 30, 2007 were $13.0 million and $25.5 million, respectively as compared to $14.4 million and $27.8 million for the three and six months ended April 30, 2006. The decrease in selling, general and administrative costs for the three and six months ended April 30, 2007 resulted from lower advertising expenditures. The lower advertising expenditures during the three months and six months ended April 30, 2007 were partially offset by $1.0 and $1.3 million, respectively, in start up costs related to the new complex in Waco, Texas, which will begin operations during the fourth quarter of fiscal 2007. The Company did not incur any start up costs during fiscal 2006. The Company expects start-up costs related to the new complex in Waco, Texas to be approximately $1.8 during the third quarter of fiscal 2007, which will result in a total start-up costs of $3.1 million for the first nine months of fiscal 2007. All costs associated with the new complex in Waco, Texas will be included in cost of sales during the fourth quarter as the new plant will begin operations during the fourth quarter of fiscal 2007.

For the three months ended April 30, 2007, the Company reported an operating income of $43.7 million as compared to an operating loss of $26.5 million for the three months ended April 30, 2006. The improvement of $70.2 million during the second quarter of fiscal 2007 resulted from the improved market prices of poultry products and increased efficiencies at the Company’s poultry facilities in South Georgia and Collins, Mississippi. For the first half of fiscal 2007, operating income was $40.3 million as compared to an operating loss of $40.5 for the first half of fiscal 2006. The improvement in operating income resulted from the improvement in market prices for the Company’s poultry products, improved efficiencies at the Company’s poultry facilities in South Georgia and Collins, Mississippi, and the negative impact during 2006 of approximately $3.0 million from Hurricane Katrina on the Company’s Mississippi and Louisiana facilities. The estimated loss of $3.0 million during fiscal 2006 from Hurricane Katrina resulted from unrecognized lost profits and certain expenses that were the direct result of the Company’s efforts to minimize the effect of Hurricane Katrina.

Interest expense during the three and six months ended April 30, 2007 was $1.3 and $2.5 million, respectively, as compared to $0.6 million for both the three and six months ended April 30, 2006. The increase in interest expense resulted from higher outstanding debt during first half of fiscal 2007 as compared to the first half of fiscal 2006, partially offset by the capitalization of interest for the construction of the new complex in Waco, Texas. The Company capitalized $1.2 million of interest costs for the new complex in Waco, Texas during the first half of fiscal 2007 and capitalized $0.3 million of interest costs related to the construction of the new general offices in Laurel, Mississippi and the new feed mill in Collins, Mississippi during the first half of fiscal 2006. The Company expects interest expense during the remainder of fiscal 2007 to be higher than interest expense during the same periods of fiscal 2006.

The Company’s effective tax rate for the three and six months ended April 30, 2007 was 36.7% and 36.5%, respectively. The Company’s effective tax rate for the three and six months ended April 30, 2006 was 38.3%. The 2007 effective tax rates differ from the statutory federal rate due to state income taxes, certain nondeductible expenses for federal income tax purposes and the benefit of certain federal income tax credits available as the result of the impact of Hurricane Katrina on the Company and certain state income tax incentives. The 2006 effective tax rate differs from the statutory federal tax rate due to state income taxes and certain nondeductible expenses for federal income tax purposes. The Company’s actual effective rate for the year ended October 31, 2007 may differ from the current estimates based on the results of operations for the remainder of fiscal 2007 and final determination of the income tax credits available to the Company.

The Company’s net income for the second quarter of fiscal 2007 was $26.9 million or $1.33 per share as compared to a net loss for the second quarter of fiscal 2006 of $16.6 million, or $.83 per share. The Company’s net income for the first half of fiscal 2007 was $24.1 million or $1.19 per share as compared to a net loss of $25.3 million or $1.26 per share for the first half of fiscal 2006.

Liquidity and Capital Resources

On January 12, 2006, Sanderson Farms, Inc. announced that sites in Waco and McLennan County, Texas had been selected for construction of a new poultry processing plant, wastewater treatment facility and hatchery. Sanderson Farms will also expand its feed mill in Robertson County, Texas to satisfy the live production needs associated with the new complex. The Company invested $15.2 million in this facility during fiscal 2006, and expects to invest approximately $79.7 million in the new complex and expansion of the Robertson County feedmill during fiscal 2007.

The Company’s working capital at April 30, 2007 was $137.2 million and its current ratio was 2.9 to 1. This compares to working capital of $112.9 million and a current ratio of 2.9 to 1 as of October 31, 2006. During the six months ended April 30, 2007, the Company spent approximately $67.4 million on planned capital projects, of which $53.4 million pertains to the construction of the new complex in Waco, Texas and expansion of the Robertson County, Texas feed mill.

The Company’s capital budget for fiscal 2007 was approximately $107.6 million at April 30, 2007, and will be funded by cash on hand, internally generated working capital, cash flows from operations and available credit. The Company had $145.0 million available under its revolving line of credit at April 30, 2007. The fiscal 2007 capital budget includes approximately $3.5 million in operating leases, $79.7 million to complete construction of the new poultry complex in Waco, Texas and expansion of the Robertson County, Texas feed mill and $2.7 million to renovate the corporate technical lab in Laurel, Mississippi. Without operating leases, the new poultry complex in Waco, Texas, expansion of the feed mill in Robertson County, Texas and the new lab in Laurel, Mississippi, the Company’s capital budget for fiscal 2007 would be $21.7 million.

On April 27, 2007, the Company amended its revolving credit facility to, among other things, change the covenant requiring a minimum debt to total capitalization ratio to 55% during fiscal 2008 and 2009, increase the available credit to $225.0 million and extend the expiration date until April 1, 2012. As of April 30, 2007, the Company was in compliance with all covenants and had $145.0 million available to borrow under the revolving credit facility.

The Company regularly evaluates both internal and external growth opportunities, including acquisition opportunities and the possible construction of new production assets, and conducts due diligence activities in connection with such opportunities. The cost and terms of any financing to be raised in conjunction with any growth opportunity, including the Company’s ability to raise debt or equity capital on terms and at costs satisfactory to the Company, and the effect of such opportunities on the Company’s balance sheet, are critical considerations in any such evaluation.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting standards generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and assumptions, and the differences could be material.

The Company’s Summary of Significant Accounting Policies, as described in Note 1 of the Notes to the Consolidated Financial Statements that are filed with the Company’s latest report on Form 10-K, should be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Management believes that the critical accounting policies and estimates that are material to the Company’s Consolidated Financial Statements are those described below.

