SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K ~~(Mark~~

(Mark One) ~~/X /~~

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended October 31, ~~2002 / /~~2004

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 : 0-16567~~ number:1-14977

SANDERSON FARMS, INC. ~~(Exact~~

(Exact name of registrant as specified in its charter) Mississippi 64-0615843 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 225 North 13th Avenue Laurel, Mississippi 39440 (Address of principal executive offices) (Zip Code) Registrant's


Mississippi		64-0615843
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)
225 North 13th Avenue
Laurel, Mississippi		39440
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (601) 649-4030
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $1.00 per share par value

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. X

x Yes ~~____~~o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of ~~registrant's~~registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. Aggregate market value (based on the closing sales price in the NASDAQ National Market System) of the voting stock held by non-affiliates of the Registrant as of November 29, 2002: approximately $111,959,484.[X].

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). X

x Yes ~~____~~o No

Aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant computed by reference to the closing sales price of the common equity in the NASDAQ National Market System on the last business day of the ~~Registrant's~~Registrant’s most recently completed second fiscal quarter: ~~$134,242,781.~~ ~~Number~~$559,063,577.

INTRODUCTORY NOTE

Definitions.This Annual Report on Form 10-K is filed by Sanderson Farms, Inc., a Mississippi corporation. Except where the context indicates otherwise, the ~~following~~ terms ~~have the following respective meanings when used in this Annual Report. "Registrant"~~“Registrant”, “Company”, and ~~"Company"~~“Sanderson Farms” mean Sanderson Farms, Inc. and its subsidiaries and predecessor organizations. ~~"Fiscal year"~~The use of these terms to refer to Sanderson Farms, Inc. and its subsidiaries collectively does not suggest that Sanderson Farms has abandoned their separate identities or the legal protections given to them as separate legal entities. “Fiscal year” means the fiscal year ended October 31, ~~2002,~~2004, which is the year for which this Annual Report is filed.

Presentation and Dates of Information.Except for Item 4A herein, the Item numbers and letters appearing in this Annual Report correspond with those used in Securities and Exchange Commission Form 10-K (and, to the extent that it is incorporated into Form 10-K, the letters used in the ~~Commission's~~Commission’s Regulation S-K) as effective on the date hereof, which specifies the information required to be included in Annual Reports to the Commission. Item 4A ("(“Executive Officers of the ~~Registrant"~~Registrant”) has been included by the Registrant in accordance with General Instruction G(3) of Form 10-K and Instruction 3 of Item 401(b) of Regulation S-K. The information contained in this Annual Report is, unless indicated to be given as of a specified date or for the specified period, given as of the date of this Report, which is December ~~27, 2002.~~ 23, 2004.

PART I

Item 1. Business

(a) GENERAL DEVELOPMENT OF THE ~~REGISTRANT'S~~REGISTRANT’S BUSINESS

The Registrant was incorporated in Mississippi in 1955, and is a fully-integrated poultry processing company engaged in the production, processing, marketing and distribution of fresh and frozen chicken products. In addition, ~~through its wholly-owned subsidiary, Sanderson Farms, Inc. (Foods Division),~~ the Registrant is engaged in the processing, marketing and distribution of processed and prepared food ~~items.~~items through its wholly-owned subsidiary, Sanderson Farms, Inc. (Foods Division).

The Registrant sells ice pack, chill pack and frozen chicken, in whole, cut-up and boneless form, primarily under the Sanderson ~~Farms(R)~~Farms® brand name to retailers, distributors, and casual dining operators principally in the southeastern, southwestern and western United States. During its fiscal year ended October 31, ~~2002~~2004 the Registrant processed ~~264.7~~273.8 million chickens, or approximately ~~1.3~~1.5 billion dressed pounds. According to ~~2002~~2004 industry statistics, the Registrant was the ~~7th~~6th largest processor of dressed chickens in the United States based on estimated average weekly processing.

The ~~Registrant's~~Registrant’s chicken operations presently encompass five hatcheries, four feed mills and six processing ~~plants and one by-products plant.~~plants. The Registrant has contracts with operators of approximately ~~473grow-out~~468 grow-out farms that provide it with sufficient housing capacity for its current operations. The Registrant also has contracts with operators of ~~143~~140 breeder farms. ~~The~~

Through its Foods Division subsidiary, the Registrant sells over ~~200~~100 processed and prepared food items nationally and regionally, primarily to distributors, national food service accounts, retailers and club stores. These food items include further processed chicken products and frozen entrees, such as chicken and dumplings, lasagna, seafood gumbo, ~~and~~ shrimp creole and other specialty ~~products, such as corn dogs.~~ products.

Since the Registrant completed the initial public offering of its common stock ~~through the sale of 1,150,000 shares to an underwriting syndicate managed by Smith Barney, Harris Upham & Co. Incorporated and Morgan Keegan & Co. Inc.~~ in May 1987, the Registrant has significantly expanded its operations to increase production capacity, product lines and marketing flexibility. Through 1995, this expansion included the expansion of the ~~Registrant's~~Registrant’s Hammond, Louisiana processing facility, the construction of new waste water facilities at the Hammond, Louisiana and Collins and Hazlehurst, Mississippi processing facilities, the addition of second shifts at the Hammond, Louisiana, Laurel, Hazlehurst, and Collins, Mississippi processing facilities, expansion of freezer and production capacity at its prepared foods facility in Jackson, Mississippi, the expansion of freezer capacity at its Laurel, Mississippi, Hammond, Louisiana and Collins, Mississippi processing facilities, the addition of deboning capabilities at all of the ~~Registrant's~~Registrant’s poultry processing facilities, and the construction and start-up of its Pike County (McComb), Mississippi production and processing

facilities, including a hatchery, a feed mill, a processing plant, a waste water treatment facility and a water treatment facility. During 1997, the Registrant completed the construction and start-up of its Brazos County (Bryan), Texas production and processing facilities, including a hatchery, a feed mill located in Robertson County, Texas, a processing plant, a waste water treatment facility and a water treatment facility. In addition, since 1987, the Registrant completed the expansion and renovation of the hatchery at its Hazlehurst, Mississippi production ~~facilities,~~facilities.

In May 2004, the Registrant announced plans to build a new poultry processing complex in southern Georgia. The complex will consist of a feed mill, hatchery, processing plant and ~~completed~~wastewater treatment facility. Construction began in the ~~renovation~~summer of 2004 and ~~expansion~~the Registrant expects the complex will begin operations in the fourth quarter of its ~~Collins, Mississippi by-products facility, allowing for the elimination of a smaller by-products facility at the Laurel, Mississippi plant.~~2005 fiscal year.

Capital expenditures for fiscal ~~2002~~2004 were funded by working capital. Effective ~~July 31, 2002,~~May 18, 2004, the Registrant amended its revolving credit agreement to, among other things, ~~increase~~extend the revolving credit ~~available~~termination date to ~~the Registrant thereunder from $90.0 million to $100.0 million.~~July 31, 2009. On June 15, 1999, the Registrant entered into a Note Purchase Agreement with the Lincoln National Life Insurance Company pursuant to which the Company issued $20 million, ~~6.65%~~7.05% senior notes due July 7, 2007. The proceeds of such notes were used to pay a portion of the debt outstanding under the revolving credit agreement. The Registrant anticipates that capital expenditures for fiscal ~~2003~~2005 will be funded by internally generated working capital and, if needed, borrowings under the revolving credit agreement.

During fiscal 1997, the Registrant completed the start-up of its Brazos County, Texas processing facility. During October 1998, the Registrant began operating one line of its Brazos County, Texas processing facility on a double shift basis, and during fiscal 2000 completed the double shifting of the plant, which is now operating at full capacity. The Registrant currently has additional processing capacity available to it through the ~~double shifting~~expansion of the 2nd shift of the second line at its Collins, Mississippi processing ~~facility.~~facility, which is currently at 80% capacity. Since 1997, the Company has also changed its marketing strategy to move away from the small bird markets serving primarily the fast food markets and into the retail and big bird deboning markets serving the retail and food service industries. This market shift has resulted in larger average bird weights of the chickens processed by the Company, and has substantially increased the number of pounds processed by the Company. In addition, the Registrant continually evaluates internal and external expansion opportunities to continue its growth in poultry and/or related food products.

(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

Not applicable.

General

The Registrant is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and the preparation, processing, marketing and distribution of processed and prepared food items.

The Registrant sells chill pack, ice pack and frozen chicken, both whole and cut-up, primarily under the Sanderson ~~Farms(R)~~Farms® brand name to retailers, distributors and fast food operators principally in the southeastern, southwestern and western United States. During its fiscal year ended October 31, ~~2002,~~2004, the Registrant processed approximately ~~264.7~~273.8 million chickens, or approximately ~~1.3~~1.5 billion dressed pounds. In addition, the Registrant purchased and further processed ~~14.5~~8.0 million pounds of poultry products during fiscal ~~2002.~~2004. According to ~~2002~~2004 industry statistics, the Registrant was the ~~7th~~6th largest processor of dressed chicken in the United States based on estimated average weekly processing.

The Registrant conducts its chicken operations through Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division), both of which are wholly-owned subsidiaries of Sanderson Farms, Inc. The production subsidiary, Sanderson Farms, Inc. (Production Division), which has facilities in Laurel, Collins, Hazlehurst and Pike County, Mississippi, and Bryan, Texas, is engaged in the production of chickens to the broiler stage. Sanderson Farms, Inc. (Processing Division), which has facilities in Laurel, Collins, Hazlehurst and Pike

County, Mississippi, Hammond, Louisiana, and Bryan, Texas, is engaged in the processing, sale and distribution of chickens.

The Registrant conducts its processed and prepared foods business through its wholly-owned subsidiary, Sanderson Farms, Inc. (Foods Division), which has a facility in Jackson, Mississippi. The Foods Division is engaged in the processing, marketing and distribution of over ~~200~~100 processed and prepared food items, which it sells nationally and regionally, principally to distributors, national food service accounts, retailers and club stores.

Products

The Registrant has the ability to produce a wide range of processed chicken products and processed and prepared food items thereby allowing it to take advantage of marketing opportunities as they arise.

Processed chicken is first saleable as an ice packed whole chicken. The Registrant adds value to its ice packed whole chickens by removing the giblets, weighing, packaging and labeling the product to specific customer requirements and cutting the product based on customer specifications. The additional processing steps of giblet removal, close tolerance weighing and cutting increase the value of the product to the customer over whole ice packed chickens by reducing customer handling and cutting labor and capital costs, reducing the shrinkage associated with cutting, and ensuring consistently sized portions. ~~With respect to chill pack products,~~

The Registrant adds additional value ~~can be achieved~~to the processed chicken by deep chilling and packaging whole chickens in bags or combinations of fresh chicken parts in various sized individual trays under the ~~Registrant's~~Registrant’s brand name, which then may be weighed and prepriced, based on each ~~customer's~~customer’s needs. ~~The~~This chill pack process increases the value of the product by extending shelf life, reducing customer weighing and packaging labor, and providing the customer with a wide variety of products with uniform, well designed packaging, all of which enhance the ~~customer's~~customer’s ability to merchandise chicken products.

To satisfy some ~~customers'~~customers’ merchandising needs, the Registrant quick freezes the chicken product, which adds value by meeting the ~~customers'~~customers’ handling, storage, distribution and marketing needs and by permitting shipment of product overseas where transportation time may be as long as 25 days.

Value added products usually generate higher sale prices per pound, exhibit less finished price volatility and generally result in higher and more consistent profit margins over the long-term than non-value added product forms. Selling fresh chickens as a prepackaged brand name product has been a significant step in the development of the value added, higher margin consumer business. The Registrant evaluates daily the potential profitability of all product lines and attempts to maximize its profits on a short-term basis by making strategic changes in its product mix to meet customer demand.

The following table sets forth, for the periods indicated, the contribution, as a percentage of sales of chicken products, of value added and non-value added chicken products. Fiscal Year Ended October 31, 1998 1999 2000 2001 2002 ---- ---- ----- ---- ---- Value added 98.6% 99.2% 99.5% 99.5% 99.7% Non-value added 1.4% .8% .5% .5 % .3% ----- ----- ----- ----- ----- Total Registrant chicken sales 100.0% 100.0% 100.0% 100.0% 100.0% ----- ----- ----- ----- -----


	Fiscal Year Ended October 31,
	2000			2001			2002			2003			2004
Value added		99.5	%		99.5	%		99.7	%		99.5	%		99.6	%
Non-value added		.5			.5			.3			.5			.4

Total Registrant chicken sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The following table sets forth, for the periods indicated, the contribution, as a percentage of net sales, of each of the ~~Registrant's~~Registrant’s major product lines. ~~Fiscal Year Ended October 31, 1998 1999 2000 2001 2002 ---- ---- ---- ---- ---- Registrant~~


	Fiscal Year Ended October 31,
	2000			2001			2002			2003			2004
Registrant processed chicken:
Value added:
Chill pack		36.4	%		40.3	%		40.6	%		34.4	%		32.5	%
Fresh bulk pack		43.3			39.6			38.9			42.5			47.5

Those plants that target the chill pack 46.6 46.5 43.3 39.6 38.9 Frozen 11.6 8.0 7.5 9.2 9.2 ---- ----- ----- ----- ---- Subtotal 82.6 87.7 87.2 89.1 88.7 ---- ---- ---- ----- ---- Non-value added: Iceretail market grow a medium sized bird and cut and package the product in various sized individual trays to customers’ specifications. The trays are weighed and prepriced primarily for customers to resell through retail outlets. While the Company sells some of its chill pack 0.7 0.5 .3 .2 .2 Frozen 0.5 0.2 .1 .2 .1 ----- ---- ---- ----- ----- Subtotal 1.2 .7 .4 .4 .3 ----- ----- ---- ----- ----- Totalproduct under store brand names, most of its chill pack production is sold under the Company’s Sanderson Farms® brand name. While the Company ~~processed~~has long term contracts (up to four years) with most of its chill pack customers, the pricing of this product is based on a formula that uses the Georgia dock whole bird price as its base. The Georgia dock whole bird price is issued each week by the Georgia Department of Agriculture and is based on its survey of prices during the preceding week. The Company currently has 3.1 million head per week dedicated to the chill pack market, and its results are materially impacted by fluctuations in the Georgia dock price.

The Georgia Dock price for whole birds as issued by the Georgia Department of Agriculture for the last five calendar years is set forth below:

Those companies with plants dedicated to the small bird market grow and process a relatively small chicken ~~83.8 88.4 87.6 89.5 89.0 Processed~~ and prepared foods 16.2 11.6 12.4 10.5 11.0 ---- ---- ---- ----- ----- Total 100.0% 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== ===== market the finished product primarily to fast food and food service companies at negotiated flat prices, cost plus formulas or spot market prices. Based on bench marking services used by the industry, this market segment has been the least profitable of the three primary market segments over the last ten years. The Company has no product dedicated to the small bird market.

Sales and Marketing

The ~~Registrant's~~Registrant’s chicken products are sold primarily to retailers (including national and regional supermarket chains and local supermarkets) and distributors located principally in the southeastern, southwestern and western United States. The Registrant also sells its chicken products to governmental agencies, fast food operators and to customers who resell the products outside of the continental United States. This wide range of customers, together with the ~~Registrant's~~Registrant’s broad product mix, provides the Registrant with flexibility in responding to changing market conditions in its effort to maximize profits. This flexibility also assists the Registrant in its efforts to reduce its exposure to market volatility.

Sales and distribution of the ~~Registrant's~~Registrant’s chicken products are conducted primarily by sales personnel at the ~~Registrant's~~Registrant’s general corporate offices in Laurel, Mississippi and by customer service representatives at each of its

six processing complexes and through independent food brokers. Each complex has individual on-site distribution centers and uses the ~~Registrant's~~Registrant’s truck fleet, as well as contract carriers, for distribution of its products.

Generally, the Registrant prices much of its chicken products based upon weekly market prices reported by the United States Department of ~~Agriculture.~~Agriculture and by private firms. Consistent with the industry, the ~~Registrant's~~Registrant’s profitability is impacted by such market prices, which may fluctuate substantially and exhibit cyclical characteristics. The Registrant ~~adds a markup to~~will adjust base prices ~~which depends~~depending upon value added, volume, product mix and other factors. While base prices may change weekly, the ~~Registrant's markup~~Registrant’s adjustment is generally negotiated from time to time with the ~~Registrant's~~Registrant’s customers. The ~~Registrant's~~Registrant’s sales are generally made on an as-ordered basis, and the Registrant maintains few long-term sales contracts with its non-chill pack customers.

The Registrant ~~has used~~uses television, radio and newspaper advertising, coupon promotion, point of purchase material and other marketing techniques to develop consumer awareness of and brand recognition for its Sanderson ~~Farms(R)~~Farms® products. The Registrant has achieved a high level of public awareness and acceptance of its products through television ~~advertising featuring a celebrity as the Registrant's spokesperson.~~advertising. Brand awareness is an important element of the ~~Registrant's~~Registrant’s marketing philosophy, and it intends to continue brand name merchandising of its products. During calendar 2004, the Company launched an advertising campaign designed to distinguish the Company’s fresh chicken products from competitors’ products. The ~~Registrant's~~campaign noted that the Company’s product is a natural product free from salt, water and other additives that some competitors inject to their fresh chicken. The campaign was well received, and the Company plans to continue the campaign into 2005.

The Registrant’s processed and prepared food items are sold nationally and regionally, primarily to distributors, national food service accounts, retailers and club stores. Sales of such products are handled by independent food brokers located throughout the United States, primarily in the southeast and southwest United States, and by sales personnel of the Registrant. Processed and prepared food items are distributed from the ~~Registrant's~~Registrant’s plant in Jackson, Mississippi, through arrangements with contract carriers.

Production and Facilities

General.The Registrant is a vertically-integrated producer of fresh and frozen chicken products, controlling the production of hatching eggs, hatching, feed manufacturing, growing, processing and packaging of its product lines.

Breeding and ~~Hatching.~~Hatching. The Registrant maintains its own breeder flocks for the production of hatching eggs. The ~~Registrant's~~Registrant’s breeder flocks are acquired as one-day old chicks (known as pullets or cockerels) from primary breeding companies that specialize in the production of genetically designed breeder stock. As of October 31, ~~2002,~~2004, the Registrant maintained contracts with 31 pullet farm operators for the grow-out of pullets (growing the pullet to the point at which it is capable of egg production, which takes approximately six months). Thereafter, the mature breeder flocks are transported by ~~Registrant's~~Registrant’s vehicles to breeder farms that are maintained, as of October 31, ~~2002,~~2004, by ~~112~~109 independent contractors under the ~~Registrant's~~Registrant’s supervision. Eggs produced by independent contract breeders are transported to ~~Registrant's~~Registrant’s hatcheries in ~~Registrant's~~Registrant’s vehicles.

The Registrant owns and operates five hatcheries located in Mississippi and Texas where eggs are incubated and hatched in a process requiring 21 days. Once hatched, the day-old chicks are vaccinated against common poultry diseases and are transported by ~~Registrant's~~Registrant’s vehicles to independent contract grow-out farms. As of October 31, ~~2002,~~2004, the ~~Registrant's~~Registrant’s hatcheries were capable of producing an aggregate of approximately ~~5.6~~5.7 million chicks per week.

Grow-out.The Registrant places its chicks on ~~473~~468 grow-out farms, as of October 31, ~~2002,~~2004, located in Mississippi, Louisiana and Texas where broilers are grown to an age of approximately six to ~~eight~~nine weeks. The farms provide the Registrant with sufficient housing capacity for its operations, and are typically family-owned farms operated under contract with the Registrant. The farm owners provide facilities, utilities and labor; the Registrant supplies the day-old chicks, feed and veterinary and technical services. The farm owner is compensated pursuant to an incentive formula designed to promote production cost efficiency.

Historically, the Registrant has been able to accommodate expansion in grow-out facilities through additional contract arrangements with independent growers.

Feed Mills.An important factor in the grow-out of chickens is the rate at which chickens convert feed into body weight. The Registrant purchases on the open market the primary feed ingredients, including corn and soybean meal, which historically have been the largest cost components of the ~~Registrant's~~Registrant’s total feed costs. The quality and composition of the feed are critical to the conversion rate, and accordingly, the Registrant formulates and produces its own feed. As of October 31, ~~2002,~~2004, the Registrant operated four feed mills, three of which are located in Mississippi and one in Texas. The ~~Registrant's~~Registrant’s annual feed requirements for fiscal ~~2002~~2004 were (approximately) ~~1,735,000~~2,010,000 tons, and it has the capacity to produce approximately ~~1,900,000~~2,184,000 tons of finished feed annually under current configurations.

