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Hogs eat Smithfield Foods' profit

Pork producer Smithfield Foods reported a loss of $12.6 million for its first quarter of fiscal 2009 due to the increased feeding costs of its hogs.


Sharply higher feed costs due to a 39% increase in corn and a 33% increase in soybean meal was cited as a reason for the loss. Hog raising costs were $1.20 per kg during the first quarter of fiscal 2009 compared with $0.96 per kg in the first quarter of last year.

Live hog prices for the quarter increased modestly to $1.09 per kg from $1.05 per kg in the first quarter of fiscal 2008. The slight increase was not sufficient to recover the sharply higher costs, according to the company.

For the quarter, Smithfield's Hog Production division had a loss of $38.8 million (2008: +$93m) with sales of $725.8 million ($605.6m).

"Given the overall adverse environment of the industry, I am pleased with the results for the current quarter," said C. Larry Pope, president and chief executive officer of Smithfield Foods. "Our fresh pork operations and our packaged meats business performed well in the face of sharply rising input costs. We are continuing to focus closely on our cost structure and improving plant operating efficiencies. Also, our new management structure is in place and moving forward nicely."

Export boost

Smithfield's Pork division saw its operating income increase from $26.5 million during the first quarter of fiscal 2008 to $61.7 million for the most recent quarter. Sales for the quarter were $2,579.2 million compared with $2,228.2 million for the previous year.

The division was supported by an export volume increase of 124% during the first quarter, with large increases in shipments to China, Russia, Japan, Mexico and the EU.

Primary reasons for this sharp increase were the rapidly rising costs elsewhere in the world combined with the weak US dollar.

"The volatile nature of both the domestic and world markets for meat prices and grains, combined with uncertainty surrounding the economy and the US dollar, make a prediction of future results very difficult,” Pope said.

“However, we continue to pursue our long-term strategy of emphasising our packaged meats business and improving our fresh meat operations. This strategy is working and is improving the base of our business."

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