Allowance for Doubtful Accounts

In the normal course of business, the Company extends credit to its customers on a short-term basis. Although credit risks associated with our customers are considered minimal, the Company routinely reviews its accounts receivable balances and makes

provisions for probable doubtful accounts. In circumstances where management is aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve is recorded to reduce the receivable to the amount expected to be collected. If circumstances change (i.e., higher than expected defaults or an unexpected material adverse change in a major customer’s ability to meet its financial obligations to us), our estimates of the recoverability of amounts due us could be reduced by a material amount, and the allowance for doubtful accounts and related bad debt expense would increase by the same amount.

Inventories

Processed food and poultry inventories and inventories of feed, eggs, medication and packaging supplies are stated at the lower of cost (first-in, first-out method) or market. If market prices for poultry or feed grains move substantially lower, the Company would record adjustments to write down the carrying values of processed poultry and feed inventories to fair market value, which would increase the Company’s costs of sales.

Live poultry inventories of broilers are stated at the lower of cost or market and breeders at cost less accumulated amortization. The cost associated with broiler inventories, consisting principally of chicks, feed, medicine and payments to the growers who raise the chicks for us, are accumulated during the growing period. The cost associated with breeder inventories, consisting principally of breeder chicks, feed, medicine and grower payments are accumulated during the growing period. Capitalized breeder costs are then amortized over nine months using the straight-line method. Mortality of broilers and breeders is charged to cost of sales as incurred. If market prices for chickens, feed or medicine or if grower payments increase (or decrease) during the period, the Company could have an increase (or decrease) in the market value of its inventory as well as an increase (or decrease) in costs of sales. Should the Company decide that the nine month amortization period used to amortize the breeder costs is no longer appropriate as a result of operational changes, a shorter (or longer) amortization period could increase (or decrease) the costs of sales recorded in future periods. High mortality from disease or extreme temperatures would result in abnormal charges to cost of sales to write-down live poultry inventories.

Long-Lived Assets

Depreciable long-lived assets are primarily comprised of buildings and machinery and equipment. Depreciation is provided by the straight-line method over the estimated useful lives, which are 15 to 39 years for buildings and 3 to 12 years for machinery and equipment. An increase or decrease in the estimated useful lives would result in changes to depreciation expense.

The Company continually evaluates the carrying value of its long-lived assets for events or changes in circumstances that indicate that the carrying value may not be recoverable. As part of this evaluation, the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposal. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized to reduce the carrying value of the long-lived asset to the estimated fair value of the asset. If the Company’s assumptions with respect to the future expected cash flows associated with the use of long-lived assets currently recorded change, then the Company’s determination that no impairment charges are necessary may change and result in the Company recording an impairment charge in a future period. The Company did not identify any indicators of impairment during the current fiscal period.

Accrued Self Insurance

Insurance expense for workers’ compensation benefits and employee-related health care benefits are estimated using historical experience and actuarial estimates. Stop-loss coverage is maintained with third party insurers to limit the Company’s total exposure. Management regularly reviews the assumptions used to recognize periodic expenses. Any resulting adjustments to accrued claims are reflected in correct operating results. If historical experience proves not to be a good indicator of future expenses, if management were to use different actuarial assumptions, or if there is a negative trend in the Company’s claims history, there could be a significant increase or decrease in cost of sales depending on whether these expenses increased or decreased, respectively.

Income Taxes

The Company determines its effective tax rate by estimating its permanent differences resulting from differing treatment of items for financial and income tax purposes. The Company is periodically audited by taxing authorities and considers any adjustments made as a result of the audits in considering the tax expense. Any audit adjustments affecting permanent differences could have an impact on the Company’s effective tax rate.

Contingencies

The Company is a party to a number of legal proceedings as discussed in Note 6 of our unaudited quarterly condensed consolidated financial statements filed with this report. We recognize the costs of legal defense in the periods incurred. A

determination of the amount of reserves required, if any, for these matters is made after considerable analysis of each individual case. Because the outcome of these cases cannot be determined with any certainty, no estimate of the possible loss or range of loss resulting from the cases can be made. At this time, the Company has not accrued any reserve for any of these matters. Future reserves may be required if losses are deemed probable due to changes in the Company’s assumptions, the effectiveness of legal strategies, or other factors beyond the Company’s control. Future results of operations may be materially affected by the creation of or changes to reserves or by accruals of losses to reflect any adverse determination of these legal proceedings.

New Accounting Pronouncements

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is a purchaser of certain commodities, primarily corn and soybean meal, for use in manufacturing feed for its chickens. As a result, the Company’s earnings are affected by changes in the price and availability of such feed ingredients. Feed grains are subject to volatile price changes caused by factors described below that include weather, size of harvest, transportation and storage costs and the agricultural policies of the United States and foreign governments. The price fluctuations of feed grains have a direct and material effect on the Company’s profitability.

Generally, the Company purchases its corn, soybean meal and other feed ingredients for prompt delivery to its feed mills at market prices at the time of such purchases. The Company sometimes will purchase feed ingredients for deferred delivery that typically ranges from one month to twelve months after the time of purchase. The grain purchases are made directly with our usual grain suppliers, which are companies in the regular business of supplying grain to end users, and do not involve options to purchase. Such purchases occur when senior management concludes that market factors indicate that prices at the time the grain is needed are likely to be higher than current prices, or where, based on current and expected market prices for the Company’s poultry products, management believes it can purchase feed ingredients at prices that will allow the Company to earn a reasonable return for its shareholders. Market factors considered by management in determining whether or not and to what extent to buy grain for deferred delivery include:

	•		Current market prices;

	•		Current and predicted weather patterns in the United States, South America, China and other grain producing areas, as such weather patterns might affect the planting, growing, harvesting and yield of feed grains;

	•		The expected size of the harvest of feed grains in the United States and other grain producing areas of the world as reported by governmental and private sources;

	•		Current and expected changes to the agricultural policies of the United States and foreign governments;

	•		The relative strength of United States currency and expected changes therein as it might impact the ability of foreign countries to buy United States feed grain commodities;

	•		The current and expected volumes of export of feed grain commodities as reported by governmental and private sources;

	•		The current and expected use of available feed grains for uses other than as livestock feed grains (such as the use of corn for the production of ethanol, which use is impacted by the price of crude oil); and

	•		Current and expected market prices for the Company’s poultry products.

The Company purchases physical grain, not financial instruments such as puts, calls or straddles that derive their value from the value of physical grain. Thus, the Company does not use derivative financial instruments as defined by SFAS 133, “Accounting for

Derivatives for Instruments and Hedging Activities.” The Company does not enter into any derivative transactions or purchase any grain-related contracts other than the physical grain contracts described above.