Feed grains are commodities subject to volatile price changes caused by weather, size of harvest, transportation and storage costs and the agricultural policies of the United States and foreign governments. On October 31, ~~2002,~~2004, the Registrant had approximately 739,000 bushels of corn storage capacity at its feed mills, which was sufficient to store all of its weekly requirements for corn. Generally, the Registrant purchases its corn and other feed supplies at current prices from suppliers and, to a limited extent, direct from farmers. Feed grains are available from an adequate number of sources. Although the Registrant has not experienced, and does not anticipate problems in securing adequate supplies of feed grains, price fluctuations of feed grains can be expected to have a direct and material effect upon the ~~Registrant's~~Registrant’s profitability. Although the Registrant attempts to manage the risk from volatile price changes in grain markets by sometimes ~~purchases grains in forward markets,~~purchasing grain at current prices for future delivery, it cannot eliminate the potentially adverse effect of grain price increases.

Processing.Once the chicks reach processing weight, they are transported to the ~~Registrant's~~Registrant’s processing plants. These plants use modern, highly automated equipment to process and package the chickens. The ~~Registrant's~~Registrant’s Pike County, Mississippi processing plant, which currently operates two processing lines on a double shift basis, is currently processing approximately 1,250,000 chickens per week. The ~~Registrant's~~Registrant’s Collins, Mississippi processing plant, which is currently operating one of its two lines on a double shift basis and one line on a ~~single~~partial double shift basis, is currently processing approximately ~~950,000~~1,100,000 chickens per week. The ~~Registrant's~~Registrant’s Brazos County, Texas processing plant, which is currently operating two lines on a double shift basis, is currently processing approximately 1,250,000 chickens per week. The ~~Registrant's~~Registrant’s Laurel and Hazlehurst, Mississippi and Hammond, Louisiana processing plants, which currently operate on a double shift basis, are currently processing approximately 1,875,000 chickens per week. The Registrant also has the capabilities to produce deboned product at six processing facilities. At October 31, ~~2002,~~2004, these deboning facilities were operating on a double shifted basis resulting in a combined capacity to process approximately ~~10.8~~13.4 million pounds of product per week.

Sanderson Farms, Inc. (Foods Division).The facilities of Sanderson Farms, Inc. (Foods Division) are located in Jackson, Mississippi in a plant with approximately 75,000 square feet of refrigerated manufacturing and storage space. The plant uses highly automated equipment to prepare, process and freeze food items. The Registrant could increase significantly its production of processed and prepared food items without incurring significant capital expenditures or delays.

Executive Offices; Other Facilities.The ~~Registrant's~~Registrant’s corporate offices are located in Laurel, Mississippi. As of October 31, ~~2002,~~2004, the Registrant operated ~~one by-products plant, and six~~seven automotive maintenance shops which service approximately ~~484~~503 Registrant over-the-road and farm vehicles. In addition, the Registrant has one child care facility located near its Collins, Mississippi processing plant, currently serving over ~~240~~202 children.

During fiscal 2005, the Company will begin construction of a new 90,000 square feet corporate office building in Laurel, Mississippi. The office building will house the Company’s corporate offices, meeting facilities and computer equipment and will constitute the corporate headquarters. The Company expects to spend approximately $13 million on the new headquarters.

Quality Control

The Registrant believes that quality control is important to its business and conducts quality control activities throughout all aspects of its operations. The Registrant believes these activities are beneficial to efficient production and in assuring its customers wholesome, high quality products.

From the corporate offices, the Director of Technical Services supervises the operation of a modern, well-equipped laboratory which, among other things, monitors sanitation at the hatcheries, quality and purity of the ~~Registrant's~~Registrant’s feed ingredients and feed, the health of the ~~Registrant's~~Registrant’s breeder flocks and broilers, and conducts microbiological tests of live chickens, facilities and finished products. The Registrant conducts on-site quality control activities at each of the six processing plants and the processed and prepared food plant.

Regulation

The ~~Registrant's~~Registrant’s facilities and operations are subject to regulation by various federal and state agencies, including, but not limited to, the Federal Food and Drug Administration ~~("FDA"~~(“FDA”), the United States Department of Agriculture ~~("USDA"~~(“USDA”), the Environmental Protection Agency, the Occupational Safety and Health Administration and corresponding state agencies. The ~~Registrant's~~Registrant’s chicken processing plants are subject to continuous on-site inspection by the USDA. The Sanderson Farms, Inc. (Foods Division) processing plant operates under the ~~USDA's~~USDA’s Total Quality Control Program which is a strict self-inspection plan written in cooperation with and monitored by the USDA. The FDA inspects the production of the ~~Registrant's~~Registrant’s feed mills.

Compliance with existing regulations has not had a material adverse effect upon the ~~Registrant's~~Registrant’s earnings or competitive position in the past and is not anticipated to have a materially adverse effect in the future. Management believes that the Registrant is in substantial compliance with existing laws and regulations relating to the operation of its facilities and does not know of any major capital expenditures necessary to comply with such statutes and regulations.

The Registrant takes extensive precautions to ensure that its flocks are healthy and that its processing plants and other facilities operate in a healthy and environmentally sound manner. Events beyond the control of the Registrant, however, such as an outbreak of disease in its flocks or the adoption by governmental agencies of more stringent regulations, could materially and adversely affect its operations.

Competition

The Registrant is subject to significant competition from regional and national firms in all markets in which it competes. Some of the ~~Registrant's~~Registrant’s competitors have greater financial and marketing resources than the Registrant.

The primary methods of competition are price, product quality, number of products offered, brand awareness and customer service. The Registrant has emphasized product quality and brand awareness through its advertising strategy. See ~~"Business -~~“Business — Sales and ~~Marketing"~~Marketing”. Although poultry is relatively inexpensive in comparison with other meats, the Registrant competes indirectly with the producers of other meats and fish, since changes in the relative prices of these foods may alter consumer buying patterns.

One customer accounted for 12.5% and 11.7%, respectively, of consolidated sales for the years ended October 31, 2004 and October 31, 2003. The Company does not believe the loss of this or any customer would have a material adverse effect on the Company. No customer accounted for more than 10% of consolidated sales for the year ended October 31, 2002.

Sources of Supply

During fiscal ~~2002,~~2004, the Registrant purchased its pullets and its cockerels from two (2) major breeders. The Registrant has found the genetic cross of the breeds supplied by these companies to produce chickens most suitable to the ~~Registrant's~~Registrant’s purposes. The Registrant has no written contracts with these breeders for the supply of breeder stock. Other sources of breeder stock are available, and the Registrant continually evaluates these sources of supply.

Should breeder stock from its present suppliers not be available for any reason, the Registrant believes that it could obtain adequate breeder stock from other suppliers.

Other major raw materials used by the Registrant include feed grains, cooking ingredients and packaging materials. The Registrant purchases these materials from a number of vendors and believes that its sources of supply are adequate for its present needs. The Registrant does not anticipate any difficulty in obtaining these materials in the future.

Seasonality

The demand for the ~~Registrant's~~Registrant’s chicken products generally is greatest during the spring and summer months and lowest during the winter months.

Trademarks

The Registrant has registered with the United States Patent and Trademark Office the trademark Sanderson ~~Farms(R)~~Farms® which it uses in connection with the distribution of its prepared foods, frozen entree products and premium grade chill pack products. The Registrant considers the protection of this trademark to be important to its marketing efforts due to consumer awareness of and loyalty to the Sanderson ~~Farms(R)~~Farms® label. The Registrant also has registered with the United States Patent and Trademark Office ~~seven~~eight other trademarks ~~which~~that are used in connection with the distribution of chicken and other products and for other competitive purposes. The Registrant has registered with the United States Patent and Trademark Office the trademark Sanderson Farms(R) which it uses in connection with the distribution of its prepared foods, and frozen entree products, as well as in connection with the distribution of its premium grade chill pack chicken products.

The Registrant, over the years, has developed important non-public proprietary information regarding product related matters. While the Registrant has internal safeguards and procedures to protect the confidentiality of such information, it does not generally seek patent protection for its technology.

Employees and Labor Relations

As of October 31, ~~2002,~~2004, the Registrant had ~~7,886~~8,300 employees, including ~~776~~827 salaried and ~~7,110~~7,473 hourly employees. A collective bargaining agreement with the United Food and Commercial Workers International Union covering ~~646~~923 hourly employees who work at the ~~Registrant's~~Registrant’s processing plant in Hammond, Louisiana ~~expires~~expired on November 30, 2004. Negotiations to extend the agreement were completed during November 2004, and the new agreement has an expiration date of December 1, 2007. The collective bargaining agreement has a grievance procedure and no strike-no lockout clauses that should assist in maintaining stable labor relations at the Hammond plant.

A collective bargaining agreement with the ~~Laborers'~~Laborers’ International Union of North America, Professional Employees Local Union #693, AFL-CIO, covering ~~566~~563 hourly employees who work at the ~~Registrant's~~Registrant’s processing plant in Hazlehurst, Mississippi was negotiated and signed by the union and the Registrant effective July 15, 1995. This ~~Agreement expired on June 30, 1999, and~~agreement was last renegotiated and ~~executed~~signed on ~~July 26, 1999,~~February 24, 2003, and ~~had a~~has an expiration date of December ~~31, 2002. Negotiations are underway on a new agreement.~~23, 2005. This collective bargaining agreement has a grievance procedure and no strike-no lockout clauses that should assist in maintaining stable labor relations at the Hazlehurst plant.

A collective bargaining agreement with the ~~Laborers'~~Laborers’ International Union of North America, Professional Employees Local Union #693, AFL-CIO, covering ~~1,143~~1,332 hourly employees who work at the ~~Registrant's~~Registrant’s processing plant in Collins, Mississippi was negotiated and signed by the union and the Registrant effective September 9, 1995, and expired on December 30, 1999. ~~Negotiations to extend~~The agreement has been extended, and the ~~agreement were completed and an extended agreement was reached on January 13, 2000. The~~ extended agreement has a termination date of December 31, ~~2003.~~2006. This collective bargaining agreement has a grievance procedure and no strike-no lockout clause that should assist in maintaining stable labor relations at the Collins plant.

On June 9, 1999, the production, maintenance and clean-up employees at the ~~Company's~~Company’s Brazos County, Texas poultry processing facility voted to be represented by the United Food and Commercial Workers Union Local #408, AFL-CIO. A collective bargaining agreement was negotiated and signed on October 7, ~~1999, and expired on December 31, 2002.~~1999. A new contract was negotiated and signed on November 13, 2002, and the new contract has an expiration date of December 31, 2005. This collective bargaining agreement has a grievance procedure and no strike-no lockout clause that should assist in maintaining stable labor relations at the Brazos County, Texas processing facility. On May 28, 1999, truck drivers at the Company's Brazos County, Texas processing and production facilities voted to be represented in collective bargaining by the Teamsters International Local #968. Negotiations with this union were completed in December 1999, and a collective bargaining agreement effective January 1, 2000 was signed, which agreement will expire on December 31, 2002. This contract has been extended to January 27, 2003, and negotiations are underway on a new agreement.

On November 30, 2001, live haul drivers at the ~~Company's~~Company’s McComb, Mississippi production division voted to be represented by United Food and Commercial ~~Workers'~~Workers’ Union Local #1529 AFL-CIO in collective bargaining. ~~It is~~A collective bargaining agreement was reached and currently has an expiration date of December 31, 2006. The union demonstrated during 2004 by signed authorization cards that it had been chosen as the ~~Company's legal position that~~bargaining representative of the ~~live haul drivers are agricultural employees exempt from~~loader-operators, and at their request were included in the ~~National Labor Relations Act. The Company is pursing its legal position before~~bargaining unit with the ~~National Labor Relations Board and the Federal Courts.~~live-haul drivers.

On September 13, 2001, production, maintenance and truck driver employees at the ~~Company's~~Company’s McComb, Mississippi Feed Mill facility voted to be represented in collective bargaining by United Food and Commercial ~~Workers'~~Workers’ Union Local #1529 AFL-CIO. A collective bargaining agreement was negotiated and signed effective July 16, 2002, and ~~has~~had an expiration date of June 30, 2005. This agreement ~~includes~~included a provision allowing re-opening of bargaining of certain financial matters on July 1, 2003 and July 1, 2004, and has a grievance procedure and no strike-no lockout clause that should assist in maintaining stable labor relations at this facility. By agreement dated July 20, 2003, the Company and the union agreed to amend the agreement to provide for an expiration date of December 31, 2004. Negotiations are currently underway for a new agreement.

(d) FINANCIAL INFORMATION ABOUT ~~FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES~~GEOGRAPHIC AREAS

All of the Company’s operations are domiciled in the United States. All of the products sold to the Company’s customers for the Company’s fiscal years 2004, 2003 and 2002 were produced in the United States and all long-lived assets of the Company are domiciled in the United States.

The ~~Registrant engages in no material foreign operations, and no material portion~~Company exports certain of its ~~revenues was derived from customers~~products to foreign markets, primarily Mexico, Russia, China, Puerto Rico, and the Caribbean. These exports sales for fiscal years 2004, 2003 and 2002 totaled approximately $65.2 million, $45.9 million and $36.8 million, respectively. The Company’s exports sales are facilitated through independent food brokers located in ~~foreign countries.~~ the United States and the Company’s internal sales staff. For fiscal 2004, 2003 and 2002, the Company made no sales of products produced in a country other than the United States.

(e) AVAILABLE INFORMATION

Our address on the world wide web is http://www.sandersonfarms.com. The information on our web site is not a part of this document. Our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and all amendments to those reports and the Company’s corporate code of conduct are available, free of charge, through our web site as soon as reasonably practicable after they are filed with the SEC. Information concerning corporate governance matters is also available on the website.

Item 2. Properties.

The ~~Registrant's~~Registrant’s principal properties are as follows: Use Location (City, State) --- --------------------- Poultry complex, including Laurel, Mississippi poultry processing plant, hatchery and feedmill Poultry complex, including Pike County, Mississippi poultry processing plant, hatchery and feedmill Poultry complex, including Hazlehurst, Mississippi poultry processing plant, hatchery and feedmill Poultry complex, including Brazos and Robertson Counties, Texas poultry processing plant, hatchery and feedmill Poultry processing plant Hammond, Louisiana Poultry processing plant, Collins, Mississippi hatchery and by-products plant Prepared food plant Jackson, Mississippi Corporate general offices


Use		Location (City, State)
Poultry complex, including poultry processing plant, hatchery and feedmill		Laurel, Mississippi
Poultry complex, including poultry processing plant, hatchery and feedmill		Pike County, Mississippi
Poultry complex, including poultry processing plant, hatchery and feedmill		Hazlehurst and Gallman, Mississippi
Poultry complex, including poultry processing plant, hatchery and feedmill		Brazos and Robertson Counties, Texas
Poultry complex, under construction, including poultry processing plant, hatchery and feedmill		Moultrie and Adel, Georgia
Poultry processing plant		Hammond, Louisiana
Poultry processing plant, hatchery and child care facility		Collins, Mississippi
Prepared food plant		Jackson, Mississippi
Corporate general offices		Laurel, Mississippi

The Registrant owns substantially all of its major operating facilities with the following exceptions: one processing plant and feed mill complex is leased on an annual renewal basis through 2063 with an option to purchase at a nominal amount, at the end of the lease term. One processing plant complex is leased under four leases, which are renewable annually through 2061, 2063, 2075 and 2073, respectively. Certain infrastructure improvements associated with a processing plant are leased under a lease which expires in 2012 and is thereafter renewable annually through 2091. All of the foregoing leases are capital leases.

There are no material encumbrances on the major operating facilities owned by the Registrant, except that the plant of Sanderson Farms, Inc. (Foods Division) is encumbered by a mortgage which collateralizes a note with an outstanding principal balance of ~~$957,000~~$723,000 on October 31, ~~2002,~~2004, which bears interest at the rate of 5% per annum and is payable in equal annual installments through 2009. In addition, under the terms of the revolving credit agreement effective July 29, 1996, as amended, and under the $20 million long-term fixed rate loan agreements effective in February 1993 and June 1999, the Registrant may not pledge any additional assets as collateral other than fixed assets up to 15% of its tangible assets.

Management believes that the ~~Company's~~Company’s facilities are suitable for its current purposes, and believes that current renovations and expansions will enhance present operations and allow for future internal growth.

Item 3. Legal Proceedings.

On ~~April 5, 2000, thirteen individuals claiming to be former hourly employees of the Company's processing subsidiary (Sanderson Farms, Inc. (Processing Division) (the "Processing Division")) filed~~May 19, 2003, a lawsuit in the United States District Court for the Southern District of Texas claiming that the Processing Division violated requirements of the Fair Labor Standards Act. The Plaintiffs' lawsuit also purported to represent similarly situated workers whowas filed consents to be included as plaintiffs in the suit. A total of 109 individuals consented to join the lawsuit. The lawsuit alleges that the Processing Division (1) failed to pay its hourly employees "for time spent donning and doffing sanitary and safety equipment, obtaining and sharpening knives and scissors, working in the plant and elsewhere before and after the scheduled end of the shift, cleaning safety equipment and sanitary equipment, and walktime," and (2) altered employee time records by using an automated time keeping system. Plaintiffs further claim that the Processing Division concealed the alteration of time records and seek on that account an equitable tolling of the statute of limitations beyond the three-year limitation period back to the date the automated time-keeping system was allegedly implemented. Plaintiffs sought an unspecified amount of unpaid hourly and overtime wages plus an equal amount as liquidated damages, for present and former hourly employees who file consents to join in the lawsuit. There were 6,476 hourly workers employed at the Processing Division's plants as of October 31, 2002. On April 24, 2001, the Court granted the Processing Division's summary judgment motion and entered a final judgment in favor of the Processing Division. Plaintiffs appealed that decision to the United States Fifth Circuit Court of Appeals. On March 7, 2002, the United States Fifth Circuit Court of Appeals affirmed the decision of the United States District Court granting the Processing Division's motion for summary judgment. The plaintiffs had 90 days from March 7, 2002 to request that the United States Supreme Court hear an appeal of this case, which time has expired. On May 15, 2000, an employee of the Company's production subsidiary (Sanderson Farms, Inc. (Production Division) (the "Production Division")), filed suit against the Production Division in the United States District Court for the Southern District of Texas on behalf of live-haul drivers to recover an unspecified amount of overtime compensation and liquidated damages. Approximately 26 employees filed consents to join in this lawsuit. Previously, the United States Department of Labor ("DOL") filed a similar suit against the Production Division74 individual plaintiffs in the United States District Court for the Southern District of Mississippi ~~Hattiesburg Division, on behalf~~alleging an “intentional pattern and practice of ~~live-haul employees~~race discrimination and hostile environment in violation of Title VII and Section 1981 rights.” This lawsuit alleges that Sanderson Farms, in its capacity as an employer, has “engaged in (and continues to engage in) a pattern and practice of intentional unlawful employment discrimination and intentional unlawful employment practices at its plants, locations, off-premises work sites, offices, and facilities in Pike County, Mississippi...in violation of Title VII of the ~~Production Division's Laurel, Mississippi facility. Both lawsuits were brought under~~Civil Rights Act of 1964 (as amended)... .” The action further alleges that “Sanderson Farms has willfully, deliberately, intentionally, and with malice deprived black workers in its employ of the ~~Fair Labor Standards Act~~full and ~~seek recovery~~equal benefits of ~~overtime compensation, together with an equal amount as liquidated damages, for live-haul employees (i.e., live-haul drivers, chicken catchers, and loader-operators) employed~~all laws in violation of the Civil Rights Act.. .” On June 6, 2003, thirteen additional plaintiffs joined in the pending lawsuit by the ~~Production Division.~~filing of a First Amended Complaint. This brought the total number of plaintiffs to 87.

