Poultry producer Sanderson Farms Inc. (SAFM) said Tuesday it is being hurt by lower wholesale prices and higher grain costs in the current quarter, sparking a 24 percent drop in its stock and pulling down shares of its rivals.

The company posted a quarterly profit that doubled on strong consumer demand, but it said wholesale prices, particularly for boneless breast meat, fell from peak levels reached several weeks ago.

Prices usually soften even more after the U.S. Labor Day holiday. Poultry companies typically see demand for chicken rise in the summer months as consumers stock up for barbecues.

Sanderson, based in Laurel, Miss., said net income jumped to $33.9 million, or $1.69 a share, in its fiscal third quarter ended July 31, from $15.4 million, or 78 cents per share, a year earlier. One analyst expected a profit of $1.93 a share, according to Reuters Estimates.

Sanderson's warning sparked a sell-off in shares of rivals Tyson (TSN) and Pilgrim's Pride (PPC).

Sanderson's stock plunged $11.12 to $34.90 on Nasdaq after sinking as low as $33.85 earlier. Shares of rival Pilgrim's Pride Corp. fell 11.6 percent to $24.72, while Tyson Foods Inc. slid 5.1 percent to $18.49, both on the New York Stock Exchange (search).

After Tuesday's close, however, Pilgrim's Pride affirmed its forecast for fourth-quarter earnings of 70 cents to 80 cents a share and said commodity sale prices for chickens were within the range of expectations.

"I really think it is kind of an overreaction to some numbers they put into the report," said Todd Duvick, research analyst with Banc of America, referring to the sharp sell-off in the sector. "I don't think that is really reflective of the overall industry.

"We have had very healthy margins for the industry for the past six months," Duvick said. "I think from a peak that we have had recently there is only one way to go. But I don't expect it to go south as fast as you would infer from what's happening to Sanderson Farms' stock price and maybe some of the other poultry processors."

Sanderson said market prices for corn and soybean meal, its primary feed ingredients, increased 15.8 percent and 46.0 percent, respectively, from a year ago. The company still expects second-half grain costs to be about $25 million higher than first-half levels.

"Bottom line, things aren't quite as great as they were a couple of months ago, but the sky's not falling," Paul Aho, a poultry economist with Poultry Perspective (search), said of the industry.

Sanderson expects market conditions and higher grain costs to limit its earnings to $4.85 to $5.35 a share for the full year. One analyst who tracks the company expected earnings of $6.05 a share this year, according to Reuters Estimates.

Net sales rose to $293.9 million from $232.2 million.

"The summer season is still the stronger season," said Bill Roenigk, vice president for the National Chicken Council. "There is still a measurable increase in the summer because of vacations and barbecues."

Sanderson said consumer demand for chicken remains strong but is being hurt by a drop in wholesale prices, particularly for boneless breast meat.

The market price of boneless breast meat were about 44 percent higher in the quarter, but it dropped to $1.75 a pound on Tuesday after peaking at $2.56 a pound during the quarter, the company said.

Pittsburg, Texas-based Pilgrim's Pride said it had no news to explain the stock decline, and Springdale, Ark.-based Tyson, the largest U.S. meat company, was not immediately available for comment.