The cost of feed grains is recognized in cost of sales, on a first-in-first-out basis, at the same time that the sales of the chickens that consume the feed grains are recognized.

The Company’s interest expense is sensitive to changes in the general level of U.S. interest rates. The Company maintains certain of its debt as fixed rate in nature to mitigate the impact of fluctuations in interest rates. The fair value of the Company’s fixed rate debt approximates the carrying amount at January 31, 2007. Management believes the potential effects of near-term changes in interest rates on the Company’s debt is not material.

The Company is a party to no other market risk sensitive instruments requiring disclosure.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of April 30, 2007. There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter ended April 30, 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On July 31, 2006, following various procedural motions, the Company filed its Answer to the plaintiffs’ Complaint.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in the Company’s Form 10-K for the fiscal year ended October 31, 2006.

Item 4. Submission of Matters to a Vote of Security Holders

At the 2007 Annual Meeting of Shareholders of Sanderson Farms, Inc. held February 22, 2007, the shareholders elected the following persons to the Company’s Board of Directors to serve until the 2010 Annual Meeting of Shareholders, or until their successors are elected and qualified, by the votes indicated below:


NAME	FOR		WITHHELD
Fred Banks, Jr.		17,617,838		32,177

Toni D. Cooley		17,617,830		32,187

Robert C. Khayat		17,614,624		35,391

Dianne Mooney		17,618,230		31,785

Gail Jones Pittman		17,617,012		33,003

By a vote of 17,027,986 for, 597,586 against, and 18,270 abstaining, the shareholders ratified the Board’s selection of Ernst & Young LLP as the Company’s independent auditors for the fiscal year ending October 31, 2007.

Item 6. Exhibits

The following exhibits are filed with this report.

Exhibit 3.1 Articles of Incorporation of the Registrant dated October 19, 1978. (Incorporated by reference to Exhibit 4.1 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

Exhibit 3.2 Articles of Amendment, dated March 23, 1987, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.2 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

Exhibit 3.3 Articles of Amendment, dated April 21, 1989, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.3 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

Exhibit 3.4 Certificate of Designations of Series A Junior Participating Preferred Stock of the Registrant dated April 21, 1989. (Incorporated by reference to Exhibit 4.4 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

Exhibit 3.5 Article of Amendment, dated February 20, 1992, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.5 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

Exhibit 3.6 Article of Amendment, dated February 27, 1997, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.6 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

Exhibit 3.7 Bylaws of the Registrant, amended and restated as of December 2, 2004. (Incorporated by reference to Exhibit 3 filed with the Registrant’s Current Report on Form 8-K on December 8, 2004.)

Exhibit 10.1 First Amendment to Credit Agreement dated April 27, 2007, among Sanderson Farms, Inc. and Harris N.A., individually and as Agent for the Banks defined therein. (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s current report on Form 8-K on May 2, 2007.)

Exhibit 10.2*+ Form of Agreement between Registrant and its non-employee directors who participate in its management share purchase plan, as amended.

Exhibit 10.3*+ Form of Agreement between Registrant and its officers and employees who participate in its management share purchase plan, as amended.

Exhibit 10.4*+ Form of Restricted Stock Agreement between the Registrant and its non-employee directors who are granted restricted stock, as amended.

Exhibit 15* Accountants’ Letter re: Unaudited Financial Information.

Exhibit 31.1* Certification of Chief Executive Officer.

Exhibit 31.2* Certification of Chief Financial Officer.

Exhibit 32.1** Section 1350 Certification.

Exhibit 32.2** Section 1350 Certification.


*		Filed herewith.

+		Management contract or compensatory plan or arrangement.

**		Furnished herewith.

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 thereunto duly authorized.


		SANDERSON FARMS, INC. (Registrant)

Date: May 24, 2007		By: /s/ D. Michael Cockrell Treasurer and Chief
		Financial Officer

Date: May 24, 2007		By: /s/ James A. Grimes Secretary and Principal
		Accounting Officer

INDEX TO EXHIBITS


Exhibit
Number		Description of Exhibit
3.1		Articles of Incorporation of the Registrant dated October 19, 1978. (Incorporated by reference to Exhibit 4.1 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

3.2		Articles of Amendment, dated March 23, 1987, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.2 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

3.3		Articles of Amendment, dated April 21, 1989, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.3 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

3.4		Certificate of Designations of Series A Junior Participating Preferred Stock of the Registrant dated April 21, 1989. (Incorporated by reference to Exhibit 4.4 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

3.5		Article of Amendment, dated February 20, 1992, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.5 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

3.6		Article of Amendment, dated February 27, 1997, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.6 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

3.7		Bylaws of the Registrant amended and restated as of December 2, 2004. (Incorporated by reference to Exhibit 3 filed with the Registrant’s Current Report on Form 8-K on December 8, 2004.)

10.1		Exhibit 10.1 First Amendment to Credit Agreement dated April 27, 2007, among Sanderson Farms, Inc. and Harris N.A., individually and as Agent for the Banks defined therein. (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s current report on Form 8-K on May 2, 2007.)

10.2*+		Form of Agreement between Registrant and its non-employee directors who participate in its management share purchase plan, as amended.

10.3*+		Form of Agreement between Registrant and its officers and employees who participate in its management share purchase plan, as amended.

10.4*+		Form of Restricted Stock Agreement between the Registrant and its non-employee directors who are granted restricted stock, as amended.

15*		Accountants’ Letter re: Unaudited Financial Information.

31.1*		Certification of Chief Executive Officer

31.2*		Certification of Chief Financial Officer

32.1**		Section 1350 Certification.

32.2**		Section 1350 Certification.


*		Filed herewith.

**		Furnished herewith.

+		Management contract or compensatory plan or arrangement.

Exhibit 10.2

SANDERSON FARMS, INC.
SHARE PURCHASE AGREEMENT
(Management Share Purchase Plan)
(Non-Employee Director Agreement)

This SHARE PURCHASE AGREEMENT (this “Agreement”), made and entered into as of the day of , 20 (the “Grant Date”), by and between (the “Participant”) and Sanderson Farms, Inc. (together with its subsidiaries and affiliates, the “Company”), to set forth the terms and conditions of an Award of Share Purchase Rights granted pursuant to the Sanderson Farms, Inc. and Affiliates Stock Incentive Plan, adopted on February 17, 2005 (the “Plan”) and this Agreement. Any capitalized term used but not defined herein shall have the meaning ascribed to such term in the Plan. The term “Fiscal Year” shall mean the fiscal year of the Company which begins on November 1 of each calendar year and ends on October 31 of the next calendar year.