The ~~lawsuits assert that additional overtime compensation and liquidated damages may be owed to certain employees. The lawsuits also~~plaintiffs in this lawsuit seek, an injunction to prevent the withholding of overtime compensation to live-haul employees in the future. On January 18, 2001, the United States District Court for the Southern District of Texas granted the Production Division's request to move the suit pending before that court to the Southern District of Mississippi, Hattiesburg Division. The Production Division later filed its motion with the United States District Court for the Southern District of Mississippi to have the two cases consolidated, which motion was granted. On February 4, 2002, the Production Division reached a settlement with the Department of Labor that fully and completely compromised and settled the claims of all live-haul employees in the Production Division,among other than certain Production Division employees represented in a collective bargaining agreement in Texas. The settlement, approved by the court on March 11, 2002, and pursuant to which the Production Division paid during its second fiscal quarter (accrued during its first fiscal quarter) approximately $450,000 inthings, back pay and ~~interest to the involved current and former employees~~other compensation in the ~~Production Division's Mississippi~~amount of $500,000 each and ~~Texas operations, terminates~~unspecified punitive damages. The Company will aggressively defend the ~~private rights~~lawsuit. The Company has a policy of ~~these employees under the Fair Labor Standards Act~~zero tolerance with respect to discrimination of any type, and preliminarily investigated the ~~claims made~~complaints alleged in this ~~suit. With respect~~lawsuit when they were brought as EEOC charges. This investigation, which is ongoing, has substantiated none of the complaints alleged in the lawsuit, and the Company believes the charges are without merit. On July 21, 2003, the Company filed a Motion to ~~approximately 74 employees represented under~~Dismiss or, alternatively, Motion for Summary Judgment or Motion for More Definite Statement. The plaintiffs filed a ~~collective bargaining agreement in Texas,~~response to that motion, and the Company filed its rebuttal to the plaintiffs’ response on August 21, 2003. On December 17, 2003, the court entered its ~~Order Granting Joint~~order denying the Company’s motion for summary judgment, but granting its motion for more definite statement. The court also ordered that the union representing some of the plaintiffs be joined as a defendant. The court gave the plaintiffs until January 26, 2004 to amend their complaint to more specifically set out their claims. Although the Company’s motion to dismiss was denied, the court’s order permits the Company to refile its dispositive motions after the plaintiffs file an amended complaint. On January 27, 2004, 84 of the 87 plaintiffs filed their Second Amended Complaint. The remaining three plaintiffs voluntarily dismissed their claims. The Company filed its answer to the plaintiffs’ second amended complaint on March 26, 2004, denying any and all liability and setting forth numerous affirmative defenses. On July 1, 2004 the Company filed a Motion to Sever Plaintiff’s Cases, wherein the Company requested that the court sever the pending lawsuit with 84 plaintiffs into 84 separate lawsuits, one for each plaintiff. The Company asserted in its motion that this relief should be granted because the 84 cases are too dissimilar and were misjoined. The Company further asserted that it would be prejudiced by being subjected to one common trial for all 84 plaintiffs, rather than separate trials for each plaintiff. On August 26, 2004, the Court ~~Approval~~issued its order severing this case into six separate causes of ~~Settlement~~action, with the plaintiffs divided into six groups based on their job classifications. On October 12, 2004, the plaintiffs filed new complaints for each of the six severed cases, which the Company answered on November ~~4, 2002. The final settlement of this matter will become effective upon a ruling by the court on the plaintiff's request~~24, 2004. A case management conference for award of attorney's fees. The court is scheduled to hear arguments on the attorney's fees issue on January 7, 2003. The Production Division will pay approximately $188,000 in back pay to the Texas employees as parteach of the ~~settlement, and~~six cases is set for December 28, 2004. The Company intends to vigorously defend this ~~amount~~action. This matter is accrued and reflected in the Company's accompanying consolidated financial statements. Substantially similar lawsuits to those described above have been filed against other integrated poultry companies. In addition, organizing activity conducted by the representatives or affiliates of the United Food and Commercial Workers Union against the poultry industry has encouraged worker participation in these and the other lawsuits.pending.

On September 26, 2000, three current and former contract growers filed suit against the Company in the Chancery Court of Lawrence County, Mississippi. The plaintiffs filed suit on behalf of ~~"all~~“all Mississippi residents to whom, between, on or about November 1981 and the present, the Company induced into growing chickens for it and paid compensation under the so-called ~~`ranking system'~~‘ranking system’."” Plaintiffs allege that the Company ~~"has~~“has defrauded plaintiffs by unilaterally imposing and utilizing the so-called ~~`ranking system'~~‘ranking system’ which wrongfully places each grower into a competitive posture against other growers and arbitrarily penalizes each less successful grower based upon criteria which were never revealed, explained or discussed with plaintiffs."” Plaintiffs further allege that they are required to accept chicks that are genetically different and with varying degrees of healthiness, and feed of dissimilar quantity and quality. Finally, plaintiffs allege that they are ranked against each other although they possess dissimilar facilities, equipment and technology. Plaintiffs seek an unspecified amount in compensatory and punitive damages, as well as varying forms of equitable relief.

The Company is vigorously defending and will continue to vigorously defend this action. On November 22, 2002, the Court denied the ~~Company's~~Company’s motions to compel arbitration, challenging the jurisdiction of the Chancery Court of Lawrence County, Mississippi, and seeking to have the case dismissed pursuant to rule 5(c) of the Mississippi Rules of Civil Procedure. The Company then filed its motion for interlocutory appeal on these issues with the Mississippi State Supreme Court. On December 6, ~~2003,~~2002, the Mississippi State Supreme Court agreed to hear this motion and stayed the action in the Chancery Court pending disposition of this motion. ~~This~~The Company’s motion for interlocutory appeal was granted and this matter is ~~pending.~~pending before the Mississippi State Supreme Court. As discussed below, the Supreme Court granted the Company’s request that this case be consolidated with ~~the wage and hour and donning and doffing lawsuits~~a second grower suit discussed ~~above, substantially similar lawsuits have been filed against other integrated poultry companies.~~below.

On August 2, 2002, three contract egg producers filed suit against the Company in the Chancery Court of Jefferson Davis County, Mississippi. The Plaintiffs filed suit on behalf of ~~"all~~“all Mississippi residents who, between June 1993 and the present, [the Company] fraudulently and negligently induced into housing, feeding and providing water for [the ~~Company's]~~Company’s] breeder flocks and gathering, grading, packaging and storing the hatch eggs generated by said flocks and who have been compensated under the payment method established by the [Company]."” Plaintiffs alleged that the Company ~~"has~~“has defrauded Plaintiffs by unilaterally imposing and utilizing a method of payment which wrongfully and arbitrarily penalizes each grower based upon criteria which are under the control of the [Company] and which were never revealed, explained or discussed with each Plaintiff."” Plaintiffs allege that they were required to accept breeder hens and roosters which are genetically different, with varying degrees of healthiness, and feed of dissimilar quantity and quality. Plaintiffs further allege contamination of and damage to their real property. Plaintiffs alleged that they were ~~"fraudulently~~“fraudulently and negligently induced into housing, feeding and providing water for the ~~Company's~~Company’s breeder flocks and gathering, grading, packaging and storing the hatch eggs produced from said ~~flocks"~~flocks” for the Company. Plaintiffs seek unspecified amount of compensatory and punitive damages, as well as various forms of equitable relief.

On September 5, 2002, the Company filed its Motion to Dismiss and/or Transfer Jurisdiction and/or to Compel Arbitration and/or for Change of Venue. Plaintiffs responded to this motion and the Company replied to the Plaintiffs’ response. A hearing of this motion was completed on November 18, 2003. Prior to completion of the hearing, the Company filed a request with the American Arbitration Association (“AAA”) to arbitrate the claims made in this lawsuit. On June 7, 2004, the Chancery Court of Jefferson Davis County, Mississippi entered an Order denying all of the relief requested by the Company in its motion dated September 5, 2002. On June 29, 2004, the Company filed a Notice of Appeal and/or, in the Alternative, Petition to Appeal from Interlocutory Order and Motion for Stay Pursuant to M.R.A.P.5(c) with the Mississippi Supreme Court, requesting appellate review of the Chancery Court’s Order. On August 11, 2004, the Mississippi Supreme Court entered its Order accepting jurisdiction under the Notice of Appeal portion of the Company’s June 29, 2004 filing, but dismissed the Alternative Petition for Interlocutory Appeal portion of the same filing as moot. The court also agreed in its August 11, 2004 order to consolidate this case with the broiler grower lawsuit described above. The Mississippi Supreme Court continued the stay previously entered, holding in abeyance the trial court proceedings pending a ruling by it on the consolidated appeals of both grower lawsuits. This matter, together with the grower suit discussed above with which it has been consolidated before the Mississippi State Supreme Court, is currently being briefed before the court. The Company will vigorously defend ~~this lawsuit. On July 25, 2002, a current contract grower and her husband filed suit against~~ the Company and Farmers State Bank, N.A. in the District Court of Milam County, Texas. The Plaintiffs alleged "a conspiracy to defraud Plaintiffs in connection with [the Company's] promotion of a get-rich-quick scheme portrayed to Plaintiffs as a good investment for Plaintiff's future." The Plaintiffs further alleged that the Company and Farmers State Bank "conspired to defraud Plaintiffs by convincing them to purchase farm land, execute loan documents for the construction of chicken barns, and then forcing them to sign contracts of adhesion that made Plaintiffs the domestic servants of the defendants." The Plaintiffs further alleged that the Company and Farmers State Bank violated the Texas Deceptive Trade Practices-Consumer Protection Act. Plaintiffs seek an unspecified amount in compensatory damages, treble damages, attorney's fees, pre- and post-judgement interest and all costs of court. The Plaintiffs also seek a Permanent Injunction enjoining the Farmers State Bank from foreclosing on or otherwise taking possession or control of Plaintiff's real estate and the improvements thereon and other equitable relief. On August 8, 2002, the court heard arguments on the Plaintiff's motion for permanent injunction and on the Company's motion to stay the proceeding with respect to its pending arbitration of the matter as requiredclaims by the ~~Egg Producers Contract entered into~~contract egg producers whether before a panel of arbitrators appointed by ~~and between one of~~ the Plaintiffs and the Company. On August 19, 2002, the court granted the Company's motion to compel arbitration in this case with respect to the Company and its grower pursuant to the arbitration provision of the contract. The caseAAA or before the District Court of Milam County, Texas will be stayed pending arbitration between the Company and its grower. No arbitration date has been set. The Company will vigorously defend this matter. The Company is also a party to lawsuits against various vitamin and methionine suppliers arising out of alleged price fixing activities by the defendants. For more information about these lawsuits, please see the section of this Report entitled "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations."court.

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~~Company’s consolidated results of operation or financial position.

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

No matters were submitted to a vote of the ~~Registrant's~~Registrant’s security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the Fiscal Year.

Item 4A. Executive Officers of the Registrant. Executive Name Age Office Officer Since Joe F. Sanderson, Jr. 56 Chairman of the Board, 1984 (1) President and Chief Executive Officer D. Michael Cockrell 45 Treasurer and Chief 1993 (2) Financial Officer, Board Member James A. Grimes 54 Secretary and 1993 (3) Chief Accounting Officer Lampkin Butts 51 Vice President - Sales, 1996 (4) Board Member (1) Joe F. Sanderson, Jr. has served as President and Chief Executive Officer of the Registrant since November 1, 1989, and as Chairman of the Board since January 8, 1998. From January 1984, to November 1989, Mr. Sanderson served as Vice-President, Processing and Marketing of the Registrant. (2)


			Executive
Name	Age	Office	Officer Since
Joe F. Sanderson, Jr.	57	Chairman of the Board of Directors and Chief Executive Officer	1984 (1)
D. Michael Cockrell	47	Treasurer and Chief Financial Officer, Director	1993 (2)
James A. Grimes	56	Secretary and Chief Accounting Officer	1993 (3)
Lampkin Butts	53	President and Chief Operating Officer, Director	1996 (4)

(1) Joe F. Sanderson, Jr. has served as Chief Executive Officer of the Registrant since November 1, 1989, and as Chairman of the Board since January 8, 1998. Mr. Sanderson served as President from November 1, 1989, to October 21, 2004. From January 1984 to November 1989, Mr. Sanderson served as Vice-President, Processing and Marketing of the Registrant.
(2) D. Michael Cockrell became Treasurer and Chief Financial Officer of the Registrant effective November 1, 1993, and was elected to the Board of Directors on February 19, 1998. Prior to that time, for more than five years, Mr. Cockrell was a member and shareholder of the Jackson, Mississippi law firm of Wise Carter Child & Caraway, Professional Association. (3) James A. Grimes became Secretary of the Registrant effective November 1, 1993. Mr. Grimes also serves as Chief Accounting Officer, which position he has held since 1985. (4) Lampkin Butts became Vice President - Sales of the Registrant effective November 1, 1993, and was elected to the Board of Directors on February 19, 1998. Prior to that time, for more than five years, Mr. Cockrell was a member and shareholder of the Jackson, Mississippi law firm of Wise Carter Child & Caraway, Professional Association.
(3) James A. Grimes became Secretary of the Registrant effective November 1, 1993. Mr. Grimes also serves as Chief Accounting Officer, which position he has held since 1985.
(4) Lampkin Butts was elected President and Chief Operating Officer of the Registrant effective October 21, 2004. From November 1, 1996 to October 21, 2004, Mr. Butts served as Vice President – Sales and was elected to the Board of Directors on February 19, 1998. Prior to that time, Mr. Butts served the Registrant in various capacities since 1973.

Executive officers of the Company serve at the pleasure of the Board of Directors. There are no understandings or agreements relating to any ~~person's~~person’s service or prospective service as an executive officer of the Registrant.

PART II

Item 5. Market for the ~~Registrant's~~Registrant’s Common Equity and Related Stockholder Matters.

The ~~Company's~~Company’s common stock is traded on the NASDAQ National Market System under the symbol SAFM.

The number of stockholders as of November 30, ~~2002,~~2004, was ~~2,240.~~2,401.

The following table shows quarterly cash dividends and quarterly high and low closing prices for the common stock for the past two fiscal years. National Market System quotations are based on actual sales prices. Stock Price Fiscal Year 2002 High Low Dividends ------------------------------------------------------------------------------ First Quarter $22.14 $13.55 $.10 Second Quarter $27.49 $20.93 $.10 Third Quarter $27.50 $18.20 $.10 Fourth Quarter $20.62 $15.83 $.10 Stock Price Fiscal Year 2001 High Low Dividends ------------------------------------------------------------------------------ First Quarter $10.44 $ 6.75 $.05 Second Quarter $11.50 $ 7.62 $.05 Third Quarter $13.89 $10.62 $.05 Fourth Quarter $14.26 $11.25 $.05


	Stock Price
Fiscal Year 2004	High		Low		Dividends
First Quarter	$	32.77	$	22.79	$	.	08
Second Quarter	$	42.00	$	33.22	$	.	08
Third Quarter	$	55.14	$	37.21	$	.	08
Fourth Quarter	$	48.67	$	31.49	$	.	60


	Stock Price
Fiscal Year 2003	High		Low		Dividends
First Quarter	$	14.21	$	12.00	$	.	07
Second Quarter	$	13.60	$	12.18	$	.	07
Third Quarter	$	20.39	$	12.99	$	.	06
Fourth Quarter	$	23.44	$	18.92	$	.	41

On December ~~16, 2002~~21, 2004 the closing sales price for the common stock was ~~$20.39~~$41.95 per share.

Item 6. Selected Financial Data. Year Ended October 31 2002 2001 2000 1999 1998 ----- ---- ---- ---- ---- (In thousands, except per share data) Net sales $743,665 $706,002 $605,911 $559,031 $521,394 Operating income (loss) 49,977 51,094 (588) 23,008 31,822 Net income (loss) 28,840 27,784 (5,571) 10,546 15,256 Basic and diluted earnings (loss) per share) 2.18 2.04 (.41) .75 1.06 Diluted earnings (loss) per share 2.15 2.04 (.41) .75 1.06 Working capital 68,452 76,969 71,334 67,272 59,665 Total assets 280,510 288,971 281,856 283,510 265,671 Long-term debt, less current maturities 49,969 77,212 107,491 104,651 95,695 Stockholders' equity 155,891 144,339 120,015 130,844 129,482 Cash dividends declared per share $ .40 $ .20 $ .20 $ .20 $ .20 QUARTERLY FINANCIAL DATA Fiscal Year 2002 First Second Third Fourth Quarter Quarter Quarter Quarter -------- -------- -------- ------- (In thousands, except per share data) (Unaudited) Net sales $164,527 $175,413 $202,694 $201,031 Operating income 9,497 13,382 15,910 11,188 Net income 5,295 7,708 9,285 6,552 Basic earnings per share $ .39 $ .59 $ .71 $ .50 Diluted earnings per share $ .39 $ .58 $ .70 $ .49 Fiscal Year 2001 First Second Third Fourth Quarter Quarter Quarter Quarter -------- -------- -------- ------- (In thousands, except per share data) (Unaudited) Net sales $152,081 $163,583 $183,692 $206,646 Operating income 2,339 10,068 16,668 22,019 Net income 384 5,018 9,559 12,823 Basic and diluted earnings per share $ .03 $ .37 $ .70 $ .94


	Year Ended October 31
	2004		2003		2002		2001		2000
			(In thousands, except per share data)
Net sales	$	1,052,297	$	872,235	$	743,665	$	706,002	$	605,911
Operating income (loss)		150,154		90,522		49,977		51,094		(588	)
Net income (loss)		91,428		54,061		28,840		27,784		(5,571	)
Basic earnings (loss) per share		4.62		2.78		1.45		1.36		(.27	)
Diluted earnings (loss) per share		4.57		2.75		1.43		1.36		(.27	)
Working capital		150,624		82,236		68,452		76,969		71,334
Total assets		375,007		298,905		280,510		288,971		281,856
Long-term debt, less current maturities		10,918		21,604		49,969		77,212		107,491
Stockholders’ equity		279,341		197,099		155,891		144,339		120,015
Cash dividends declared per share	$	.84	$	.61	$	.27	$	.13	$	.13

Item 7. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.

CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE PERFORMANCE

This Annual Report, ~~contains certain~~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 ~~the business, financial condition~~future events and ~~prospects of the Company. The~~are subject to various risks, uncertainties and other factors that may cause actual ~~performance of the Company could~~results to differ materially from ~~that indicated by~~ the ~~forward-looking statements because of various~~views, beliefs and estimates expressed in such statements. These risks, uncertainties and ~~uncertainties, including, without limitation, changes~~other factors include, but are not limited to the following:

(1) Changes in the market price for the ~~Company's~~Company’s finished products and ~~for~~ feed grains, both of which may fluctuate substantially and exhibit cyclical characteristics typically associated with commodity ~~markets, as described below;~~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 ~~competition~~laws, regulations and ~~economic conditions; various~~other activities in government agencies and similar organizations related to food safety.

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

(6) Changes in ~~governmental rules~~ and ~~regulations applicable to~~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 ~~industry;~~products.

(9) Changes in the availability and ~~other risks~~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 ~~below. These risks and uncertainties~~above cannot be controlled by the Company. When used in this ~~Annual Report,~~quarterly report, the words ~~"believes," "estimates," "plans," "expects," "should," "outlook," "anticipates,"~~“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.

GENERAL

The ~~Company's~~Company’s poultry operations are integrated through its control 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"~~(“grow-out”), processing and marketing. Consistent with the poultry industry, the ~~Company's~~Company’s profitability is substantially impacted by the market price 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~~Company’s poultry operations, including hatching egg production, hatching, growing, and processing cost, are responsive to efficient cost containment programs and management practices. Over the past three fiscal years, these other production costs have averaged approximately ~~65.6%~~62.5% of the ~~Company's~~Company’s total production costs.

The Company believes that value-added products are subject to less price volatility and generate higher, more consistent profit margin than whole chickens ice packed and shipped in bulk form. To reduce its exposure to market cyclicality that has historically characterized commodity chicken market prices, the Company has increasingly concentrated on the production and marketing of value-added product lines with emphasis on product quality, customer service, and brand recognition. The Company adds value to its poultry products by performing one or more processing steps beyond the stage where the whole chicken is first saleable as a finished product, such as cutting, deep chilling, packaging and labeling the product. The Company believes that one of its major strengths is its ability to change its product mix to meet customer demands.

The ~~Company's~~Company’s processed and prepared foods product line includes approximately ~~200~~100 institutional and consumer packaged food items that it sells nationally, primarily to distributors, food service establishments and retailers. A majority of the prepared food items are made to the specifications of food service users.

Poultry prices per pound, as measured by the Georgia dock price, fluctuated during the three years ended October 31, ~~2002~~2004 as follows: 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Fiscal 2002 High $.6500* $.6300 $.6425 $.6425 Low $.6275 $.6250* $.6250* $.6275 Fiscal 2001 High $.6150* $.6200 $.6250 $.6650* Low $.6150* $.6175 $.6450 $.6500 Fiscal 2000 High $.5850 $.5800 $.5975 $.6200* Low $.5800 $.5725* $.5725 $.6000 *Year


	1st			2nd			3rd			4th
	Quarter			Quarter			Quarter			Quarter
Fiscal 2004
High	$	.7000		$	.7500		$	.8100	*	$	.8075
Low	$	.6825	*	$	.7050		$	.7525		$	.7575
Fiscal 2003
High	$	.6250		$	.6400		$	.6775		$	.6925	*
Low	$	.6125	*	$	.6250		$	.6350		$	.6800
Fiscal 2002
High	$	.6500	*	$	.6300		$	.6425		$	.6425
Low	$	.6275		$	.6250	*	$	.6250	*	$	.6275

*Year High/Low Fiscal 2001 as compared to fiscal 2000 brought significant increases in the average sales price of whole birds, wings and leg quarters with only modest decreases in market prices for boneless breast meat. In addition, the average cost of feed grains, while higher than the fiscal 2000 average, remained at relatively favorable levels during fiscal 2001. The overall favorable market conditions during fiscal 2001 were enhanced by the ongoing improvements to the Company's operations and marketing changes implemented over the past several years. During fiscal 2002,

On January 29, 2004, the Company ~~continued~~announced a three-for-two stock split to ~~see improvements~~be effected as a 50% stock dividend. The new shares were distributed on February 26, 2004, to stockholders of record as of close of business on February 10, 2004. Per share information in this Annual Report reflects the ~~Company's sales program and operating performance. These improvements, however, were offset by overall lower prices~~stock split. Cash was paid in lieu of fractional shares.

EXECUTIVE OVERVIEW OF RESULTS — 2004

Results for ~~poultry products and higher grain prices during fiscal 2002 as compared to fiscal 2001.~~ ~~Results of Operations Fiscal 2002 Compared to Fiscal 2001 For~~ the fiscal year ended October 31, ~~2002,~~2004 were driven by record high chicken market prices, although feed ingredient costs were also higher than the fiscal year ended October 31, 2003. Higher chicken prices also more than offset higher advertising costs incurred as part of the Company’s fiscal 2004 advertising and marketing program and a reduction in settlement proceeds from vitamin and methionine suppliers. The Company believes the outlook for fiscal 2005 looks promising for continued strong consumer demand for chicken, although it does not expect chicken market prices to reach levels experienced during fiscal 2004. In addition, the Company believes it will realize a significant reduction in operating costs with materially lower prices projected for corn and soybean meal. The Company contracted for a portion of its feed grain needs for fiscal 2005, and based on the pricing of those purchases and given current conditions, expects to realize savings of between $60 and $65 million during fiscal 2005 as compared to fiscal 2004.

RESULTS OF OPERATIONS

Fiscal 2004 Compared to Fiscal 2003

For fiscal 2004 the Company’s net sales were ~~$743.7~~a record $1.1 billion, an increase of $180.1 million ~~a 5.3% increase compared with~~or 20.6% over the previous fiscal year’s record net sales of ~~$ 706.0 million for the prior year. Net sales of poultry products increased $24.2 million or 3.8%. This~~$872.2 million. The increase in the Company’s net sales was due to favorable market prices of the Company’s poultry products ~~resulted from~~and an increase in the pounds of poultry ~~product~~products sold of ~~10.9%, which was partially offset~~6.1%. As measured by a ~~decrease in~~simple average of the Georgia dock price for whole chickens, prices increased 15.0% during fiscal 2004 as compared to fiscal 2003. Also, average ~~sales price~~market prices for boneless breast, leg quarters and wings all showed considerable strength during fiscal 2004 as compared to fiscal 2003 and increased 22.0%, 41.0% and 65.2%, respectively. Although these same market prices were higher during the fourth quarter of ~~poultry products~~fiscal 2004 as compared to the fourth quarter of ~~6.3%.~~fiscal 2003, they were less favorable during the fourth quarter of fiscal 2004 than the Company experienced for the first three quarters of fiscal 2004. The increase in the pounds of poultry products sold ~~during fiscal 2002 as compared to fiscal 2001~~ resulted primarily from an increase in the average live weight of chickens ~~produced of 8.2%. Overall market prices for poultry products were significantly lower~~sold during fiscal ~~2002~~2004 as compared to fiscal 2001 as leg quarters, wings and breast tenders were 23.9%, 33.1% and 19.1% lower, respectively. The softness in leg quarter prices resulted from the Russian embargo of United States poultry meat on March 10, 2002. Shipments to Russia resumed during the fourth quarter of fiscal 2002. However, these shipments resumed only on a limited basis, and it may be some time before volumes return to previous levels. As a result leg quarter prices will remain under pressure in the near term. Net sales of prepared food products increased $13.0 million or 16.9% during fiscal 2002 as compared to fiscal 2001. The increase reflects an increase in the pounds of prepared food products sold of 12.0% and an increase in the average sales price of prepared food products sold of 4.4%. Cost of sales during fiscal 2002 increased $36.5 million or 5.8% as compared to fiscal 2001, which is net of $5.0 million in awards received from lawsuits against vitamin and methionine vendors. The Registrant is a party to lawsuits against various vitamin and methionine suppliers arising out of alleged price fixing activities by the defendants. During fiscal 2002 and through December 26, 2002, the Registrant recognized $5.0 million as partial settlement of these lawsuits with various defendants. Settlement discussions are ongoing with the remaining defendants, and, based on prior settlement discussions and the results thereof and developments that have occurred subsequent to October 31, 2002, management believes it is likely that material settlement payments will be made to the Company by certain defendants during fiscal 2003. Cost of sales of poultry products during the same period increased $24.1 million or 4.3%. The increase in cost of sales of poultry products reflects a decrease in the average cost of sales per pound of poultry products of 5.9% as the Company benefitted from improved operating performance, lower energy costs and the awards mentioned above. Cash market prices for corn and soy meal during fiscal 2002 as compared to fiscal 2001 increased 9.0%, and decreased 0.9%, respectively. However, during the fourth quarter of fiscal 2002 as compared to the fourth quarter of fiscal 2001 the cash market prices for corn and soy meal increased 25.4% and 4.9%, respectively. The Company expects corn and soy meal prices to be higher during fiscal 2003 than during fiscal 2002. Cost of sales of prepared food products during fiscal 2002 as compared to fiscal 2001 increased $12.4 million or 19.0% due to an increase in pounds of prepared food products sold of 12.0%, an increase in the cost of raw materials and a change in the mix of products sold. Selling, general and administration expenses for fiscal 2002 increased $2.3 million compared to fiscal 2001. This increase was primarily due to expenses associated with the Company's employee incentive plan, an increase in allowance for doubtful accounts and increased contributions to the Company's Employee Stock Ownership Plan. The Company's operating income during fiscal 2002 as compared to fiscal 2001 was approximately the same despite the challenging market environment the poultry industry experienced during fiscal 2002. The Company's operating income for fiscal 2002 was approximately $50.0 million as compared to operating income during fiscal 2001 of $51.1 million. The fiscal 2002 operating income reflects improved plant efficiency and live grow-out performance and the $5.0 million in awards from the lawsuits against vitamin and methionine suppliers. Excluding these awards, the Company's operating income for fiscal 2002 was $45.0 million. As in fiscal 2001, the Company continued to decrease its outstanding debt during fiscal 2002. The Company decreased its debt during fiscal 2002 by $27.2 million, which, along with lower interest rates, resulted in significantly lower interest expense. Interest expense for fiscal 2002 was $3.7 million as compared to $6.8 million for fiscal 2001, a decrease of $3.1 million or 45.6%. The Company expects interest expense to be lower during the first quarter of fiscal 2003 as compared to the first quarter of fiscal 2002. The Company's effective tax rates for fiscal 2002 and fiscal 2001 were 38.0% and 37.9%, respectively. Fiscal 2001 Compared to Fiscal 2000 The Company's net sales during fiscal 2001 were $706.0 million, an increase of $100.1million or 16.5% over fiscal 2000 net sales of $605.9 million. This increase in the Company's net sales resulted from an increase in pounds of poultry products sold of 9.6% and an increase in the average sales price of poultry products of 8.9%. The increase in the pounds of poultry products sold resulted from an increase in the number of chickens processed primarily from the expansion of the Brazos, Texas processing plant during the second half of fiscal 2000 and an increase in the average live weight of chickens processed. During fiscal 2001 the Company benefited from improved market prices for wings and leg quarters of 66.8% and 27.9%, respectively. In addition, a simple average of the Georgia Dock prices for whole birds for fiscal 2001 increased 7.3% as compared to fiscal 2000. These improvements were partially offset by lower average market prices for boneless breast meat. Net sales of prepared food products decreased ~~$1.6~~$6.2 million or ~~2.0%~~5.5%, ~~which is the net~~as a result of a decrease in the pounds of prepared food products sold of ~~4.5% partially offset by~~6.3%.

The Company’s cost of sales were $842.3 million during fiscal 2004 as compared to $741.4 million during fiscal 2003. Cost of sales of the Company’s poultry products during fiscal 2004 were $734.2 million as compared to $638.9 million during the previous fiscal year, an increase of $95.3 million or 14.2%. The increase in the ~~average sale price of prepared food products of 2.6%. During fiscal 2001 as compared to fiscal 2000,~~Company’s cost ~~of sales increased $46.6 or 8.0%. Cost~~ of sales of poultry products ~~increased $47.5 million or 9.2% during fiscal 2001 as compared to fiscal 2000. The~~resulted from an increase in the ~~Company's~~ cost of ~~sales resulted from the~~feed grains, and to a lesser

extent, an increase in the pounds of poultry products sold of ~~9.6%, and to a lesser extent, increases in the average cost of feed grains. Corn and soybean meal cash market prices for~~6.1% during fiscal ~~2001~~2004 as compared to fiscal ~~2000 increased 3.0%~~2003. In addition, during fiscal 2004 and ~~2.2%, respectively. Cost~~fiscal 2003 the Company’s cost of sales were reduced by $.3 million and $12.4 million, respectively, from proceeds related to lawsuits against vitamin and methionine suppliers.

The Company’s cost of ~~prepared food products during~~corn and soybean meal, the Company’s primary feed ingredients, increased approximately 6.8% and 52.1% for the fiscal year ended October 31, ~~2001~~2004 as compared to the fiscal year ended October 31, ~~2000 decreased approximately $900,000 or 1.4% as the Company eliminated less profitable~~2003. Cost of sales of prepared food ~~sales.~~ products increased $5.6 million or 5.5% due to an increase in poultry prices. The prepared foods operation purchases most of its chicken from the Company’s poultry operations, and such chicken is a major component of its raw materials.

Selling, general and administrative expenses for fiscal ~~2001 increased $1.9~~2004 were $59.8 million ~~or 7.0%,~~ as compared to ~~fiscal 2000.~~$40.3 million, an increase of $19.5 million. This increase ~~resulted from contributions during fiscal 2001~~is primarily due to the ~~Company's Employee Stock Ownership Plan~~cost of the Company’s advertising program and increased ~~contributions to the Company's 401(k) Plan. The Company did not make~~ contributions to the Employee Stock Ownership Plan (“ ESOP”). The Company’s fiscal 2004 advertising program began in ~~fiscal 2000 because of operating losses. Also,~~January 2004 and cost the ~~increase reflects a charge~~Company approximately $14.0 million during fiscal ~~2001~~2004. The Company plans to continue and expand this program with new ads and in new markets during fiscal 2005. The Company expects the 2005 advertising campaign to cost approximately $16.0 million. During fiscal 2004 the Company contributed $7.0 million to the ESOP, an increase of $3.0 million as compared to the contribution the Company made during fiscal 2003 of $4.0 million.

The Company’s operating income for the ~~employee incentive program. These increases were partially offset by~~fiscal year ended October 31, 2004 was a ~~planned reduction~~record $150.1 million as compared to $90.5 million during the fiscal year ended October 31, 2003. This increase in the ~~Company's advertising expenditures~~Company’s operating income of $59.6 million resulted from the favorable market for poultry products and continued strong operating performance. These factors enabled the Company to more than offset increased feed costs and the benefit received from additional settlement proceeds received during fiscal ~~2001~~2003 as compared to fiscal ~~2000 and a nonrecurring bad debt~~2004.

During fiscal 2004, interest expense ~~of $1.2 million during the second quarter of fiscal 2000 resulting from the bankruptcy filing by AmeriServe Food Distribution, Inc. on February 1, 2000. The Company's operating income for fiscal 2001~~ was ~~$51.1~~$1.6 million as compared to ~~an operating loss~~$2.5 million during fiscal 2003. This decrease reflects lower outstanding debt during fiscal 2004 as compared to fiscal 2003. The Company’s total debt at October 31, 2004 was $15.3 as compared to $26.0 million as of October 31, 2003.

The Company’s effective tax rate during fiscal 2004 and fiscal 2003 was 38.75% and 38.68%, respectively.

Net income for the fiscal ~~2000~~year ended October 31, 2004 was $91.4 million, or $4.57 per diluted share, compared with net income of ~~$600,000, an improvement~~$54.1 million, or $2.75 per diluted share for the fiscal year ended October 31, 2003. During fiscal 2004, the Company recognized $177,000, net of ~~$52.5 million. The improvement~~income taxes, for Sanderson Farms’ share in the ~~Company's operating~~partial settlement of lawsuits against vitamin and methionine suppliers for overcharges, compared with total similar recoveries of $7.6 million, net of income ~~reflects a continued strong performance by our prepared foods division, a significant increase in~~taxes, or $.38 per diluted share, during fiscal 2003.

EXECUTIVE OVERVIEW RESULTS — 2003

During fiscal 2003 grain prices were substantially higher for the full year ended October 31, 2003 as compared to the full year ended October 31, 2002. However, the Company benefited from favorable market prices for its poultry products during the second half of fiscal 2003 and from proceeds received during the year related to the vitamin and methionine lawsuits. All in all, fiscal 2003 was a record setting year in sales and net income for Sanderson Farms.

Fiscal 2003 Compared to Fiscal 2002

During fiscal 2003 net sales were $872.2 million, an increase of 17.3% when compared to net sales of $743.7 million for fiscal 2002. Net sales of poultry products increased $105.8 million or 16.2% and net sales of prepared food products increased $22.7 million or 25.3%. The increase in net sales of poultry products resulted from favorable market prices for poultry products and an increase in the pounds of poultry products sold of 9.6%. The additional volume of poultry products resulted from an increase in the live weight of chickens processed of 5.3%, an increase in the number of chickens processed of 2.4% and an improved processing yield. Overall market prices during fiscal 2003 for the Company’s poultry products were higher when compared to fiscal 2002. The Company’s average sale price of poultry products increased 6.1% during fiscal 2003 as compared to fiscal 2002. A simple average of the Georgia dock whole bird prices was 2.4% higher for the year ended October 31, 2003 as compared to the year ended October 31, 2002. In addition, market prices for boneless breast, breast tenders and bulk leg quarters

were 17.2%, 17.9% and ~~wings,~~12.8% higher, respectively. Net sales of prepared food products increased $22.7 million or 25.3% primarily from an increase in pounds of prepared food products sold of 26.0%.

The Company’s cost of sales for fiscal 2003 increased $78.3 million or 11.8% as compared to cost of sales for fiscal 2002. This increase is primarily due to increases in the pounds of poultry and ~~marketing changes~~prepared food products sold and increases in the cost of feed grains. Cost of sales of poultry products increased $53.2 million or 9.1%. However, the average cost of sales of poultry products per pound decreased .4% as the Company ~~implemented over~~benefited from proceeds from lawsuits against vitamin and methionine suppliers and improved performance from the ~~past several years~~Company’s poultry operations. A simple average of corn and soy meal cash market prices for the year ended October 31, 2003 as ~~well as ongoing improvements~~compared to the ~~Company's operations.~~year ended October 31, 2002 reflected increases of 6.9% and 11.2%, respectively. During fiscal ~~2001~~2003 and fiscal 2002 the ~~Company was able~~Company’s cost of sales were reduced by $12.4 million and $5.0 million, respectively, from proceeds related to ~~reduce its outstanding debt by approximately 31.2 million. As a result, interest expense~~lawsuits against vitamin and methionine suppliers. Cost of sales of prepared food products increased $25.1 million or 32.4% due to an increase in the volume of prepared food products sold and increased cost of chicken products.

Selling, general and administrative expenses for fiscal ~~2001~~2003 were $40.3 million, an increase of $9.8 million or 32.0% as compared to selling, general and administrative expenses during fiscal 2002 of $30.5 million. The increase during fiscal 2003 resulted from increased expenses related to the Company’s phantom stock options, bonus award program, employee stock ownership plan, bad debt reserves and certain marketing and administrative costs.

During fiscal 2003 the Company’s operating income was ~~$6.8~~$ 90.5 million, an increase of $40.5 million as compared to ~~$8.2~~$50.0 million for fiscal ~~2000, a decrease of $1.4 million most of which decrease came~~2002. During fiscal 2003 as compared to fiscal 2002, the Company benefitted from higher market prices for poultry products, improvements in the ~~fourth~~operating performance and marketing execution of both the Company’s poultry and prepared foods operations and proceeds from vitamin and methionine litigation. These factors more than offset increases in average cost of feed grains during fiscal ~~quarter.~~2003 as compared to fiscal 2002. Overall market prices for poultry products were lower during the first half of fiscal 2003 as compared to the same period during fiscal 2002. During the third and fourth quarters of fiscal 2003 as compared to the same quarters in fiscal 2002 market prices for the Company’s poultry products improved significantly, and were reflected in the increase in the Company’s average sale price of poultry products during fiscal 2003 as compared to fiscal 2002 of 6.1%. The Company’s average sales price of its poultry products during the third and fourth quarter of fiscal ~~2001 as compared to~~2003 were 7.5% and 21.0% higher than the third and fourth quarter of fiscal ~~2000~~2002. This improved market environment during the ~~Company's~~second half of the Company’s fiscal year was in part a result of the stabilization of the export market for poultry products, including the Russian market. Higher market prices for competing meats such as beef and pork also contributed to improved market conditions. During fiscal 2003 and fiscal 2002, the Company’s operating income included $12.4 million and $5.0 million, respectively, from vitamin and methionine litigation. Interest expense during the fiscal year ended October 31, 2003 was approximately $2.5 million as compared to $3.7 million for the year ended October 31, 2002. This reduction in interest expense ~~decreased $1.0 million.~~ during fiscal 2003 as compared to fiscal 2002 resulted from less debt outstanding.

The ~~Company's~~Company’s effective tax ~~rates~~rate for the fiscal year ended October 31, 2003 and October 31, 2002 was 38.7% and 38.0%, respectively. The increase pertains to lower state tax credits available as a percentage of taxable income.

Net income for fiscal ~~2001~~2003 was $54.1 million as compared to $28.8 million during fiscal 2002. Included in the Company’s net income are proceeds from vitamin and methionine litigation of $7.6 million or $.38 per diluted share during fiscal ~~2000 were 37.9%~~2003 and ~~37.2%, respectively.~~ $3.1 million or $.15 per diluted share during fiscal 2002.

Liquidity and Capital Resources

The ~~Company's~~Company’s working capital at October 31, ~~2002~~2004 was ~~$68.4~~$150.6 million and its current ratio was ~~2.2~~3.3 to 1. This compares to working capital of ~~$77.0~~$82.2 million and a current ratio of ~~2.6~~2.3 to 1 as of October 31, ~~2001.~~2003. During fiscal ~~2002~~2004 the Company spent approximately ~~$19.7~~$27.5 million on planned capital projects, which include $9.5 million on the new complex in south Georgia. In addition, the Company invested $1.6 million in an existing company with other poultry producers for the processing and ~~$14.6 million~~marketing of spent hens. The Company’s ownership interest is less than 10%, and the Company will account for this investment on a cost basis.

On January 29, 2004, the Company announced a three-for-two stock split to ~~repurchase 736,000~~be effected as a 50% stock dividend. The new shares were distributed on February 26, 2004, to stockholders of ~~its common~~record as of close of business on February 10, 2004. Share and per share data have been adjusted to reflect this stock ~~under its existing stock repurchase plan.~~ split.

The ~~Company's~~Company’s capital budget for fiscal ~~2003~~2005 is approximately ~~$19.4 million. The fiscal 2003 capital budget includes cost of renovations~~$125.0 million, and ~~changes and additions to existing processing facilities to allow better product flows and product mix for more product flexibility. The Company expects that~~will be funded by cash on hand, internally generated working capital and cash flows from ~~operations will be sufficient in fiscal 2003 to fund the anticipated capital expenditures. However, if~~operations. If needed, the Company has ~~available $80.0~~a $100.0 million ~~under~~revolving line of credit available. The $125 million fiscal 2005 capital budget includes approximately $7.2 million in operating leases, $13.0 million to construct a new corporate office building, and $88.3 million on the new poultry complex in south Georgia. Without operating leases, the new office building and the Georgia complex, the Company’s capital budget for fiscal 2005 would be a maintenance level budget of approximately $16.5 million.

On May 18, 2004, the Company entered into an amendment to its revolving credit ~~agreement~~facility. The amendment, among other things, increased allowed capital expenditures to allow for the construction of the Georgia complex, changed the net worth covenant to reflect the Company’s new dividend rate, extended the committed revolver by five years rather than the usual three year extension, reduced the interest rate charged on amounts outstanding, and removed a letter of credit commitment related to certain industrial development bonds.