1. Rights to Purchase Restricted Stock.

The Participant may elect to reduce the annual retainer and meeting fees otherwise payable to him in respect of his services as a member of the Board of the Company (“Director Compensation”) by a specified percentage (up to 100 percent) and, in lieu of receiving such specified percentage of Director Compensation, receive a number of Shares of the Company, subject to the terms, conditions and restrictions set forth herein (“Restricted Stock”), equal to the amount of such reduction divided by a dollar amount equal to the Fair Market Value of a Share on the date on which such Restricted Stock is received. In the first year of the Participant’s eligibility to participate in the Plan, an election in respect of Director Compensation otherwise payable for the period of that initial year of eligibility subsequent to the election must be made within 30 days after the date that the Participant becomes eligible so to participate (the “Initial Election Deadline”). An election so made during the initial year of eligibility shall become irrevocable on the Initial Election Deadline and shall be effective beginning with the date that Director Compensation is otherwise payable (each such date, a “Director Payment Date”) that first occurs after the Initial Election Deadline. Any election to reduce Director Compensation otherwise payable in a calendar year after the Participant’s initial year of eligibility shall be effective beginning with the first Director Payment Date occurring on or after January 1 of the calendar year next following the calendar year in which such election is made (and shall become irrevocable on December 31 of the calendar year in which such election is made with respect to the next calendar year). Any cancellation of, or other change in, any such Director Compensation reduction election shall become effective as of the first Director Payment Date occurring on or after January 1 of the calendar year next following the calendar year in which notice of such cancellation or change is filed (and any such notice shall become irrevocable on December 31 of the calendar year in which it is filed with respect to the next calendar year).

Any Director Compensation reduction hereunder shall apply ratably to the Participant’s Director Compensation otherwise payable on each Director Payment Date covered by such election. Restricted Stock shall be issued or purchased by the Company for the account of the

Participant in respect of such Director Compensation reductions on each Director Payment Date. Fractional shares will be issued (or purchased) where necessary.

2. Company Matching Contribution.

For each four shares of Restricted Stock acquired by the Participant pursuant to Section 1 above, the Company shall simultaneously issue or allocate to the account of the Participant, for no additional consideration, one additional share of Restricted Stock (the “Company Match”), including fractional shares where necessary.

3. Terms of Restricted Stock.

(a) The Restricted Stock is subject to forfeiture as provided herein and, during the Restriction Period defined below, may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of by the Participant, other than by will or by the laws of descent and distribution of the state in which the Participant resides on the date of his death. The period during which the Restricted Stock is not vested and is subject to transfer restrictions is referred to herein as the “Restriction Period.”

(b) Except as otherwise provided in this Agreement or the Plan, each share of Restricted Stock acquired hereunder shall vest and no longer be subject to forfeiture or any transfer restrictions hereunder on the third anniversary of its acquisition date, so long as the Participant has continued to serve as a member of the Company’s Board from the acquisition date through such third anniversary.

(c) If the Participant separates from service (within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “Code”)) as a member of the Company’s Board either by reason of death or Disability (“Disability” shall have the meaning set forth in Section 409A(a)(2)(C) of the Code at any time such definition is more restrictive than the Plan definition of “Disability”), or at the expiration of his or her term as a director, or if there is a Change in Control (provided that such Change in Control also constitutes a “change in ownership or effective control” of the Company within the meaning of Section 409A(a)(2)(A)(v) of the Code), then any portion of the Restricted Stock that has not vested shall immediately vest and no longer be subject to forfeiture or any transfer restrictions hereunder. If the Participant separates from service as a member of the Company’s Board for any other reason, voluntarily or involuntarily, prior to the expiration of his or her most recent term, then (X) any portion of the Restricted Stock acquired by the Participant pursuant to the Company Match that has not vested as of the date of separation from service shall immediately be forfeited, ownership shall be transferred back to the Company (and any dividends or other distributions with respect thereto paid to the Participant shall be returned to the Company) and the Restricted Stock shall become authorized but unissued Shares, and (Y) any portion of the Restricted Stock acquired by the Participant in respect of Director Compensation reductions that has not vested as of the date of separation from service may, at the Company’s option, be repurchased by the Company at the price paid by the Participant for such Restricted Stock,less the amount of dividends received by

the Participant (and the Company may pay such purchase price in whole or in part by cancellation of any indebtedness owed by the Participant to the Company). Any such Restricted Stock not so repurchased by the Company will vest on the third anniversary of its acquisition by the Participant.

4 . Registration of Shares.

Certificates representing the number of shares of Restricted Stock purchased from time to time shall be registered in the Participant’s name (or an appropriate book entry shall be made). Certificates, if issued, may, at the Company’s option, either be held by the Company in escrow until the applicable Restriction Period expires or until the restrictions thereon otherwise lapse and/or be delivered to the Participant and registered in the name of the Participant, bearing an appropriate restrictive legend that refers to this Agreement and remaining subject to appropriate stop-transfer orders. The Participant agrees to deliver to the Board, upon request, one or more stock powers endorsed in blank relating to the Restricted Stock. If and when shares of Restricted Stock vest and are no longer subject to forfeiture or transfer restrictions, unlegended certificates for such Restricted Stock shall be delivered to the Participant (subject to Section 8 pertaining to the withholding of taxes and Section 16 pertaining to the Securities Act of 1933, as amended (the “Securities Act”)); provided, however, that the Board may cause such legend or legends to be placed on any such certificates as it may deem advisable under Applicable Law.

If the Company elects to hold certificates in escrow, then it shall deliver to the Participant not less often than every six months a statement of the aggregate number of shares of Restricted Stock held for his account and the applicable acquisition dates and purchase prices of shares of Restricted Stock acquired by the Participant since the last such statement.

5. Rights as a Stockholder.

Except as otherwise provided in this Agreement or the Plan, during the Restriction Period applicable to any Restricted Stock, the Participant shall have, with respect to the Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the Restricted Stock and the right to receive any dividends or other distributions with respect thereto.

6. Adjustments.

If any change in corporate capitalization, such as a stock split, reverse stock split, stock dividend, or any corporate transaction such as a reorganization, reclassification, merger or consolidation or separation, including a spin-off of the Company or sale or other disposition by the Company of all or a portion of its assets, any other change in the Company’s corporate structure, or any distribution to stockholders (other than a cash dividend) results in the outstanding Shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares or other securities of the Company, or for shares of stock or other securities of any other corporation, or new, different or additional shares

or other securities of the Company or of any other corporation being received by the holders of outstanding Shares, then the shares of Restricted Stock acquired pursuant to this Agreement shall be treated in the same manner as other outstanding Shares of the Company.