On April 26, 2004, the Company gave notice to U.S. Bank National Association, as trustee under the Indenture of Trust dated as of November, related to the Robinson County Industrial Development Corporation Variable Rate Demand Industrial Development Revenue Bonds (Sanderson Farms, Inc. Project) Series 1995 (“Bonds”), of the Company’s intent to exercise its right to call all of the Bonds for optional redemption on June 1, 2004 (the “Redemption Date”) at a redemption price of 100% of the principal amount of the Bonds plus accrued interest to the Redemption Date. The Trustee redeemed the Bonds on June 1, 2004.

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.

Contractual Obligations

Obligations under long-term debt, long-term capital leases, non-cancelable operating leases, purchase obligations relating to feed grains, other feed ingredients and packaging supplies and claims payable relating to the Company’s workers’ compensation insurance policy at October 31, ~~2002.~~ 2004 were as follows (in thousands):


	Payments Due By Period
					1 - 3		3 - 5		More than
Contractual Obligations	Total		Less than 1 Year		Years		Years		5 Years
Long-term debt		12,723		4,125		8,269		297		32
Capital lease obligations		2,580		260		570		640		1,110
Operating leases		15,497		4,265		7,398		2,932		902
Purchase obligations		33,568		33,568		0		0		0
Claims payable		6,084		3,484		2,600		0		0

Total		70,452		45,702		18,837		3,869		2,044

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. Management suggests that~~estimates and assumptions, and the ~~Company's Summary of Significant Accounting Policies, as described in Note 1 of the Notes to the Consolidated Financial Statements,~~differences could be read in conjunction with this Management's Discussion and Analysis of Financial Condition and Results of Operations. The Company believes the critical accounting policies and estimates that most impact the Company's Consolidated Financial Statements are described below. material.

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.~~accounts based on an individual assessment of a customer’s credit quality as well as subjective factors and trends, including the aging of receivable balances. In circumstances where management is aware of a specific ~~customer's~~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.~~ 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 ~~grower~~ 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 chicks, 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 1915 to 39 years for buildings and 3 to 712 years for machinery and equipment. An increase or decrease in the estimated useful lives would result in changes to depreciation expense.

The Company continually reevaluates the carrying value of its long-lived assets for events or changes in circumstances ~~which~~that indicate that the carrying value may not be recoverable. As part of this reevaluation, 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.

Accrued Self Insurance

Insurance expense for ~~workers'~~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~~Company’s total exposure. Management regularly reviews the assumptions used to recognize periodic expenses. ~~However, actual~~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 ~~differ significantly from~~be a significant increase (or decrease) in cost of sales depending on whether these ~~estimates.~~ 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.~~authorities and considers any adjustments made as a result of the audits in computing the Company’s income tax expense. Any audit adjustments affecting permanent differences could have an impact on the ~~Company's~~Company’s effective tax rate.

The recently passed “American Jobs Creation Act of 2004” represents far-reaching legislation that will have a significant impact on many U.S. taxpayers. Among other things, the Act will provide a deduction with respect to income of certain U.S. manufacturing activities and allow for favorable taxing on repatriation of offshore earnings. Although the provisions of the Act do not impact the fiscal year 2004 financial statements under current accounting rules, the Act will likely impact the Company’s financial statements in future periods. We are currently evaluating the financial impact of this Act.

Contingencies

The Company is a party to a number of legal proceedings and recognizes 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. At this time, the Company has not accrued any reserve for any of these matters. Further reserves may be required 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.

New Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51.” Interpretation No. 46 requires consolidation of entities when an enterprise absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently, entities are generally consolidated by an enterprise when it has a controlling financial interest through ownership of a majority voting interest in the entity. The consolidation requirements of this pronouncement were effective for the first reporting period ending after March 31, 2004. The Company does not absorb losses or enjoy returns from any entity other than its subsidiaries, all of which are wholly owned and consolidated with the Company, except for the Company’s less than 10% interest in a Company that processes and markets spent hens. The investment in this Company is $1.6 million and it is not considered to be a variable interest entity. Therefore the adoption of FIN 46 had no impact on the Company.

In December of 2003, the Medicare Prescription Drug, Improvements, and Modernization Act of 2003 (“Act”) was signed into law. In addition to including numerous other provisions that have potential effects on an employer’s retiree health plan, the Medicare law included a special subsidy for employers that sponsor retiree health plans with prescription drug benefits that are at least as favorable as the new Medicare Part D benefit. In May of 2004, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvements and Modernization Act of 2003,” that provides guidance on the accounting for the effects of the Act for employers that sponsor postretirement health care plans that provide drug benefits. We adopted the provisions of the FSP in the fourth quarter of fiscal year 2004. The adoption of FSP No. 106-2 did not have a material impact on the Company’s results of operations, financial position or cash flows.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk. ~~Market Risk~~

The Company is a purchaser of certain commodities, primarily corn and soybean ~~meal.~~meal, for use in manufacturing feed for its chickens. As a result, the ~~Company's~~Company’s earnings are affected by changes in the price and availability of such feed ingredients. ~~As market conditions dictate,~~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 six 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 ~~lock-in future feed ingredient prices using forward purchase agreements with suppliers.~~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 ~~use such instruments for trading purposes and~~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 ~~not~~recognized in cost of sales, on a ~~party to any leverage derivatives. The Company's interest expense is sensitive to changes in~~first-in-first-out basis, at the ~~general level of U.S. interest rates. The Company maintains certain of its debt as fixed rate in nature to mitigate~~same time that the ~~impact of fluctuations in interest rates. The fair value~~sales of the ~~Company's fixed rate debt approximates~~chickens that consume the carrying amount at October 31, 2002. Management believes the potential effects of near-term changes in interest rates on the Company's fixed rate debt is not material. The Company is a party to no other market risk sensitive instruments requiring disclosure. feed grains are recognized.

Item 8. Financial Statements and Supplementary Data. Sanderson Farms, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS October 31 2002 2001 ---------------------------- (In thousands)
~~Assets Current assets: Cash and cash equivalents $ 9,542 $ 24,175 Accounts receivable, less allowance~~
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Sanderson Farms, Inc.
We have audited the accompanying consolidated balance sheets of $663,000 in 2002 and $303,000 in 2001 1,073 40,187 Inventories 57,964 52,350 Refundable income taxes 2,764 0 Prepaid expenses 2,121 9,452 --------- --------- Total current assets 123,464 126,164 Property, plant and equipment: Land and buildings 134,076 130,366 Machinery and equipment 255,590 248,621 ------- ------- 389,666 378,987 Accumulated depreciation (233,183) (216,801) -------- ------- 156,483 162,186 Other assets 563 621 -------- ---------- Total assets $280,510 $288,971 ======= ======= Liabilities and Stockholders' Equity Current liabilities: Accounts payable 25,258 $ 20,309 Accrued expenses 26,511 25,708 Current maturities of long-term debt 3,243 3,178 -------- --------- Total current liabilities 55,012 49,195 Long-term debt, less current maturities 49,969 77,212 Claims payable 2,600 2,400 Deferred income taxes 17,038 15,825 Stockholders' equity: Preferred Stock: Series A Junior Participating Preferred Stock, $100 par value: authorized shares-500,000; none issued Par value to be determined by the Board of Directors: authorized shares-4,500,000; none issued Common Stock, $1 par value: authorized shares-100,000,000; issued and outstanding shares-13,051,026 in 2002 and 13,564,955 in 2001 13,051 13,565 Paid-in capital 0 2,945 Retained earnings 142,840 127,829 ------- ------- Total stockholders' equity 155,891 144,339 ------- ------- Total liabilities and stockholders' equity $280,510 $288,971 ======= =======
~~See accompanying notes.~~ ~~Sanderson Farms, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME~~
Years Ended October 31 2002 2001 2000 ------- -------- ------- (In thousands, except per share data) Net sales $743,665 $706,002 $605,911 Cost and expenses: Cost of sales 663,161 626,693 580,136 Selling, general and administrative 30,527 28,215 26,363 ------- ------- ------- 693,688 654,908 606,499 ------- ------- ------- Operating income (loss) 49,977 51,094 (588) Other income (expense): Interest income 185 377 213 Interest expense (3,681) (6,753) (8,195) Other (1) 54 69 ------ ------ ------ (3,497) (6,322) (7,913) ------ ------ ------ Income (loss) before income taxes and cumulative effect of accounting change 46,480 44,772 (8,501) Income tax expense (benefit) 17,640 16,988 (3,164) ------ ------ ------ Income (loss) before cumulative effect of accounting change 28,840 27,784 (5,337) ====== ====== ====== Cumulative effect of accounting change (net of income taxes of $140,000) 0 0 (234) ------ ------ ------ Net income (loss) $28,840 $27,784 $(5,571) ====== ====== ====== Basic net income (loss) per share: Income (loss) before cumulative effect of accounting change $ 2.18 $ 2.04 $ (.39) Cumulative effect of accounting change 0 0 (.02) ------ ------ ------ Net income (loss) per share $ 2.18 $ 2.04 $ (.41) ====== ====== ====== Diluted net income (loss) per share: Income (loss) before cumulative effect of accounting change $ 2.15 $ 2.04 $ (.39) Cumulative effect of accounting change 0 0 (.02) ------ ------ ------ Net income (loss) per share $ 2.15 $ 2.04 $ (.41) ====== ====== ====== Weighted average shares outstanding: Basic 13,200 13,596 13,726 ====== ====== ====== Diluted 13,429 13,640 13,726 ====== ====== ======
~~See accompanying notes.~~ Sanderson Farms, Inc. and subsidiaries as of October 31, 2004 and 2003 and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended October 31, 2004. Our audit also included the financial statement schedule listed in the index under item 15(a).These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes accessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sanderson Farms, Inc. and subsidiaries at October 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended October 31, 2004, in conformity with U.S. generally accepted accounting principles. Also in our opinion the related financial statement schedule when considered in relation to the basic financial statements as a whole, presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

New Orleans, Louisiana
December 23, 2004

SANDERSON FARMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended October 31 2002 2001 2000 ---------------------------------------- (In thousands) Operating activities Net income (loss) $28,840 $27,784 $(5,571) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of accounting change 0 0 374 Depreciation and amortization 24,710 25,722 26,432 Provision for losses on accounts receivable 360 44 1,413 Deferred income taxes 1,340 (178) 340 Change in assets and liabilities: Accounts receivable (1,246) (3,193) (1,874) Inventories (5,614) (2,088) (2,628) Prepaid expenses and refundable income taxes (5,560) 2,791 (3,647) Other assets (141) (205) 30 Accounts payable 4,949 2,802 5,002 Accrued expenses and claims payable 1,003 11,173 463 ------ ------ ------ Total adjustments 19,801 36,868 25,905 ------ ------ ------ Net cash provided by operating activities 48,641 64,652 20,334 Investing activities Capital expenditures (19,704) (14,587) (16,557) Net proceeds from sale of property and equipment 896 86 217 ------ ------ ------ Net cash used in investing activities (18,808) (14,501) (16,340) Financing activities Net change in revolving credit (24,000) (28,000) 6,000 Principal payments on long-term debt (2,958) (2,954) (2,950) Principal payments on capital lease obligation (220) (205) (195) Dividends paid (5,245) (2,721) (2,740) Purchase and retirement of common stock (14,640) (739) (2,518) Net proceeds from common stock issued 2,597 0 0 ------ ------ ----- Net cash used in financing activities (44,466) (34,619) (2,403) ------ ------ ----- Net change in cash and cash equivalents (14,633) 15,532 1,591 Cash and cash equivalents at beginning of year 24,175 8,643 7,052 ------ ------ ------ Cash and cash equivalents at end of year 9,542 $24,175 $ 8,643 ====== ====== ====== Supplemental disclosure of cash flow information: Income taxes paid (refunded), net $18,675 $12,372 $ (67) ====== ====== ====== Interest paid $ 3,993 $ 6,920 $ 8,728 ====== ====== ======


	Years Ended October 31
	2004			2003			2002
				(In thousands)
Operating activities
Net income	$	91,428		$	54,061		$	28,840
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		26,326			24,485			24,710
Provision for losses on accounts receivable		165			727			360
Deferred income taxes		500			(920	)		1,340
Change in assets and liabilities:
Accounts receivable		(3,210	)		(5,849	)		(1,246	)
Inventories		(13,850	)		(3,789	)		(5,614	)
Prepaid expenses and refundable income taxes		(3,483	)		2,431			(5,560	)
Other assets		(123	)		(135	)		(141	)
Accounts payable		11,351			(6,225	)		4,949
Accrued expenses and claims payable		(6,511	)		11,029			1,003

Total adjustments		11,165			21,754			19,801

Net cash provided by operating activities		102,593			75,815			48,641
Investing activities
Other investment		(1,597	)		0			0	)
Capital expenditures		(27,538	)		(23,430	)		(19,704	)
Net proceeds from sale of property and equipment		79			394			896

Net cash used in investing activities		(29,056	)		(23,036	)		(18,808	)
Financing activities
Net change in revolving credit		0			(20,000	)		(24,000	)
Principal payments on long-term debt		(10,420	)		(7,014	)		(2,958	)
Principal payments on capital lease obligation		(245	)		(230	)		(220	)
Dividends paid		(16,733	)		(11,957	)		(5,245	)
Purchase and retirement of common stock		(32	)		(5,160	)		(14,640	)
Net proceeds from common stock issued		7,579			4,264			2,597

Net cash used in financing activities		(19,851	)		(40,097	)		(44,466	)

Net change in cash and cash equivalents		53,686			12,682			(14,633	)
Cash and cash equivalents at beginning of year		22,224			9,542			24,175

Cash and cash equivalents at end of year	$	75,910		$	22,224		$	9,542

Supplemental disclosure of cash flow information:
Income taxes paid	$	63,486		$	20,093		$	18,675

Interest paid	$	1,611		$	2,569		$	3,993

See accompanying notes.

Sanderson Farms, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Significant Accounting Policies

Principles of Consolidation:The consolidated financial statements include the accounts of Sanderson Farms, Inc. (the ~~"Company"~~“Company”) and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

Business:The Company is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared food items. The ~~Company's~~Company’s net sales and cost of sales are significantly affected by market price fluctuations of its principal products sold and of its principal feed ingredients, corn and other grains.

The Company sells to retailers, distributors and fast food operators primarily in the southeastern, southwestern and western United States. Revenue is recognized when product is delivered to customers. Revenue on certain international sales is recognized upon transfer of title, which may occur after shipment. Management periodically performs credit evaluations of its ~~customers'~~customers’ financial condition and generally does not require collateral. One customer accounted for 12.5% and 11.7%, respectively, of consolidated sales for the year ended October 31, 2004 and October 31, 2003. No customer accounted for more than 10% of consolidated sales for the year ended October 31, 2002. Shipping and handling costs are included as a component of cost of sales.

Use of Estimates:The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Cash Equivalents:The Company considers all highly liquid investments with maturities of ninety days or less when purchased to be cash equivalents.

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 based on an individual assessment of a customer’s credit quality as well as subjective factors and trends, including the aging of receivable balances. 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.

Live poultry inventories of broilers are stated at the lower of cost or market and breeders at cost less accumulated amortization. The costs associated with breeders, including breeder chicks, feed, medicine and grower pay, are accumulated up to the production stage and amortized over nine months using the straight-line method.

Property, Plant and Equipment:Property, plant and equipment is stated at cost. Depreciation of property, plant and equipment is provided by the straight-line and units of production methods over the estimated useful lives of 19 to 39 years for buildings and 3 to 7 years for machinery and equipment.

Impairment of Long-Lived Assets:The Company continually reevaluates the carrying value of its long-lived assets for events or changes in circumstances which indicate that the carrying value may not be recoverable. As part of this reevaluation, 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 through a charge to operations.

Self-Insurance Programs: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 current operating results.

Advertising and Marketing Costs:The Company expenses advertising costs as incurred. Advertising costs are included in selling, general and administrative expenses and totaled $14.0 million, $.8 million and $.2 million for fiscal 2004, 2003 and 2002, respectively.

Income Taxes:Deferred income taxes are accounted for using the liability method and relate principally to cash basis temporary differences and depreciation expense accounted for differently for financial and income tax purposes. Effective November 1, 1988, the Company changed from the cash to the accrual basis of accounting for its farming subsidiary. The Taxpayer Relief Act of 1997 (the "Act") provides that the taxes on the cash basis temporary differences as of that date are payable over 20 years beginning in fiscal 1998 or in full in the first fiscal year in which the Company fails to qualify as a "Family Farming Corporation." The Company will continue to qualify as a "Family Farming Corporation" provided there are no changes in ownership control, which management does not anticipate during fiscal 2003.

Stock Based Compensation:At October 31, 2004, the company has a stock-based employee compensation plan, which is described more fully in Note 8. The ~~Company~~company accounts for ~~stock option grants in accordance with~~this plan under the recognition and measurement principles of APB Opinion No. 25, ~~"Accounting~~Accounting for Stock Issued to ~~Employees."~~ Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price at least equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.


	Year Ended October 31
	2004			2003			2002
				(In thousands)
Net income, as reported	$	91,428		$	54,061		$	28,840
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(45	)		(60	)		(15	)

Pro forma net income	$	91,383		$	54,001		$	28,825

Earnings per share:
Basic-as reported	$	4.62		$	2.78		$	1.45

Basic-pro forma	$	4.62		$	2.78		$	1.45

Diluted-as reported	$	4.57		$	2.75		$	1.43

Diluted-pro forma	$	4.57		$	2.74		$	1.43

Earnings Per Share:Basic earnings per share is based upon the weighted average number of common shares outstanding during the year. Diluted earnings per share includes any dilutive effects of options, warrants, and convertible securities.

On January 29, 2004, the Board of Directors declared a 3 for 2 stock split to be effected in the form of a 50% stock dividend. This dividend was paid February 29, 2004 to stockholders of record on February 10, 2004. Share and per share data have been adjusted to reflect this stock split. Cash was paid in lieu of fractional shares.

Fair Value of Financial Instruments:The carrying amounts for cash and temporary cash investments approximate their fair values. The carrying amounts of the ~~Company's~~Company’s borrowings under its credit facilities and long-term debt also approximate the fair values based on current rates for similar debt.

Impact of Recently Issued Accounting Standards: ~~Effective~~In January 2003, the Financial Accounting Standards Board issued interpretation No. 46, “Consolidation of Variable Interest Entities an interpretation of Accounting Research Bulletin No. 51, “Interpretation No. 46 requires consolidation of entities when an enterprise absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of

ownership, contractual or other financial interests in ~~fiscal 2001,~~the entity. Currently, entities are generally consolidated by an enterprise when it has a controlling financial interest through ownership of a majority voting interest in the entity. The consolidation requirements of this pronouncement were effective for the first reporting period ending after March 31, 2004. The Company ~~adopted FASB No. 133, "Accounting~~does not absorb losses or enjoy returns from any entity other than its subsidiaries, all of which are wholly owned and consolidated with the Company, except for ~~Derivative Instruments~~the Company’s less than 10% interest in a Company that processes and ~~Hedging Activities", which required all derivatives~~markets spent hens. The investment in this Company is $1.6 million and it is not considered to be ~~recorded~~a variable interest entity. Therefore the adoption of FIN 46 had no impact on the ~~balance sheet~~Company.

In December of 2003, the Medicare Prescription Drug, Improvements and Modernization Act of 2003 (“Act”) was signed into law. In addition to including numerous other provisions that have potential effects on an employer’s retiree health plan, the Medicare law included a special subsidy for employers that sponsor retiree health plans with prescription drug benefits that are at ~~fair value. The adoption~~least as favorable as the new Medicare Part D benefit. In May of ~~this statement had no effect~~2004, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvements and Modernization Act of 2003,” that provides guidance on the ~~consolidated earnings and financial position~~accounting for the effects of the ~~Company. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting the Costs of Start-Up Activities," which requires~~Act for employers that ~~costs related to start-up activities be expensed as incurred. Prior to October 31, 1999, the Company capitalized its start-up costs. The Company~~sponsor postretirement health care plans that provide drug benefits. We adopted the provisions of the ~~Statement of Position 98-5, "Reporting the Costs of Start-Up Activities," which required that costs related to start-up activities be expensed as incurred in its consolidated financial statements~~FSP in the ~~first~~fourth quarter of fiscal ~~2000.~~year 2004. The ~~effect of~~ adoption of ~~SOP 98-5~~FSP No. 106-2 did not have a material impact on the Company’s results of operations, financial position or cash flows.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” SFAS No. 151 amends Accounting Research Bulletin (“ARB”) No. 43, Chapter 4, to clarify that abnormal amounts of idled facility expense, freight handling costs and wasted materials (spoilage) should be recognized as current-period charges. In addition, SFAS No. 151 requires that allocation of fixed production overhead to inventory be based on the normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal ~~2000 was to record a charge for~~years beginning after June 15, 2005. The Company is currently assessing the ~~cumulative effect~~impact that SFAS No. 151 will have on the results of ~~an accounting change of $234,000 (net of income taxes of $140,000)~~operations, financial position or ~~$.02 per basic and diluted earnings per share.~~ cash flows.

2. Inventories

Inventories consisted of the following: ~~October~~


	October 31
	2004		2003
	(In thousands)
Live poultry-broilers and breeders	$	45,318	$	35,938
Feed, eggs and other		10,081		6,821
Processed poultry		11,024		8,939
Processed food		5,172		5,653
Packaging materials		4,008		4,402

	$	75,603	$	61,753

3. Prepaid expenses

Prepaid expenses consisted of the following:


	October 31
	2004		2003
	(In thousands)
Parts and supplies	$	5,698	$	5,323
Current deferred tax assets		1,460		2,275
Other prepaid expenses		5,919		5,403

	$	13,077	$	13,001

31 2002 2001 ----------------------------- (In thousands) Live poultry-broilers and breeders $33,392 $30,649 Feed, eggs and other 7,389 6,597 Processed poultry 8,423 5,894 Processed food 4,507 4,918 ------ ------ Packaging materials 4,253 4,292 ------ ------ $57,964 $52,350 ====== ====== 3.

4. Accrued expenses

Accrued expenses consisted of the following:


	October 31
	2004		2003
	(In thousands)
Income taxes payable	$	0	$	7,243
Accrued bonuses		11,474		11,419
Accrued rebates		3,387		3,600
Workers’ compensation claims		3,484		3,540
Accrued property taxes		2,306		2,319
Accrued wages		3,201		3,332
Accrued vacation		2,822		2,214
Other accrued expenses		4,355		3,873

	$	31,029	$	37,540

5. Long-term Credit Facilities and Debt

Long-term debt consisted of the following: October 31 2002 2001 ---- ---- (In thousands) Revolving credit agreement with banks (weighted average rate of 5.1% at October 31, 2002) $20,000 $44,000 Term loan with an insurance company, accruing interest at 7.49%; due in annual principal installments of $2,850,000 2,900 5,750 Term loan with an insurance company, accruing interest at 6.65%; due in annual principal installments of $2,857,000, beginning in July 2004 20,000 20,000 Note payable, accruing interest at 5%; due in annual installments of $161,400, including interest, maturing in 2009 957 1,065 6% Mississippi Business Investment Act bond-capital lease obligation, due November 1, 2012 3,055 3,275 Robertson County, Texas, Industrial Revenue Bonds accruing interest at a variable rate, 2.4% at October 31, 2002; with optional annual principal installments of $900,000, due November 1, 2005 6,300 6,300 ------ ------ 53,212 80,390 Less current maturities of long-term debt 3,243 3,178 ------ ------ $49,969 $77,212 ====== ======


	October 31
	2004		2003
	(In thousands)
Term loan with an insurance company, accruing interest at 7.05%; due in annual principal installments of $4,000,000, maturing in 2007	$	12,000	$	16,000
Note payable, accruing interest at 5%; due in annual installments of $161,400, including interest, maturing in 2009		723		843
6% Mississippi Business Investment Act bond-capital lease obligation, due November 1, 2012		2,580		2,825
Robertson County, Texas, Industrial Revenue Bonds accruing interest at a variable rate, 1.2% at October 31, 2003		0		6,300

		15,303		25,968
Less current maturities of long-term debt		4,385		4,364

	$	10,918	$	21,604

The Company has a $100.0 million ~~($80.0 million available at October 31, 2002)~~ revolving credit agreement with four ~~banks, which~~banks. As of October 31, 2004, all of the credit is available and the revolver extends ~~to fiscal 2005.~~until July 31, 2009. Borrowings are at prime or below and may be prepaid without penalty. A commitment fee of .25% is payable quarterly on the unused portion of the revolver. Covenants related to the revolving credit and the term loan agreements include requirements for maintenance of minimum consolidated net working capital, tangible net worth, debt to total capitalization and current ratio. The agreements also establish limits on dividends, assets that can be pledged and capital expenditures.

Property, plant and equipment with a carrying value of approximately ~~$4,127,933 million~~$1,791,850 is pledged as collateral to a ~~note payable and the~~ capital lease obligation.

The aggregate annual maturities of long-term debt at October 31, ~~2002~~2004 are as follows (in thousands): Fiscal Year Amount 2003 $ 3,243 2004 6,264 2005 11,285 2006 11,306 2007 11,333 Thereafter 9,781 ------- $53,212 ======= 4.


Fiscal Year	Amount
2005	$	4,385
2006		4,406
2007		4,433
2008		455
2009		482
Thereafter		1,142

	$	15,303

6. Income Taxes

Income tax expense (benefit) consisted of the following: Years Ended October 31 2002 2001 2000 ----------------------------- (In thousands) Current: Federal $14,670 $15,518 $(3,600) State 1,630 1,450 (44) ------------------------------- 16,300 16,968 (3,644) Deferred: Federal 1,226 (264) 325 State 114 284 15 ------------------------------- 1,340 20 340 ------------------------------- 17,640 16,988 (3,304) Less income tax expense applicable to cumulative effect of accounting change 0 0 140 ------------------------------- Income tax expense (benefit) applicable to income (loss) before cumulative effect of accounting change $17,640 $16,988 $(3,164) ===============================


	Years Ended October 31
	2004		2003			2002
			(In thousands)
Current:
Federal	$	49,250	$	29,940		$	14,670
State		8,090		5,080			1,630

		57,340		35,020			16,300
Deferred:
Federal		430		(800)	)		1,226
State		70		(120	)		114

		500		(920	)		1,340

	$	57,840	$	34,100		$	17,640

Significant components of the ~~Company's~~Company’s deferred tax assets and liabilities were as follows: October 31, 2002 2001 ----------------------- (In thousands) Deferred tax liabilities: Cash basis temporary differences $2,994 $ 3,193 Property, plant and equipment 14,986 13,937 Prepaid and other assets 1,066 278 ------ ------ Total deferred tax liabilities 19,046 17,408 Deferred tax assets: Accrued expenses and accounts receivable 3,736 3,156 State net operating loss and credit carryforwards 0 282 ------ ------ Total deferred tax assets 3,736 3,438 ------ ------ Net deferred tax liabilities $15,310 $13,970 ====== ====== Current deferred tax assets (included in prepaid expenses) $ 1,728 $ 1,855 Long-term deferred tax liabilities 17,038 15,825 ------ ------ Net deferred tax liabilities $15,310 $13,970 ====== ======


	October 31
	2004		2003
	(In thousands)
Deferred tax liabilities:
Property, plant and equipment	$	17,977	$	17,515
Prepaid and other assets		1,108		910

Total deferred tax liabilities		19,085		18,425
Deferred tax assets:
Accrued expenses and accounts receivable		4,195		4,035

Net deferred tax liabilities	$	14,890	$	14,390

Current deferred tax assets (included in prepaid expenses)	$	1,460	$	2,275
Long-term deferred tax liabilities		16,350		16,665

Net deferred tax liabilities	$	14,890	$	14,390

The differences between the consolidated effective income tax rate and the federal statutory rate of 35% are as follows: Years ended October 31 2002 2001 2000 -------------------------- (In thousands) Income taxes (benefit) at statutory rate $16,268 $15,670 $(3,018) State income taxes (benefit) 1,511 1,754 (19) State income tax credit 0 (627) 0 Increase in deferred taxes for change in income tax rate 0 367 0 Other, net (139) (176) (267) ---------------------------- Income tax expense (benefit) $17,640 $16,988 $(3,304) ============================ 5.


	Years Ended October 31
	2004		2003		2002
			(In thousands)
Income taxes at statutory rate	$	52,244	$	30,856	$	16,268
State income taxes		5,584		3,224		1,511
Other, net		12		20		(139	)

Income tax expense	$	57,840	$	34,100	$	17,640

7. Employee Benefit Plans

The Company has an Employee Stock Ownership Plan ~~("ESOP"~~(“ESOP”) covering substantially all employees. Contributions to the ESOP are determined at the discretion of the ~~Company's~~Company’s Board of Directors. Total contributions to the ESOP were ~~$2,500,000~~$7,000,000, $4,000,000 and ~~$2,300,000~~$2,500,000 in fiscal 2004, 2003 and 2002, ~~and 2001,~~ respectively. ~~The Company did not make a contribution to the ESOP in fiscal 2000.~~

The Company has a 401(k) Plan which covers substantially all employees after ~~six months~~one year of service. Participants in the Plan may contribute up to the maximum allowed by IRS regulations. ~~Effective July 1, 2000, the~~The Company matches 100% of employee contributions to the 401(k) Plan up to 3% of each ~~employee's~~employee’s compensation and 50% of employee contributions

between 3% and 5% of each ~~employee's~~employee’s compensation. The ~~Company's~~Company’s contributions to the 401(k) Plan totaled $1,803,000 in fiscal 2004, $1,551,000 in fiscal 2003 and $1,463,000 in fiscal ~~2002, $1,411,000 in fiscal 2001 and $457,000 in fiscal 2000. 6.~~2002.

8. Stock Option Plan

The Company has elected to follow Accounting Principles Board Opinion No. 25, ~~"Accounting~~“Accounting for Stock Issued to ~~Employees"~~Employees” and related interpretations in accounting for its employee stock options because the alternative fair value accounting provided for under FASB Statement No. 123, ~~"Accounting~~“Accounting for Stock-Based Compensation,"” requires use of option valuation models that were not developed for use in valuing employee stock options.

Under the ~~Company's~~Company’s Stock Option Plan, ~~750,000~~2,225,000 shares of Common Stock have been reserved for grant to key management personnel. Options granted in fiscal 2002 ~~2001 and 2000~~ have ten-year terms and vest over four years beginning one year after the date of grant. The Company did not grant any options during fiscal 2004 and 2003.

Pro forma information regarding net income ~~(loss)~~ and earnings ~~(loss)~~ per share is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average ~~assumptions:~~assumptions in fiscal 2002: risk-free interest rate of 3.5% ~~in fiscal 2002 and 5.0% in fiscal 2001 and 6.6% in fiscal 2000;~~; dividend yields of 2.0% ~~for fiscal 2002 and fiscal 2001and 2.7% for fiscal 2000;~~; volatility factors of the expected market price of the ~~Company's~~Company’s Common Stock of ~~.325 for fiscal 2002, .350 for fiscal 2001 and ..302 for fiscal 2000;~~.325; and a weighted-average expected life of the options of four years. The weighted-average fair value of options granted was $4.73 in fiscal 2002, $3.24 in fiscal 2001 and $1.94 in fiscal 2000. The pro forma effect of the estimated fair value of the options granted was insignificant to the Company's net income (loss) and net income (loss)$3.15 per option share in fiscal ~~2002, 2001, and 2000.~~ 2002.

A summary of the ~~Company's~~Company’s stock option activity and related information is as follows:
~~Weighted-Average Shares Exercise Price -------------------------------~~ Outstanding at November 1, 1999 582,000 $12.90 Granted 141,000 7.47 Forfeited (84,000) 11.60 ------- Outstanding at October 31, 2000 639,000 11.83 Granted 71,500 11.10 Forfeited (87,500) 11.11 Outstanding at October 31, 2001 623,000 11.81 Granted 322,886 18.05 Exercised (222,150) 11.79 Forfeited (2,000) 7.47 ------- ----- Outstanding at October 31, 2002 721,736 $14.41 ======= =====


				Weighted-Average
	Shares			Exercise Price
Outstanding at October 31, 2001		934,500			7.88
Granted		484,329			12.04
Exercised		(333,225	)		7.86
Forfeited		(3,000	)		4.98

Outstanding at October 31, 2002		1,082,604			9.61
Granted		0			0.00
Exercised		( 272,775	)		8.57
Forfeited		(10,125	)		12.37

Outstanding at October 31, 2003		799,704			14.41
Granted		0			0.00
Exercised		(440,078	)		9.75
Forfeited		(2,250	)		12.37

Outstanding at October 31, 2004		357,376		$	11.56

The exercise price of the options outstanding as of October 31, ~~2002~~2004, ranged from ~~$7.19~~$4.99 to ~~$18.55~~$12.37 per share. At October 31, ~~2002,~~2004, the weighted average remaining contractual life of the options outstanding was 8 years and ~~305,537~~157,815 options were exercisable.

In fiscal 2000, the Company granted ~~141,000 "phantom shares"~~211,507 “phantom shares” to certain key management personnel. Upon exercise of a phantom share, the holder will receive a cash payment or an equivalent number of shares of the ~~Company's~~Company’s Common Stock, at the ~~Company's~~Company’s option, equal to the excess of the fair market value of the ~~Company's~~Company’s Common Stock at the time of exercise over the phantom share award value of ~~$7.47~~$4.98 per share. The phantom shares have a ten-year term and vest over four years beginning one year after the date of grant. Compensation expense of $1,547,000, $1,942,000 and $421,000 ~~and $555,000~~for the phantom share plan is included in selling, general and administrative expense in the accompanying consolidated statement of income for fiscal 2004, 2003 and 2002, ~~and fiscal 2001,~~ respectively. ~~No compensation expense was recognized applicable to the phantom shares in fiscal 2000 because the award value exceeded the fair market value~~

A summary of the ~~Company's Common Stock. 7.~~Company’s phantom share activity and related information is as follows:


				Exercise
	Shares			Price
Outstanding at October 31, 2001		211,500		$	4.98
Granted		0			0.00
Forfeited		0			0.00
Exercised		0			4.98

Outstanding at October 31, 2002		211,500			4.98
Granted		0			0.00
Forfeited		0			0.00
Exercised		(141,750	)		4.98

Outstanding at October 31, 2003		69,750			4.98
Granted		0			0.00
Forfeited		0			0.00
Exercised		(63,000	)		4.98

Outstanding at October 31, 2004		6,750		$	4.98

9. Shareholder Rights Agreement

On April 22, 1999, the Company adopted a shareholder rights agreement (the ~~"Agreement"~~“Agreement”) with similar terms as the previous one. Under the terms of the Agreement a ~~one share~~ purchase ~~("right"~~right (“right”) was declared as a dividend for each share of the ~~Company's~~Company’s Common Stock outstanding on May 4, 1999. The rights do not become exercisable and certificates for the rights will not be issued until ten business days after a person or group acquires or announces a tender offer for the beneficial ownership of 20% or more of the ~~Company's~~Company’s Common Stock. Special rules set forth in the Agreement apply to determine beneficial ownership for members of the Sanderson family. Under these rules, such a member will not be considered to beneficially own certain shares of Common Stock, the economic benefit of which is received by any member of the Sanderson family, and certain shares of Common Stock acquired pursuant to employee benefit plans of the Company.

The exercise price of a right has been established at $75. Once exercisable, each right would entitle the holder to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock, par value $100 per share. The rights may be redeemed by the Board of Directors at $.01 per right prior to an acquisition, through open market purchases, a tender offer or otherwise, of the beneficial ownership of 20% or more of the ~~Company's~~Company’s Common ~~Stock, or by two-thirds of the Directors who are not the acquirer, or an affiliate of the acquirer prior to the acquisition of 50% or more of the Company's Common Stock by such acquirer.~~Stock. The rights expire on May 4, 2009. 8.

10. Other Matters

The Company has vehicle and equipment leases that expire at various dates through fiscal 2011. Rental expense under these leases totaled 4.7 million, $3.6 million and $2.4 million for fiscal 2004, 2003 and 2002, respectively. The minimum lease payments of obligations under non-cancelable operating leases at October 31, 2004 were as follows:


Year		Dollars
2005		4.3 million
2006		3.9 million
2007		3.3 million
2008		1.8 million
2009		1.3 million
Thereafter		.9 million

environment in violation of Title VII and Section 1981 rights.” This lawsuit alleges that Sanderson Farms, in its capacity as an employer, has “engaged in (and continues to engage in) a pattern and practice of intentional unlawful employment discrimination and intentional unlawful employment practices at its plants, locations, off-premises work sites, offices, and facilities in Pike County, Mississippi...in violation of Title VII of the ~~Production Division's Laurel, Mississippi facility. Both lawsuits were brought under~~Civil Rights Act of 1964 (as amended)... .” The action further alleges that “Sanderson Farms has willfully, deliberately, intentionally, and with malice deprived black workers in its employ of the ~~Fair Labor Standards Act~~full and ~~seek recovery~~equal benefits of ~~overtime compensation, together with an equal amount as liquidated damages, for live-haul employees (i.e., live-haul drivers, chicken catchers, and loader-operators) employed~~all laws in violation of the Civil Rights Act.. .” On June 6, 2003, thirteen additional plaintiffs joined in the pending lawsuit by the ~~Production Division.~~filing of a First Amended Complaint. This brought the total number of plaintiffs to 87.

The Company is vigorously defending and will continue to vigorously defend this action. On November 22, 2002, the Court denied the ~~Company's~~Company’s motions to compel arbitration, challenging the jurisdiction of the Chancery Court of Lawrence County, Mississippi, and seeking to have the case dismissed pursuant to rule 5(c) of the Mississippi Rules of Civil Procedure. The Company then filed its motion for interlocutory appeal on these issues with the Mississippi State Supreme Court. On December 6, 2002, the Mississippi State Supreme Court agreed to hear this motion and stayed the action in the Chancery Court pending disposition of this motion. ~~This~~The Company’s motion for interlocutory appeal was granted and this matter is ~~pending.~~pending before the Mississippi State Supreme Court. As discussed below, the Supreme Court granted the Company’s request that this case be consolidated with ~~the wage and hour and donning and doffing lawsuits~~a second grower suit discussed ~~above, substantially similar lawsuits have been filed against other integrated poultry companies.~~below.

On August 2, 2002, three contract egg producers filed suit against the Company in the Chancery Court of Jefferson Davis County, Mississippi. The Plaintiffs filed suit on behalf of ~~"all~~“all Mississippi residents who, between June 1993 and the present, ~~[the Company]~~the Company fraudulently and negligently induced into housing, feeding and providing water for ~~[the Company's]~~the Company’s breeder flocks and gathering, grading, packaging and storing the hatch eggs generated by said flocks and who have been compensated under the payment method established by the ~~[Company]."~~Company.” Plaintiffs alleged that the Company ~~"has~~“has defrauded Plaintiffs by unilaterally imposing and utilizing a method of payment which wrongfully and arbitrarily penalizes each grower based upon criteria which are under the control of the ~~[Company]~~Company and which were never revealed, explained or discussed with each Plaintiff."” Plaintiffs allege that they were required to accept breeder hens and roosters which are genetically different, with varying degrees of healthiness, and feed of dissimilar quantity and quality. Plaintiffs further allege contamination of and damage to their real property. Plaintiffs alleged that they were ~~"fraudulently~~“fraudulently and negligently induced into housing, feeding and providing water for the ~~Company's~~Company’s breeder flocks and gathering, grading, packaging and storing the hatch eggs produced from said ~~flocks"~~flocks” for the Company. Plaintiffs seek an unspecified amount of compensatory and punitive damages, as well as various forms of equitable relief.

Sanderson Farms, Inc. and Subsidiaries

Valuation and Qualifying Accounts

Schedule II


COL. A	COL. B		COL. C		COL. D	COL. E		COL. F
	Balance at		Charged to		Charged to			Balance at
	Beginning		Costs and		Other	Deductions		End of
Classification	of Period		Expenses		Accounts	Describe(1)		Period
	(In Thousands)
Year ended October 31, 2004
Deducted from accounts receivable:
Allowance for doubtful accounts
Totals	$	1,390	$	165		$	0	$	1,555
Year ended October 31, 2003
Deducted from accounts receivable:
Allowance for doubtful accounts
Totals	$	663	$	727		$	0	$	1,390
Year ended October 31, 2002
Deducted from accounts receivable:
Allowance for doubtful accounts
Totals	$	303	$	360		$	0	$	663

(1)

Uncollectible accounts written off, net of recoveries

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A. 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.

As of October 31, 2004 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 October 31, 2004. There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter ended October 31, 2004 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART III

Item 10. Directors and Executive Officers of the Registrant.

As permitted by General Instruction G(3) to Form 10-K, reference is made to the information concerning the Directors of the Registrant and the nominees for election as Directors appearing in the ~~Registrant's~~Registrant’s definitive proxy

statement filed or to be filed with the Commission pursuant to Rule 14a-6(b). Such information is incorporated herein by reference to the definitive proxy statement.

Information concerning the executive officers of the Registrant is set forth in Item 4A of Part I of this Annual Report.