7. Validity of Share Issuance.

Upon the issuance of Restricted Stock pursuant to the terms of this Agreement, such shares of Restricted Stock will be duly authorized by all necessary corporate action of the Company and will be validly issued, fully paid and non-assessable.

8. Taxes and Withholding.

As soon as practicable on or after the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax purposes with respect to the acquisition of Restricted Stock pursuant to this Agreement, the Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, or the Company may deduct or withhold from any cash or property payable to the Participant, an amount equal to all federal, state, local and foreign taxes that are required by Applicable Law to be withheld with respect to such includible amount. Notwithstanding anything to the contrary contained herein, the Participant may, if the Company consents, discharge this withholding obligation by directing the Company to withhold shares of Restricted Stock having a Fair Market Value on the date that the withholding obligation is incurred equal to the amount of tax required to be withheld in connection with such vesting, as determined by the Board

9. Notices.

Any notice to the Company provided for in this Agreement shall be in writing and shall be addressed to it in care of its Secretary at its principal executive offices, and any notice to the Participant shall be addressed to the Participant at the current address shown on the payroll records of the Company. Any notice shall be deemed to be duly given if and when properly addressed and posted by registered or certified mail, postage prepaid.

10. Legal Construction.

(a) Severability . If any provision of this Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or this Agreement under any law with respect to which the Plan or this Agreement is intended to qualify, or would cause Director Compensation reductions under this Agreement to be includible in a Plan participant’s gross income pursuant to Section 409A(a)(1) of the Code, as determined by the Board, such provision shall be construed or deemed amended to conform to Applicable Law and to qualify the Plan, this Agreement and the income pursuant hereto for the desired benefits of the laws with which they are intended to qualify or, if it cannot be construed or

deemed amended without, in the determination of the Board, materially altering the intent of the Plan or the Agreement, it shall be stricken and the remainder of this Agreement shall remain in full force and effect.

(b) Gender and Number . Where the context admits, words in any gender shall include the other gender, words in the singular shall include the plural and words in the plural shall include the singular.

(c) Governing Law . To the extent not preempted by federal law, this Agreement shall be construed in accordance with and governed by the laws of the State of Mississippi.

11. Incorporation of Plan.

This Agreement, the Share Purchase Rights awarded pursuant hereto and the Restricted Stock acquired pursuant hereto are subject to, and this Agreement hereby incorporates and makes a part hereof, all terms and conditions of the Plan that are applicable to Agreements and Awards generally and to Share Purchase Rights in particular. The Board has the right to interpret, construe and administer the Plan, this Agreement and the Share Purchase Rights awarded and the Restricted Stock acquired pursuant hereto. All acts, determinations and decisions of the Board made or taken pursuant to grants of authority under the Plan or with respect to any questions arising in connection with the administration and interpretation of the Plan, including the severability of any and all of the provisions thereof, shall be in the Board’s sole discretion and shall be conclusive, final and binding upon all parties, including the Company, its stockholders, Participants, Eligible Participants and their estates, beneficiaries and successors. The Participant acknowledges that he has received a copy of the Plan.

12. No Implied Rights.

13. Integration.

This Agreement and the other documents referred to herein, including the Plan, or delivered pursuant hereto, contain the entire understanding of the parties with respect to their subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and restrictions imposed by the Securities Act and applicable state securities laws. This Agreement, including the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter.

14. Counterparts.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but which together constitute one and the same instrument.

15. Amendments; Termination.

The Board may, at any time, without consent of or receiving further consideration from the Participant, amend this Agreement and the Restricted Stock acquired pursuant hereto in response to, or to comply with changes in, Applicable Law. To the extent not inconsistent with the terms of the Plan, the Board may, at any time, amend this Agreement in a manner that is not unfavorable to the Participant without the consent of the Participant. The Board may amend this Agreement and the Restricted Stock acquired pursuant hereto otherwise with the written consent of the Participant.

The Company may suspend or terminate this Agreement at any time, provided that no such suspension or termination may adversely affect the Participant’s rights with respect to any Restricted Stock previously acquired pursuant to this Agreement, unless his written consent is obtained.

16. Securities Act.

(a) The issuance and delivery of the Share Purchase Rights to the Participant have been registered under the Securities Act by a Registration Statement on Form S-8 that has been filed with the Securities and Exchange Commission (“SEC”) and has become effective. The Participant acknowledges receipt from the Company of its Prospectus dated July 27, 2005, relating to the Plan.

(b) If the Participant is an “affiliate” of the Company, which generally means a director, executive officer or holder of 10% or more of its outstanding shares, at the time certificates representing Restricted Stock are delivered to the Participant, such certificates shall bear the following legend, or other similar legend then being generally used by the Company for certificates held by its affiliates:

“THESE SHARES MUST NOT BE OFFERED FOR SALE, SOLD, ASSIGNED OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL FOR THE ISSUER, IS EXEMPT FROM REGISTRATION THROUGH COMPLIANCE WITH RULE 144 OR WITH ANOTHER EXEMPTION FROM REGISTRATION.”

The Company shall remove such legend upon request by the Participant if, at the time of such request, the shares are eligible for sale under SEC Rule 144(k), or any provision that has replaced it, in the opinion of the Company’s counsel.

17. Arbitration.

Any controversy or claim arising out of or relating to this Share Purchase Agreement shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

IN WITNESS WHEREOF, the Participant has executed this Agreement on his own behalf, thereby representing that he has carefully read and understands this Agreement and the Plan as of the day and year first written above, and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first written above.


		SANDERSON FARMS, INC.

		By:

				Name:
				Title:



		Participant

Exhibit 10.3

SANDERSON FARMS, INC.

SHARE PURCHASE AGREEMENT
(Management Share Purchase Plan)
(Employee Agreement)

This SHARE PURCHASE AGREEMENT (this “Agreement”), made and entered into as of the day of , 20 (the “Grant Date”), by and between (the “Participant”) and Sanderson Farms, Inc. (together with its subsidiaries and affiliates, the “Company”), sets forth the terms and conditions of an Award of Share Purchase Rights granted pursuant to the Sanderson Farms, Inc. and Affiliates Stock Incentive Plan, adopted on February 17, 2005 (the “Plan”) and this Agreement. Any capitalized term used but not defined herein shall have the meaning ascribed to such term in the Plan. The term “Fiscal Year” shall mean the fiscal year of the Company which begins on November 1 of each calendar year and ends on October 31 of the next calendar year.