The Registrant also incorporates by reference, as permitted by General Instruction G(3) to Form 10-K, information appearing in its definitive proxy statement filed or to be filed with the Commission pursuant to Rule 14a-6(b) related to the filing of reports under Section 16 of the Securities Exchange Act of 1934.

The Registrant has a standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, whose members are Charles W. Ritter, Jr., Phil K. Livingston and Donald W. Zacharias. All members of the audit committee are independent directors under the listing standards of the National Association of Securities Dealers. The Registrant’s Board of Directors has determined that Phil K. Livingston is an audit committee financial expert.

The Registrant has adopted a code of ethics that applies to its senior financial personnel, including its chief executive officer, chief financial officer and chief accounting officer. The Registrant will provide a copy of the code of ethics free of charge to any person upon request to:

Sanderson Farms, Inc.
P.O. Box 988
Laurel, Mississippi 39440
Attn.: Chief Financial Officer

Requests can also be made by phone at (601) 649-4030.

Item 11. Executive Compensation.

As permitted by General Instruction G(3) to Form 10-K, reference is made to the information concerning remuneration of Directors and executive officers of the Registrant appearing in the ~~Registrant's~~Registrant’s definitive proxy statement filed or to be filed with the Commission pursuant to Rule 14a-6(b). Such information is incorporated herein by reference to the definitive proxy statement.

Item 12. Security Ownership of Certain Beneficial Owners and ~~Management.~~Management and Related Stockholder Matters.

As permitted by General Instruction G(3) to Form 10-K, reference is made to the information concerning beneficial ownership of the ~~Registrant's~~Registrant’s Common Stock, which is the only class of the ~~Registrant's~~Registrant’s voting securities, appearing in the ~~Registrant's~~Registrant’s definitive proxy statement filed or to be filed with the Commission pursuant to Rule 14a-6(b). Such information is incorporated herein by reference to the definitive proxy statement.

The following table provides information as of October 31, ~~2002~~2004 with respect to compensation plans (including individual compensation arrangements) under which equity securities of the Registrant are authorized for issuance. The Registrant has no equity compensation plan not approved by security holders. The equity compensation plan reflected in the following table is the ~~Registrant's~~Registrant’s Stock Option Plan approved by shareholders on February 28, 2002.

securities remaining

(a) Number of

available for future

securities to be issued

(b) Weighted-average

issuance under equity

upon exercise of

exercise price of

compensation plans

outstanding options,

(excluding securities

Plan category(1)

warrants and rights

reflected in column (a))

Equity compensation plans approved by security holders

357,376

11.56

394,421

Equity compensation plans not approved by security holders

Total

357,376

11.56

394,421

~~Plan category(1) (a) Number~~
(1)		The table above does not include information concerning the Registrant’s Phantom Stock Agreements dated April 21, 2000 with certain of ~~securities (b) Weighted-average (c) Number~~its executive officers and key employees. These agreements permit the respective holders to claim a cash award from the Registrant at specified times prior to April 21, 2010, equal to a number of ~~securities~~shares selected by the holder, but not exceeding in the aggregate the number of shares specified in the agreement, multiplied by the difference between the market value of a share of the Registrant’s common stock at that time and $4.9817. The Company has the option to issue shares of its common stock in lieu of the cash payable to a phantom stock holder upon the exercise of such holder’s phantom stock. Because the value of a share of phantom stock upon conversion depends on the value of the Registrant’s common stock on the conversion date, the number of shares of the Registrant’s common stock that would be ~~issued~~issuable upon conversion of the outstanding phantom stock in lieu of a cash payment, should the Registrant exercise ~~exercise price~~its option to issue shares in lieu of ~~remaining available for~~paying cash, cannot be determined. Information concerning the amount of outstanding options, outstanding options, future issuance under warrants and rights warrants and rights equity compensation plans (excluding securities reflectedthe Registrant’s phantom stock awards is contained in column (a)) Equity compensation plans approved by security holders 721,736 $14.49 437,114 Equity compensation plans not approved by security holders 0 0 0 Total 721,736 $14.49 437,114 the Registrant’s revised definitive proxy statement on Schedule 14A filed on January 28, 2002.

(1) The table above does not include information concerning the Registrant's Phantom Stock Agreements dated April 21, 2000 with certain of its executive officers and key employees. These agreements permit the respective holders to claim a cash award from the Registrant at specified times prior to April 21, 2010, equal to a number of shares selected by the holder, but not exceeding in the aggregate the number of shares specified in the agreement, multiplied by the difference between the market value of a share of the Registrant's common stock at that time and $7.46875. The Company has the option to issue shares of its common stock in lieu of the cash payable to a phantom stock holder upon the exercise of such holder's phantom stock. Because the value of a share of phantom stock upon conversion depends on the value of the Registrant's common stock on the conversion date, the number of shares of the Registrant's common stock that would be issuable upon conversion of the outstanding phantom stock in lieu of a cash payment, should the Registrant exercise its option to issue shares in lieu of paying cash, cannot be determined. Information concerning the amount of the Registrant's phantom stock awards is contained in the Registrant's revised definitive proxy statement on Schedule 14A filed on January 28, 2002.

Item 13. Certain Relationships and Related Transactions.

As permitted by General Instruction G(3) to Form 10-K, information, if any, required to be reported by Item 13 of Form 10-K, with respect to transactions with management and others, certain business relationships, indebtedness of management, and transactions with promoters, is set forth in the ~~Registrant's~~Registrant’s definitive proxy statement filed or to be filed with the Commission pursuant to Rule 14a-6(b). Such information, if any, is incorporated herein by ~~references~~reference to the definitive proxy statement. ~~PART IV~~

Item 14. ~~Controls~~Principal Accountant Fees and ~~Procedures. The Company maintains disclosure controls and procedures that are designed~~Services.

As permitted by General Instruction G(3) to ~~ensure that~~Form 10-K, information required to be ~~disclosed~~reported by Item 14 of Form 10-K is set forth in the ~~Company's Securities Exchange Act reports is recorded, processed, summarized and reported within~~Registrant’s definitive proxy statement filed or to be filed with the ~~time periods specified in the SEC's rules and forms, and that such~~Commission pursuant to Rule 14a-6(b). That 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. During the 90-day period prior to the date ofincorporated by reference into this report, an evaluation was performed under the supervision and with the participation of our Company's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective. Subsequent to the date of this evaluation, there have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls. Form 10-K.

PART IV

Item 15. Exhibits and Financial Statement ~~Schedules, and Reports on Form 8-K.~~ Schedules.

(a)1. FINANCIAL STATEMENTS: The following consolidated financial statements of the Registrant are included in Item 8: Consolidated Balance Sheets - October 31, 2002, 2001 and 2000 Consolidated Statements of Income - Years ended October 31, 2002, 2001 and 2000 Consolidated Statements of Stockholders' Equity -Years ended October 31, 2002, 2001 and 2000 Consolidated Statements of Cash Flows - Years ended October 31, 2002, 2001 and 2000 Notes to Consolidated Financial Statements - October 31, 2002

The following consolidated financial statements of the Registrant are included in Item 8:
Consolidated Balance Sheets - October 31, 2004 and 2003
Consolidated Statements of Income - Years ended October 31, 2004, 2003 and 2002
Consolidated Statements of Stockholders’ Equity - Years ended October 31, 2004, 2003 and 2002
Consolidated Statements of Cash Flows - Years ended October 31, 2004, 2003 and 2002

All other schedules are omitted as they are not applicable or the required information is set forth in the Financial Statements or notes thereto.

(a) 3. EXHIBITS:

The following exhibits are filed with this Annual Report or are incorporated herein by reference: Exhibit Number Description 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 By-Laws of the Registrant, amended and restated as of July 27, 2000. (Incorporated by reference to Exhibit 4.7 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) 10.1 Contract dated July 31, 1964 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) 10.2 Contract Amendment dated December 1, 1970 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-1 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) 10.3 Contract Amendment dated June 11, 1985 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-2 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) 10.4 Contract Amendment dated October 7, 1986 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-3 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) 10.5 Agreement dated November 1, 2001 between Sanderson Farms, Inc. (Hammond Processing Division) and United Food and Commercial Workers Local Union 455 affiliated with the United Food and Commercial Workers International Union. (Incorporated by reference to Exhibit 10c to the Registrant's Quarterly Report on Form 10-Q for the quarter ended January 31, 2002.) 10.6 Agreement dated July 26, 1999 between Sanderson Farms, Inc. (Hazlehurst Processing Division) and Laborers' International Union of North America, Professional Employees Local Union #693, AFL-CIO. (Incorporated by reference to Exhibit 10-E-6 to the Registrant's Annual Report on Form 10-K for the year ended October 31, 2000.) 10.7 Agreement dated January 13, 2000 between Sanderson Farms, Inc. (Collins Processing Division) and Laborers' International Union of North America, Professional Employees Local Union #693, AFL-CIO. (Incorporated by reference to Exhibit 10-E-7 to the Registrant's Annual Report on Form 10-K for the year ended October 31, 2000.) 10.8 Agreement dated as of December 27, 1999 between Sanderson Farms, Inc. (Brazos Production Division), Sanderson Farms, Inc. (Brazos Processing Division) and Teamsters Local Union No. 968, affiliated with the International Brotherhood of Teamsters. (Incorporated by reference to Exhibit 10-E-9 to the Registrant's Annual Report on Form 10-K for the year ended October 31, 2000.) 10.9 Agreement dated as of July 1, 2002 between Sanderson Farms, Inc. (McComb Production Division) and United Food and Commercial Workers, Local 1529, AFL-CIO, affiliated with United Food and Commercial Workers International Union, AFL-CIO. (Incorporated by reference to Exhibit 10-E-10 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 31, 2002.) 10.10* Agreement dated November 13, 2002 between Sanderson Farms, Inc. (Brazos Processing Division) and the United Food and Commercial Workers Union, Local 408, AFL-CIO, charted by the United Food and Commercial Workers International Union, AFL-CIO, CLC. 10.11+ Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. (Incorporated by reference to Exhibit 10-I filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) 10.12+ Amendment One to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. (Incorporated by reference to Exhibit 10-I-1 filed with Amendment No. 3 to the registration statement on Form S-1 filed by the Registrant on May 19, 1987, Registration No. 33-13141.) 10.13+ Amendment Two to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. (Incorporated by reference to Exhibit 10-I-2 to the Registrant's Annual Report on Form 10-K for the year ended October 31, 1987.) 10.14+ Sanderson Farms, Inc. and Affiliates Stock Option Plan (Amended and Restated as of February 28, 2002). (Incorporated by reference to Exhibit 4.8 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) 10.15+ Form of Nonstatutory Stock Option Agreement. (Incorporated by reference to Exhibit 4.9 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) 10.16+ Form of Incentive Stock Option Agreement. (Incorporated by reference to Exhibit 4.10 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) 10.17+ Form of Alternate Stock Appreciation Rights Agreement. (Incorporated by reference to Exhibit 4.11 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) 10.18*+ Form of Phantom Stock Agreement. 10.19*+ Sanderson Farms, Inc. Bonus Award Program effective November 1, 2001. 10.20 Memorandum of Agreement dated June 13, 1989, between Pike County, Mississippi and the Registrant. (Incorporated by reference to Exhibit 10-L filed with the Registrant's Annual Report on Form 10-K for the year ended October 31, 1990.) 10.21 Wastewater Treatment Agreement between the City of Magnolia, Mississippi and the Registrant dated August 19, 1991. (Incorporated by reference to Exhibit 10-M filed with the Registrant's Annual Report on Form 10-K for the year ended October 31, 1991.) 10.22 Memorandum of Agreement and Purchase Option between Pike County, Mississippi and the Registrant dated May 1991. (Incorporated by reference to Exhibit 10-N filed with the Registrant's Annual Report on Form 10-K for the year ended October 31, 1991.) 10.23 Lease Agreement between Pike County, Mississippi and the Registrant dated as of November 1, 1992. (Incorporated by reference to Exhibit 10-M filed with the Registrant's Annual Report on Form 10-K for the year ended October 31, 1993.) 10.24 Credit Agreement dated as of July 31, 1996 among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank, Atlanta; Deposit Guaranty National Bank; Caisse National de Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit10-N to Amendment No. 1 to the Quarterly Report of the Registrant for the quarter ended July 31, 1996.) 10.25* First Amendment to Credit Agreement, dated as of October 23,1997, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. 10.26* Second Amendment to Credit Agreement, dated as of July 23 ,1998, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. 10.27* Third Amendment to Credit Agreement, dated as of July 29, 1999, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; First American National Bank, D/B/A Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. 10.28* Fourth Amendment to Credit Agreement, dated as of March 17, 2000, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. 10.29* Fifth Amendment to Credit Agreement, dated as of February 16, 2001, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. 10.30 Sixth Amendment to Credit Agreement dated as of July 2, 2001, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10d to the Quarterly Report of the Registrant for the quarter ended January 31, 2002.) 10.31 Seventh Amendment to Credit Agreement dated as of July 29, 2002, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; and Trustmark National Bank. (Incorporated by reference to Exhibit10.1 to Amendment No. 1 to the Quarterly Report of the Registrant for the quarter ended July 31, 2002.) 10.32 Stock Purchase Agreement dated January 3, 2002, by and between Sanderson Farms, Inc. and the executors of the Estate of Joe Frank Sanderson. (Incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K dated January 3, 2002.) 10.33 Stock Purchase Agreement dated January 3, 2002, by and between Sanderson Farms, Inc. and the executors of the Estate of Dewey R. Sanderson, Jr. (Incorporated by reference to Exhibit 10.2 filed with the Registrant's Current Report on Form 8-K dated January 3, 2002.) 10.34 Agreement dated as of April 22, 1999 between Sanderson Farms, Inc. and Chase Mellon Shareholder Services, L.L.C. (Incorporated by reference to Exhibit 4.1 filed with the Registrant's current report on Form 8-K dated April 22, 1999.) 21* List of subsidiaries of the Registrant. 23* Consent of Ernst & Young, LLP. 99.1* Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2* Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. - ----------- * Filed herewith. +Management contract or compensatory plan or arrangement.


Exhibit
Number		Description
	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	By-Laws 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	Contract dated July 31, 1964 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.)

	10.2	Contract Amendment dated December 1, 1970 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-1 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.)

	10.3	Contract Amendment dated June 11, 1985 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-2 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.)

	10.4	Contract Amendment dated October 7, 1986 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-3 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.)

	10.5	Agreement dated November 1, 2004 between Sanderson Farms, Inc. (Hammond Processing Division) and United Food and Commercial Workers Local Union 455 affiliated with the United Food and Commercial Workers International Union. (Incorporated by reference to Exhibit 10 to the Registrant’s Report on Form 8-K dated December 20, 2004.)

	10.6	Agreement dated July 26, 1999 between Sanderson Farms, Inc. (Hazlehurst Processing Division) and Laborers’ International Union of North America, Professional Employees Local Union #693, AFL-CIO. (Incorporated by reference to Exhibit 10-E-6 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2000.)


Exhibit
Number		Description
	10.7	Agreement dated January 13, 2000 between Sanderson Farms, Inc. (Collins Processing Division) and Laborers’ International Union of North America, Professional Employees Local Union #693, AFL-CIO. (Incorporated by reference to Exhibit 10-E-7 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2000.)

	10.8	Agreement dated as of December 27, 1999 between Sanderson Farms, Inc. (Brazos Production Division), Sanderson Farms, Inc. (Brazos Processing Division) and Teamsters Local Union No. 968, affiliated with the International Brotherhood of Teamsters. (Incorporated by reference to Exhibit 10-E-9 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2000.)

	10.9	Agreement dated as of July 1, 2002 between Sanderson Farms, Inc. (McComb Production Division) and United Food and Commercial Workers, Local 1529, AFL-CIO, affiliated with United Food and Commercial Workers International Union, AFL-CIO. (Incorporated by reference to Exhibit 10-E-10 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2002.)

	10.10	Agreement dated November 13, 2002 between Sanderson Farms, Inc. (Brazos Processing Division) and the United Food and Commercial Workers Union, Local 408, AFL-CIO, charted by the United Food and Commercial Workers International Union, AFL-CIO, CLC. (Incorporated by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)

	10.11+	Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. (Incorporated by reference to Exhibit 10-I filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.)

	10.12+	Amendment One to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. (Incorporated by reference to Exhibit 10-I-1 filed with Amendment No. 3 to the registration statement on Form S-1 filed by the Registrant on May 19, 1987, Registration No. 33-13141.)

	10.13+	Amendment Two to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. (Incorporated by reference to Exhibit 10-I-2 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1987.)

	10.14+	Sanderson Farms, Inc. and Affiliates Stock Option Plan (Amended and Restated as of February 28, 2002). (Incorporated by reference to Exhibit 4.8 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

	10.15+	Form of Nonstatutory Stock Option Agreement. (Incorporated by reference to Exhibit 4.9 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

	10.16+	Form of Incentive Stock Option Agreement. (Incorporated by reference to Exhibit 4.10 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

	10.17+	Form of Alternate Stock Appreciation Rights Agreement. (Incorporated by reference to Exhibit 4.11 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)

	10.18+	Form of Phantom Stock Agreement. (Incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)


Exhibit
Number		Description
	10.19+	Sanderson Farms, Inc. Bonus Award Program effective November 1, 2004. (Incorporated by reference to Exhibit 10 to the Registrant’s Current Report on Form 8-K filed December 8, 2004.)

	10.20	Memorandum of Agreement dated June 13, 1989, between Pike County, Mississippi and the Registrant. (Incorporated by reference to Exhibit 10-L filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1990.)

	10.21	Wastewater Treatment Agreement between the City of Magnolia, Mississippi and the Registrant dated August 19, 1991. (Incorporated by reference to Exhibit 10-M filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1991.)

	10.22	Memorandum of Agreement and Purchase Option between Pike County, Mississippi and the Registrant dated May 1991. (Incorporated by reference to Exhibit 10-N filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1991.)

	10.23	Lease Agreement between Pike County, Mississippi and the Registrant dated as of November 1, 1992. (Incorporated by reference to Exhibit 10-M filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1993.)

	10.24	Credit Agreement dated as of July 31, 1996 among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank, Atlanta; Deposit Guaranty National Bank; Caisse National de Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10-N to Amendment No. 1 to the Quarterly Report of the Registrant for the quarter ended July 31, 1996.)

	10.25	First Amendment to Credit Agreement, dated as of October 23, 1997, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)

	10.26	Second Amendment to Credit Agreement, dated as of July 23, 1998, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)

	10.27	Third Amendment to Credit Agreement, dated as of July 29, 1999, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; First American National Bank, D/B/A Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)

	10.28	Fourth Amendment to Credit Agreement, dated as of March 17, 2000, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)

	10.29	Fifth Amendment to Credit Agreement, dated as of February 16, 2001, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)

	10.30	Sixth Amendment to Credit Agreement dated as of July 2, 2001, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10d to the Quarterly Report of the Registrant for the quarter ended January 31, 2002.)