1. Rights to Purchase Restricted Stock.

(a) Base Salary Reduction . The Participant may elect to reduce his base salary by a specified percentage thereof (not to exceed 15%) and, in lieu of receiving such salary, receive a number of Shares of the Company, subject to the terms, conditions and restrictions set forth herein (“Restricted Stock”), equal to the amount of such salary reduction divided by a dollar amount equal to the Fair Market Value of a Share on the date on which such Restricted Stock is received. In the first year of the Participant’s eligibility to participate in the Plan, an election to reduce the Participant’s salary for the period of that initial year of eligibility subsequent to the election must be made within 30 days after the date that the Participant becomes eligible so to participate (the “Initial Election Deadline”). An election so made during the initial year of eligibility (“Initial Salary Election”) shall become irrevocable on the Initial Election Deadline and shall be effective beginning with the first pay period that ends after the Initial Election Deadline. Any election to reduce salary otherwise payable in a calendar year after the Participant’s initial year of eligibility shall be effective beginning with the first pay period that ends after January 1 of the calendar year next following the calendar year in which such election is made (and shall become irrevocable on December 31 of the calendar year in which such election is made with respect to the next calendar year). Any cancellation of, or other change in, any such salary reduction election shall become effective as of the first pay period ending after January 1 of the calendar year next following the calendar year in which notice of such cancellation or change is filed (and any such notice shall become irrevocable on December 31 of the calendar year in which it is filed with respect to the next calendar year).

Any salary reduction hereunder shall apply ratably to the Participant’s salary for each pay period covered by such election. Restricted Stock shall be issued for the account of the Participant, or allocated to the account of the Participant from Shares previously purchased by the Company, in respect of such salary reductions on the last business day in each calendar quarter ending March 31, June 30, September 30 and December 31 (each such date, a “Quarterly Allocation Date”). The number of shares of Restricted Stock issued or allocated to the Participant on each Quarterly Allocation Date shall be based upon the aggregate salary reduction

for pay periods ending since the next preceding Quarterly Allocation Date and the Fair Market Value of a Share on such later Quarterly Allocation Date. Fractional shares will be issued (or purchased) where necessary.

If a Participant who has elected salary reductions hereunder shall terminate employment before shares of Restricted Stock are issued or allocated in respect of all such salary reductions, any salary reduction amounts in respect of which Restricted Stock has not been granted by the date of Participant’s termination of employment shall be returned to Participant promptly in cash, subject to compliance with the requirements of Sections 409A(a)(2) and (3) of the Code.

(b) Bonus Reduction . The Participant may also elect to reduce his annual bonus compensation, if any, by a specified percentage thereof (not to exceed 75%) and, in lieu of receiving such bonus, receive a number of shares of Restricted Stock equal to the amount of such bonus reduction divided by a dollar amount equal to the Fair Market Value of a Share on the date on which such Restricted Stock is received. An election for the bonus payable with respect to the Fiscal Year ending October 31, 2005 and for the bonus payable with respect to any subsequent Fiscal Year must be made on or before April 30 of that Fiscal Year (or if such day is not a business day, then on or before the next preceding business day) and shall become irrevocable on that date with respect to that Fiscal Year. Any cancellation of, or other change in, any such bonus reduction election shall become effective with respect to the Fiscal Year in which notice of such cancellation or change is filed if it is filed on or before April 30 of that Fiscal Year (or, if such day is not a business day, then on or before the next preceding business day); otherwise, it shall become effective with respect to the Fiscal Year next following the Fiscal Year in which it is filed.

Restricted Stock shall be issued or allocated to the account of the Participant in respect of any such bonus reduction on the date that such bonus is otherwise payable.

If a Participant who has elected a bonus reduction hereunder shall terminate employment before shares of Restricted Stock are issued or allocated in respect of such bonus reduction, such election shall be deemed canceled and any bonus compensation due to the Participant shall be paid in cash, subject to compliance with the requirements of Sections 409A(a)(2) and (3) of the Code.

2. Company Matching Contribution.

For each four shares of Restricted Stock acquired by the Participant pursuant to Section 1 above, whether in respect of base salary or bonus reductions, the Company shall simultaneously issue or allocate to the account of the Participant, for no additional consideration, one additional share of Restricted Stock (the “Company Match”), including fractional shares where necessary.

3. Terms of Restricted Stock.

period during which the Restricted Stock is not vested and is subject to transfer restrictions is referred to herein as the “Restriction Period.”

(b) Except as otherwise provided in this Agreement or the Plan, each share of Restricted Stock shall vest and no longer be subject to forfeiture or any transfer restrictions hereunder on the third anniversary of its acquisition by the Participant, so long as the Participant has remained continuously employed by the Company from such acquisition date through such third anniversary.

(c) In the event of (i) the Participant’s termination of employment with the Company by reason of death or Disability (for purposes of this Section 3, “Disability” shall have the meaning set forth in Section 409A(a)(2)(C) of the Code at any time such definition is more restrictive than the Plan definition of “Disability”), (ii) his termination of employment with the Company on or after his attainment of eligibility for retirement (as determined by the Board from time to time), or (iii) a Change in Control (provided that such Change in Control also constitutes a “change in ownership or effective control” of the Company within the meaning of Section 409A(a)(2)(A)(v) of the Code), any portion of the Restricted Stock that has not vested shall immediately vest and no longer be subject to forfeiture or any transfer restrictions hereunder; provided that in the case of a Participant who is a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code, such Restricted Stock shall not vest before the date which is six months after the date of the Participant’s separation from service (or, if earlier, the date of his death). If the Participant’s employment with the Company is terminated for any other reason, voluntarily or involuntarily, prior to the expiration of the Restriction Period for any shares of Restricted Stock acquired pursuant to this Agreement by the Participant, then (X) any portion of the Restricted Stock acquired by the Participant pursuant to the Company Match that has not vested as of the date of employment termination shall immediately be forfeited, ownership shall be transferred back to the Company (and any dividends or other distributions with respect thereto paid to the Participant shall be returned to the Company) and the Restricted Stock shall become authorized but unissued Shares, and (Y) any portion of the Restricted Stock acquired by the Participant in respect of salary or bonus reductions that has not vested as of the date of the employment termination may, at the Company’s option, be repurchased by the Company at the price paid by the Participant for such Restricted Stock, less the amount of dividends received by the Participant (and the Company may pay such purchase price in whole or in part by cancellation of any indebtedness owed by the Participant to the Company).