QUALIFICATION BY REFERENCE ~~Information~~

Any statement contained in this Annual Report ~~as to~~concerning the contents of any contract or other ~~document referred to or evidencing a transaction referred to is necessarily not complete, and in each~~ document filed as an exhibit to this Annual Report or incorporated herein by reference ~~all such information being qualified~~is not necessarily complete, and in ~~its entirety by such reference.~~ ~~REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Sanderson Farms, Inc. We have audited~~each instance reference is made to the accompanying consolidated balance sheets of Sanderson Farms, Inc. and subsidiaries as of October 31, 2002 and 2001 and the related consolidated statements of income, stockholders' equity, and cash flows for eachcopy of the three years in the period ended October 31, 2002. Our audit also included the financial statement schedule listed in the index under item 14(a).These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes accessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sanderson Farms, Inc. and subsidiaries at October 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended October 31, 2002, in conformity with accounting principles generally accepted in the United States. Also in our opinion the related financial statement schedule when considered in relation to the basic financial statements as a whole, presents fairly in all material respects the information set forth therein. /s/Ernst & Young LLP Jackson, Mississippi December 10, 2002 ~~Sanderson Farms, Inc. and Subsidiaries Valuation and Qualifying Accounts Schedule II~~
- ----------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E COL. F - ----------------------------------------------------------------------------------------------------- Balance at Charged to Charged to Balance at Beginning Costs and Other Deductions End of Classification of Period Expenses Accounts Describe(1) Period - ----------------------------------------------------------------------------------------------------- (In Thousands) Year ended October 31, 2002 Deducted from accounts receivable: Allowance for doubtful accounts Totals $303 $36 $0 $663 Year ended October 31, 2001 Deducted from accounts receivable: Allowance for doubtful accounts Totals $460 $44 $201 $303 Year ended October 31, 2000 Deducted from accounts receivable: Allowance for doubtful Accounts Totals $249 $1,413 $1,202 $460
~~(1) Uncollectible accounts written off, net of recoveries~~ document filed.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and as of the dates indicated. /s/ Joe F. Sanderson, Jr. 12/27/02 /s/ John H. Baker, III 12/27/02 - ------------------------- ----------------------------- Joe F. Sanderson, Jr., John H. Baker, III, Chairman of the Board, President Director and Chief Executive Officer (Principal Executive Officer) /s/ William R. Sanderson 12/27/02 /s/ Charles W. Ritter, Jr. 12/27/02 - ------------------------- ----------------------------- William R. Sanderson, Director, Charles W. Ritter, Jr., Director of Marketing Director /s/Hugh V. Sanderson . 12/27/02 /s/ Rowan H. Taylor 12/27/02 - ------------------------- ----------------------------- Hugh V. Sanderson, Director, Rowan H. Taylor, Manager of Customer Relations Director /s/ Donald W. Zacharias 12/27/02 /s/ Robert Buck Sanderson 12/27/02 - ------------------------- ----------------------------- Donald W. Zacharias, Robert Buck Sanderson, Director, Director Corporate Live Production Assistant /s/ Phil K. Livingston 12/27/02 /s/ Lampkin Butts 12/27/02 - ------------------------- ----------------------------- Phil K. Livingston, Lampkin Butts, Director, Director Vice President - Sales /s/ D. Michael Cockrell 12/27/02 /s/James A. Grimes 12/27/02 - ------------------------- ----------------------------- D. Michael Cockrell, James A. Grimes, Secretary Director, Treasurer and Chief and Chief Accounting Officer Financial Officer (Principal (Principal Accounting Officer) Financial Officer) /s/ Gail Pittman 12/27/02 - ------------------------- Gail Pittman Director CERTIFICATION I, Joe F. Sanderson, Jr., certify that: 1. I have reviewed this annual report on Form 10-K of Sanderson Farms, Inc.; 2. Based on my knowledge, this annual 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 annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4.


/s/ Joe F. Sanderson, Jr.	12/23/04	/s/ John H. Baker, III	12/23/04

Joe F. Sanderson, Jr.,		John H. Baker, III,
Chairman of the Board and		Director
Chief Executive Officer
(Principal Executive Officer)

/s/ William R. Sanderson	12/23/04	/s/ Charles W. Ritter, Jr.	12/23/04

William R. Sanderson,		Charles W. Ritter, Jr.,
Director		Director

/s/Hugh V. Sanderson	12/23/04	/s/ Rowan H. Taylor	12/23/04

Hugh V. Sanderson,		Rowan H. Taylor,
Director		Director

/s/ Donald W. Zacharias	12/23/04	/s/ Robert Buck Sanderson	12/23/04

Donald W. Zacharias,		Robert Buck Sanderson,
Director		Director

/s/ Phil K. Livingston	12/23/04	/s/ Lampkin Butts	12/23/04

Phil K. Livingston,		Lampkin Butts, Director,
Director		President and Chief Operating Officer

/s/ D. Michael Cockrell	12/23/04	/s/James A. Grimes	12/23/04

D. Michael Cockrell,		James A. Grimes, Secretary
Director, Treasurer and Chief		and Chief Accounting Officer
Financial Officer (Principal Financial Officer)		(Principal Accounting Officer)

/s/ Gail Jones Pittman	12/23/04	/s/Beverly Wade Hogan	12/23/04

Gail Jones Pittman,		Beverly Wade Hogan,
Director		Director

EXHIBITS:

The ~~registrant's other certifying officers and I~~following exhibits are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures 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 annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, 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 in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 27, 2002 /s/ Joe F. Sanderson, Jr. ------------------------- Joe F. Sanderson, Jr. President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer) CERTIFICATION I, D. Michael Cockrell, certify that: 1. I have reviewed this annual report on Form 10-K of Sanderson Farms, Inc.; 2. Based on my knowledge, this annual 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 annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures 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 annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, 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 in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 27, 2002 /s/ D. Michael Cockrell ----------------------- D. Michael Cockrell Treasurer, Chief Financial Officer and Director (Principal Financial Officer) ~~EXHIBIT INDEX Exhibit Number Description 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 By-Laws of the Registrant, amended and restated as of July 27, 2000. (Incorporated by reference to Exhibit 4.7 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) 10.1 Contract dated July 31, 1964 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) 10.2 Contract Amendment dated December 1, 1970 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-1 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) 10.3 Contract Amendment dated June 11, 1985 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-2 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) 10.4 Contract Amendment dated October 7, 1986 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-3 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) 10.5 Agreement dated November 1, 2001 between Sanderson Farms, Inc. (Hammond Processing Division) and United Food and Commercial Workers Local Union 455 affiliated with the United Food and Commercial Workers International Union. (Incorporated by reference to Exhibit 10c to the Registrant's Quarterly Report on Form 10-Q for the quarter ended January 31, 2002.) 10.6 Agreement dated July 26, 1999 between Sanderson Farms, Inc. (Hazlehurst Processing Division) and Laborers' International Union of North America, Professional Employees Local Union #693, AFL-CIO. (Incorporated by reference to Exhibit 10-E-6 to the Registrant'sthis Annual Report on Form 10-K for the year ended October 31, 2000.) 10.7 Agreement dated January 13, 2000 between Sanderson Farms, Inc. (Collins Processing Division) and Laborers' International Union of North America, Professional Employees Local Union #693, AFL-CIO. (Incorporatedor are incorporated herein by reference to Exhibit 10-E-7 to the Registrant's Annual Report on Form 10-K for the year ended October 31, 2000.) 10.8 Agreement dated as of December 27, 1999 between Sanderson Farms, Inc. (Brazos Production Division), Sanderson Farms, Inc. (Brazos Processing Division) and Teamsters Local Union No. 968, affiliated with the International Brotherhood of Teamsters. (Incorporated by reference to Exhibit 10-E-9 to the Registrant's Annual Report on Form 10-K for the year ended October 31, 2000.) 10.9 Agreement dated as of July 1, 2002 between Sanderson Farms, Inc. (McComb Production Division) and United Food and Commercial Workers, Local 1529, AFL-CIO, affiliated with United Food and Commercial Workers International Union, AFL-CIO. (Incorporated by reference to Exhibit 10-E-10 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 31, 2002.) 10.10* Agreement dated November 13, 2002 between Sanderson Farms, Inc. (Brazos Processing Division) and the United Food and Commercial Workers Union, Local 408, AFL-CIO, charted by the United Food and Commercial Workers International Union, AFL-CIO, CLC. 10.11+ Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. (Incorporated by reference to Exhibit 10-I filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) 10.12+ Amendment One to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. (Incorporated by reference to Exhibit 10-I-1 filed with Amendment No. 3 to the registration statement on Form S-1 filed by the Registrant on May 19, 1987, Registration No. 33-13141.) 10.13+ Amendment Two to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. (Incorporated by reference to Exhibit 10-I-2 to the Registrant's Annual Report on Form 10-K for the year ended October 31, 1987.) 10.14+ Sanderson Farms, Inc. and Affiliates Stock Option Plan (Amended and Restated as of February 28, 2002). (Incorporated by reference to Exhibit 4.8 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) 10.15+ Form of Nonstatutory Stock Option Agreement. (Incorporated by reference to Exhibit 4.9 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) 10.16+ Form of Incentive Stock Option Agreement. (Incorporated by reference to Exhibit 4.10 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) 10.17+ Form of Alternate Stock Appreciation Rights Agreement. (Incorporated by reference to Exhibit 4.11 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) 10.18*+ Form of Phantom Stock Agreement. 10.19*+ Sanderson Farms, Inc. Bonus Award Program effective November 1, 2001. 10.20 Memorandum of Agreement dated June 13, 1989, between Pike County, Mississippi and the Registrant. (Incorporated by reference to Exhibit 10-L filed with the Registrant's Annual Report on Form 10-K for the year ended October 31, 1990.) 10.21 Wastewater Treatment Agreement between the City of Magnolia, Mississippi and the Registrant dated August 19, 1991. (Incorporated by reference to Exhibit 10-M filed with the Registrant's Annual Report on Form 10-K for the year ended October 31, 1991.) 10.22 Memorandum of Agreement and Purchase Option between Pike County, Mississippi and the Registrant dated May 1991. (Incorporated by reference to Exhibit 10-N filed with the Registrant's Annual Report on Form 10-K for the year ended October 31, 1991.) 10.23 Lease Agreement between Pike County, Mississippi and the Registrant dated as of November 1, 1992. (Incorporated by reference to Exhibit 10-M filed with the Registrant's Annual Report on Form 10-K for the year ended October 31, 1993.) 10.24 Credit Agreement dated as of July 31, 1996 among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank, Atlanta; Deposit Guaranty National Bank; Caisse National de Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit10-N to Amendment No. 1 to the Quarterly Report of the Registrant for the quarter ended July 31, 1996.) 10.25* First Amendment to Credit Agreement, dated as of October 23,1997, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. 10.26* Second Amendment to Credit Agreement, dated as of July 23 ,1998, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. 10.27* Third Amendment to Credit Agreement, dated as of July 29, 1999, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; First American National Bank, D/B/A Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. 10.28* Fourth Amendment to Credit Agreement, dated as of March 17, 2000, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. 10.29* Fifth Amendment to Credit Agreement, dated as of February 16, 2001, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. 10.30 Sixth Amendment to Credit Agreement dated as of July 2, 2001, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10d to the Quarterly Report of the Registrant for the quarter ended January 31, 2002.) 10.31 Seventh Amendment to Credit Agreement dated as of July 29, 2002, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; and Trustmark National Bank. (Incorporated by reference to Exhibit10.1 to Amendment No. 1 to the Quarterly Report of the Registrant for the quarter ended July 31, 2002.) 10.32 Stock Purchase Agreement dated January 3, 2002, by and between Sanderson Farms, Inc. and the executors of the Estate of Joe Frank Sanderson. (Incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K dated January 3, 2002.) 10.33 Stock Purchase Agreement dated January 3, 2002, by and between Sanderson Farms, Inc. and the executors of the Estate of Dewey R. Sanderson, Jr. (Incorporated by reference to Exhibit 10.2 filed with the Registrant's Current Report on Form 8-K dated January 3, 2002.) 10.34 Agreement dated as of April 22, 1999 between Sanderson Farms, Inc. and Chase Mellon Shareholder Services, L.L.C. (Incorporated by reference to Exhibit 4.1 filed with the Registrant's current report on Form 8-K dated April 22, 1999.) 21* List of subsidiaries of the Registrant. 23* Consent of Ernst & Young, LLP. 99.1* Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2* Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. - ----------- * Filed herewith. +Management contract or compensatory plan or arrangement.


Plant Location	Market Segment	Capacity Per Week		Industry Size Range
Laurel, Mississippi	Big Bird Deboning		625,000		7.05
Hazlehurst, Mississippi	Big Bird Deboning		625,000		7.05
Hammond, Louisiana	Big Bird Deboning		625,000		7.05
McComb, Mississippi	Chill Pack Retail		1,250,000		5.50
Bryan, Texas	Chill Pack Retail		1,250,000		5.50
Collins, Mississippi	Chill Pack Retail (Day Shift)		625,000		5.50
Collins, Mississippi	Big Bird Deboning (Night Shift)		475,000		7.05


	Common Stock						Paid-In			Retained			Total Stockholders’
	Shares			Amount			Capital			Earnings			Equity
				(In thousands, except shares and per share amounts)
Balance at October 31, 2001		13,564,955		$	13,565		$	2,945		$	127,829		$	144,339
Net income for year											28,840			28,840
Cash dividends ($.27 per share)											(5,245	)		(5,245	)
Purchase and retirement of common stock		(736,079	)		(736	)		(5,320	)		(8,584	)		(14,640	)
Issuance of common stock		222,150			222			2,375						2,597

Balance at October 31, 2002		13,051,026			13,051			0			142,840			155,891
Net income for year											54,061			54,061
Cash dividends ($.28 per share)											(5,449	)		(5,449	)
Special cash dividends ($.33 per share)											(6,508	)		(6,508	)
Purchase and retirement of common stock		(219,000	)		(219	)		(2,133	)		(2,808	)		(5,160	)
Issuance of common stock		181,850			182			4,082						4,264

Balance at October 31, 2003		13,013,876			13,014			1,949			182,136			197,099

Net income for year											91,428			91,428
Cash dividends ($.34 per share)											(6,753	)		(6,753	)
Special cash dividends ($.50 per share)											(9,980	)		(9,980	)
Three-for-two stock split		6,558,726			6,559			(4,186	)		(2,373	)		0
Redemption of fractional shares											(32	)		(32	)
Issuance of common stock		386,636			386			7,193						7,579

Balance at October 31, 2004		19,959,238		$	19,959		$	4,956		$	254,426		$	279,341


Exhibit
Number		Description
	10.31	Seventh Amendment to Credit Agreement dated as of July 29, 2002, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the Quarterly Report of the Registrant for the quarter ended July 31, 2002.)

	10.32	Agreement dated as of April 22, 1999 between Sanderson Farms, Inc. and Chase Mellon Shareholder Services, L.L.C. (Incorporated by reference to Exhibit 4.1 filed with the Registrant’s current report on Form 8-K dated April 22, 1999.)

	10.33	Agreement dated January 19, 2003 between Sanderson Farms, Inc. (Hazlehurst Processing Division) and Laborers’ International Union of North America, Professional Employees Local Union #693, AFL-CIO (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2003.)

	10.34	Eighth Amendment to Credit Agreement dated as of July 31, 2003, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, individually and as Agent; SunTrust Bank; AmSouth Bank; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2003.)

	10.35	Amendment dated July 20, 2003 to Agreement between Sanderson Farms, Inc. (McComb Production Division) and United Food and Commercial Workers, Local 1529, AFL-CIO affiliated with United Food and Commercial Workers International Union, AFL-CIO. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2003.)

	10.36	Amendment dated January 4, 2004 to Agreement dated July 1, 2002 between Sanderson Farms, Inc. (McComb Production Division) and the United Food and Commercial Workers International Union, AFL-CIO. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2004.)

	10.37	Ninth Amendment dated May 18, 2004 to Credit Agreement dated as of July 31, 1996, as amended, among Sanderson Farms, Inc., Harris Trust and Savings Bank, as agent for the Banks, and Harris Trust and Savings Bank, Sun Trust Bank, AmSouth Bank and Trustmark National Bank. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2004.)

	21	List of subsidiaries of the Registrant. (Incorporated by reference to Exhibit 21 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)

	23*	Consent of Ernst & Young LLP.

	31.1*	Certification of Chief Executive Officer.

	31.2*	Certification of Chief Financial Officer.

	32.1**	Section 1350 Certification.

	32.2**	Section 1350 Certification.


Exhibit
Number		Description
		Services, L.L.C. (Incorporated by reference to Exhibit 4.1 filed with the Registrant’s current report on Form 8-K dated April 22, 1999.)

	10.33	Agreement dated January 19, 2003 between Sanderson Farms, Inc. (Hazlehurst Processing Division) and Laborers’ International Union of North America, Professional Employees Local Union #693, AFL-CIO (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2003.)

	10.34	Eighth Amendment to Credit Agreement dated as of July 31, 2003, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, individually and as Agent; SunTrust Bank; AmSouth Bank; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2003.)

	10.35	Amendment dated July 20, 2003 to Agreement between Sanderson Farms, Inc. (McComb Production Division) and United Food and Commercial Workers, Local 1529, AFL-CIO affiliated with United Food and Commercial Workers International Union, AFL-CIO. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2003.)

	10.36	Amendment dated January 4, 2004 to Agreement dated July 1, 2002 between Sanderson Farms, Inc. (McComb Production Division) and the United Food and Commercial Workers International Union, AFL-CIO. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2004.)

	10.37	Ninth Amendment dated May 18, 2004 to Credit Agreement dated as of July 31, 1996, as amended, among Sanderson Farms, Inc., Harris Trust and Savings Bank, as agent for the Banks, and Harris Trust and Savings Bank, Sun Trust Bank, AmSouth Bank and Trustmark National Bank. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2004.)

	21	List of subsidiaries of the Registrant. (Incorporated by reference to Exhibit 21 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)

	23*	Consent of Ernst & Young LLP.

	31.1*	Certification of Chief Executive Officer.

	31.2*	Certification of Chief Financial Officer.

	32.1**	Section 1350 Certification.

	32.2**	Section 1350 Certification.


PART I
Item 1. Business			2
Item 2. Properties
Item 3. Legal Proceedings			11
Item 4. Submission of Matters to a Vote of Security Holders			12
Item 4A. Executive Officers of the Registrant			14
PART II			14
Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters			14
Item 6. Selected Financial Data			15
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 7A. Quantitative and Qualitative Disclosure About Market Risk			23
Item 8. Financial Statements and Supplementary Data			24
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			39
Item 9A. Controls and Procedures			39
PART III			39
Item 10. Directors and Executive Officers of the Registrant			39
Item 11. Executive Compensation			40
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			40
Item 13. Certain Relationships and Related Transactions			41
Item 14. Principal Accountant Fees and Services			41
PART IV			41
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K			41
SIGNATURES			41
EXHIBITS			46
EX-23 CONSENT OF ERNST & YOUNG LLP
EX-31.1 SARBANES 302 CERTIFICATION OF THE CEO
EX-31.2 SARBANES 302 CERTIFICATION OF THE CFO
EX-32.1 SARBANES 906 CERTIFICATION OF THE CEO
EX-32.2 SARBANES 906 CERTIFICATION OF THE CFO
Consent of Ernst & Young LLP
Ex-31.1 Sarbanes 302 Certification of the CEO
Ex-31.2 Sarbanes 302 Certification of the CFO
Ex-32.1 Sarbanes 906 Certification of the CEO
Ex-32.2 Sarbanes 906 Certification of the CFO

(1)		Joe F. Sanderson, Jr. has served as Chief Executive Officer of the Registrant since November 1, 1989, and as Chairman of the Board since January 8, 1998. Mr. Sanderson served as President from November 1, 1989, to October 21, 2004. From January 1984 to November 1989, Mr. Sanderson served as Vice-President, Processing and Marketing of the Registrant.

(2)		D. Michael Cockrell became Treasurer and Chief Financial Officer of the Registrant effective November 1, 1993, and was elected to the Board of Directors on February 19, 1998. Prior to that time, for more than five years, Mr. Cockrell was a member and shareholder of the Jackson, Mississippi law firm of Wise Carter Child & Caraway, Professional Association. (3) James A. Grimes became Secretary of the Registrant effective November 1, 1993. Mr. Grimes also serves as Chief Accounting Officer, which position he has held since 1985. (4) Lampkin Butts became Vice President - Sales of the Registrant effective November 1, 1993, and was elected to the Board of Directors on February 19, 1998. Prior to that time, for more than five years, Mr. Cockrell was a member and shareholder of the Jackson, Mississippi law firm of Wise Carter Child & Caraway, Professional Association.

(3)		James A. Grimes became Secretary of the Registrant effective November 1, 1993. Mr. Grimes also serves as Chief Accounting Officer, which position he has held since 1985.

(4)		Lampkin Butts was elected President and Chief Operating Officer of the Registrant effective October 21, 2004. From November 1, 1996 to October 21, 2004, Mr. Butts served as Vice President – Sales and was elected to the Board of Directors on February 19, 1998. Prior to that time, Mr. Butts served the Registrant in various capacities since 1973.

•		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.


	Fiscal Year 2004
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
	(In thousands, except per share data)
	(Unaudited)
Net sales	$	226,441	$	272,710	$	293,923	$	259,223
Operating income		31,383		54,972		55,775		8,024
Net income		18,986		33,437		33,944		5,061
Diluted earnings per share	$	.95	$	1.67	$	1.69	$	.25

		The following consolidated financial statements of the Registrant are included in Item 8:

		Consolidated Balance Sheets - October 31, 2004 and 2003

		Consolidated Statements of Income - Years ended October 31, 2004, 2003 and 2002

		Consolidated Statements of Stockholders’ Equity - Years ended October 31, 2004, 2003 and 2002

		Consolidated Statements of Cash Flows - Years ended October 31, 2004, 2003 and 2002

		The following consolidated financial statement schedules of the Registrant are included in Item 8:

		Schedule II — Valuation and Qualifying Accounts

		All other financial statement schedules are not required under the related instructions or are inapplicable and therefore have been omitted.

*		Filed herewith.

**		Furnished herewith.

+		Management contract or compensatory plan or arrangement.


		SANDERSON FARMS, INC.

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

Date: December 23, 2004