(d) If the Board determines in good faith that the Participant has engaged in any Detrimental Activity during the period that the Participant is employed by the Company or during the two-year period following the Participant’s voluntary termination of employment or his termination by the Company for Cause, then (X) any portion of the Restricted Stock acquired by the Participant pursuant to the Company Match that has not vested as of the date of the Board’s determination shall immediately be forfeited, ownership shall be transferred back to the Company (and any dividends or other distributions with respect thereto paid to the Participant shall be returned to the Company) and the Restricted Stock shall become authorized but unissued Shares, and (Y) any portion of the Restricted Stock acquired by the Participant in respect of salary or bonus reductions that has not vested as of the date of the Board’s determination may, at the Company’s option, be repurchased by the Company at the price paid by the Participant for such Restricted Stock less the amount of dividends received by the Participant (and the Company may pay such purchase price in whole or in part by cancellation of any indebtedness owed by the Participant to the Company). If, at the time of such determination, shares of Restricted Stock

acquired by the Participant pursuant to the Company Match have already vested, the Participant shall repay to the Company the Fair Market Value of such Shares as of the date(s) that they were issued or allocated to the Participant (and any dividends or other distributions with respect thereto paid to the Participant shall be returned to the Company).

4. Registration of Shares.

5. Rights as a Stockholder.

6. Adjustments.

outstanding Shares, then the shares of Restricted Stock acquired pursuant to this Agreement shall be treated in the same manner as other outstanding Shares of the Company.

7. Validity of Share Issuance.

Upon the issuance or Restricted Stock pursuant to the terms of this Agreement, such shares of Restricted Stock will be duly authorized by all necessary corporate action of the Company and will be validly issued, fully paid and non-assessable.

8. Taxes and Withholding.

9. Notices.

10. Legal Construction.

(a) Severability . If any provision of this Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or this Agreement under any law with respect to which the Plan or this Agreement is intended to qualify, or would cause base salary or bonus reductions under this Agreement to be includible in a Plan participant’s gross income pursuant to Section 409A(a)(1) of the Code, as determined by the Board, such provision shall be construed or deemed amended to conform to Applicable Law and to qualify the Plan, this Agreement and the income pursuant hereto for the desired benefits of the laws with which they are intended to qualify or, if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan or the Agreement, it shall be stricken and the remainder of this Agreement shall remain in full force and effect.

(c) Governing Law . To the extent not preempted by federal law, this Agreement shall be construed in accordance with and governed by the laws of the State of Mississippi.

11. Incorporation of Plan.

This Agreement , the Share Purchase Rights awarded pursuant hereto and the Restricted Stock acquired pursuant hereto are subject to, and this Agreement hereby incorporates and makes a part hereof, all terms and conditions of the Plan that are applicable to Agreements and Awards generally and to Share Purchase Rights in particular. The Board has the right to interpret, construe and administer the Plan, this Agreement and the Share Purchase Rights awarded and the Restricted Stock acquired pursuant hereto. All acts, determinations and decisions of the Board made or taken pursuant to grants of authority under the Plan or with respect to any questions arising in connection with the administration and interpretation of the Plan, including the severability of any and all of the provisions thereof, shall be in the Board’s sole discretion and shall be conclusive, final and binding upon all parties, including the Company, its stockholders, Participants, Eligible Participants and their estates, beneficiaries and successors. The Participant acknowledges that he has received a copy of the Plan.

12. No Implied Rights.

Neither this Agreement nor the award of Share Purchase Rights nor the acquisition of any Restricted Stock shall confer on the Participant any right with respect to continuance of employment or other service with the Company. Except as may otherwise be limited by a written agreement between the Company and the Participant, and acknowledged by the Participant, the right of the Company to terminate at will the Participant’s employment with it at any time (whether by dismissal, discharge, retirement or otherwise) is specifically reserved by the Company.

13. Integration.

14. Counterparts.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but which together constitute one and the same instrument.

15. Amendments; Termination.

16. Securities Act.

17. Arbitration.


SANDERSON FARMS, INC.

By:

	Name:	D. Michael Cockrell
	Title:	Treasurer& CFO


Participant

Exhibit 10.4

SANDERSON FARMS, INC.

RESTRICTED STOCK AGREEMENT
(Non-Employee Director)

This RESTRICTED STOCK AGREEMENT (this “Agreement”), made and entered into as of the day of , 20 (the “Grant Date”), by and between (the “Participant”) and Sanderson Farms, Inc. (together with its subsidiaries and affiliates, the “Company”), sets forth the terms and conditions of a Restricted Stock Award issued pursuant to the Sanderson Farms, Inc. and Affiliates Stock Incentive Plan, adopted on February 17, 2005 (the “Plan”) and this Agreement. Any capitalized term used but not defined herein shall have the meaning ascribed to such term in the Plan.

1. Grant and Vesting of Restricted Stock.

(a) As a reward for past service or in consideration of and as an incentive to the Participant’s continued service as a non-employee director on the Company’s Board, and for no additional consideration, the Company hereby grants to the Participant, as of the Grant Date, shares of the Company’s common stock, par value $1.00 per share (the “Restricted Stock”), subject to the terms and conditions set forth herein and in the Plan. The Restricted Stock is subject to forfeiture as provided herein and may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of by the Participant, other than by will or by the laws of descent and distribution of the state in which the Participant resides on the date of his death. The period during which the Restricted Stock is not vested and is subject to transfer restrictions is referred to herein as the “Restriction Period.”

(b) Except as otherwise provided in this Agreement or the Plan, the Restricted Stock shall vest and no longer be subject to forfeiture or any transfer restrictions hereunder upon the expiration of the Participant’s current term as a director on the Company’s Board, so long as the Participant has served as a director continuously through the full term.

(c) If the Participant separates from service as a director on the Company’s Board by reason of death or Disability, or if there is a Change of Control, the Restricted Stock that has not vested shall immediately vest and no longer be subject to forfeiture or any transfer restrictions hereunder. If the Participant separates from service as a director for any other reason, voluntarily or involuntarily, prior to the expiration of the Restriction Period, then the Restricted Stock that has not vested as of the separation date shall immediately be forfeited, ownership shall be transferred back to the Company and the Restricted Stock shall become authorized but unissued Shares.

2. Issuance of Shares.

Certificates representing the Restricted Stock shall be registered in the Participant’s name (or an appropriate book entry shall be made). Certificates, if issued, may, at the Company’s option, either be held by the Company in escrow until the Restriction Period expires or until the restrictions thereon otherwise lapse and/or be issued to the Participant and registered in the name of the Participant, bearing an appropriate restrictive legend that refers to this Agreement and remaining subject to appropriate stop-transfer orders. The Participant agrees to deliver to the Board, upon request, one or more stock powers endorsed in blank relating to the Restricted Stock. If and when the Restricted Stock vests and is no longer subject to forfeiture or transfer restrictions, unlegended certificates for such Restricted Stock shall be delivered to the Participant (subject to Section 6 pertaining to the withholding of taxes and Section 14 pertaining to the Securities Act of 1933, as amended (the “Securities Act”)); provided, however, that the Board may cause such legend or legends to be placed on any such certificates as it may deem advisable under Applicable Law.

3. Rights as a Stockholder.

Except as otherwise provided in this Agreement or the Plan, during the Restriction Period the Participant shall have, with respect to the Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the Restricted Stock and the right to receive any dividends or other distributions with respect thereto.

4. Adjustments.

5. Validity of Share Issuance.

The shares of Restricted Stock have been duly authorized by all necessary corporate action of the Company and are validly issued, fully paid and non-assessable.

6. Taxes and Withholding.

As soon as practicable on or after the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax purposes with respect to this Award of Restricted Stock, the Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, or the Company may deduct or withhold from any cash or property payable to the Participant, an amount equal to all federal, state, local and foreign taxes that are required by Applicable Law to be withheld with respect to such includible amount. Notwithstanding anything to the contrary contained herein, the Participant may, if the Company consents, discharge this withholding obligation by directing the Company to withhold shares of Restricted Stock having a Fair Market Value on the date that the withholding obligation is incurred equal to the amount of tax required to be withheld in connection with such vesting, as determined by the Board.

7. Notices.

8. Legal Construction.

(a) Severability . If any provision of this Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or this Agreement under any law with respect to which the Plan or this Agreement is intended to qualify, or would cause compensation deferred under the Plan to be includible in a Plan participant’s gross income pursuant to Section 409A(a)(1) of the Internal Revenue Code of 1986, as amended, as determined by the Board, such provision shall be construed or deemed amended to conform to Applicable Law or, if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan or the Agreement, it shall be stricken and the remainder of this Agreement shall remain in full force and effect.

(c) Governing Law . To the extent not preempted by federal law, this Agreement shall be construed in accordance with and governed by the laws of the State of Mississippi.

9. Incorporation of Plan.

This Agreement and the Restricted Stock Award made pursuant hereto are subject to, and this Agreement hereby incorporates and makes a part hereof, all terms and conditions of the Plan that are applicable to Agreements and Awards generally and to Restricted Stock Awards in

particular. The Board has the right to interpret, construe and administer the Plan, this Agreement and the Restricted Stock Award made pursuant hereto. All acts, determinations and decisions of the Board made or taken pursuant to grants of authority under the Plan or with respect to any questions arising in connection with the administration and interpretation of the Plan, including the severability of any and all of the provisions thereof, shall be in the Board’s sole discretion and shall be conclusive, final and binding upon all parties, including the Company, its stockholders, Participants, Eligible Participants and their estates, beneficiaries and successors. The Participant acknowledges that he has received a copy of the Plan.

10. No Implied Rights.

Neither this Agreement nor the issuance of any Restricted Stock shall confer on the Participant any right with respect to continuance of employment or other service with the Company. If the Participant is an employee of the Company, then except as may otherwise be limited by a written agreement between the Company and the Participant, and acknowledged by the Participant, the right of the Company to terminate at will the Participant’s employment with it at any time (whether by dismissal, discharge, retirement or otherwise) is specifically reserved by the Company.

11. Integration.

12. Counterparts.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but which together constitute one and the same instrument.

13. Amendments.

The Board may, at any time, without consent of or receiving further consideration from the Participant, amend this Agreement and the Restricted Stock Award made pursuant hereto in response to, or to comply with changes in, Applicable Law. To the extent not inconsistent with the terms of the Plan, the Board may, at any time, amend this Agreement in a manner that is not unfavorable to the Participant without the consent of the Participant. The Board may amend this

Agreement and the Restricted Stock Award made pursuant hereto otherwise with the written consent of the Participant.

14. Securities Act.

(a) The issuance and delivery of the Restricted Stock to the Participant have been registered under the Securities Act by a Registration Statement on Form S-8 that has been filed with the Securities and Exchange Commission (“SEC”) and has become effective. The Participant acknowledges receipt from the Company of its current Prospectus relating to the Restricted Stock.

15. Arbitration.

Any controversy or claim arising out of or relating to this Restricted Stock Agreement shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.


		SANDERSON FARMS, INC.

		By:

				Name:
				Title:



		Participant

EXHIBIT 15

ACCOUNTANTS’ LETTER RE: UNAUDITED FINANCIAL INFORMATION

The Board of Directors and Stockholders
Sanderson Farms, Inc.

We are aware of the incorporation by reference in the Registration Statements (Form S-8 No. 33-67474 and Form S-8 No. 333-92412) pertaining to the Sanderson Farms, Inc. and Affiliates Stock Option Plan and the Registration Statement (Form S-8 No. 333-123099) pertaining to the Sanderson Farms, Inc. and Affiliates Stock Incentive Plan of our report dated May 23, 2007 relating to the unaudited condensed consolidated interim financial statements of Sanderson Farms, Inc. that are included in its Form 10-Q for the quarter ended April 30, 2007.

/s/ Ernst and Young LLP

New Orleans, Louisiana
May 23, 2007

EXHIBIT 31.1

CERTIFICATION

I, Joe F. Sanderson, Jr., certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Sanderson Farms, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(c)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 24, 2007



	/s/ Joe F. Sanderson, Jr.
	Chief Executive Officer and Chairman of the Board (Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION

I, D. Michael Cockrell, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Sanderson Farms, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 24, 2007



	/s/ D. Michael Cockrell
	Treasurer and Chief Financial Officer (Principal Financial Officer)

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. 1350

In connection with the Quarterly Report of Sanderson Farms, Inc. (the “Company”) on Form 10-Q for the quarter ended April 30, 2007 (the “Report”), I, Joe F. Sanderson, Jr., Chairman and Chief Executive Officer of the Company, certify that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Joe F. Sanderson, Jr.
Joe F. Sanderson, Jr.
Chairman and Chief Executive Officer
May 24, 2007

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. 1350

In connection with the Quarterly Report of Sanderson Farms, Inc. (the “Company”) on Form 10-Q for the quarter ended April 30, 2007 (the “Report”), I, D. Michael Cockrell, Treasurer and Chief Financial Officer of the Company, certify that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ D. Michael Cockrell
D. Michael Cockrell
Treasurer and Chief Financial Officer
May 24, 2007

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