From Deseret News archives:

Smithfield Foods has quarterly loss

Published: Wednesday, Aug. 27, 2008 12:24 a.m. MDT
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MILWAUKEE — Smithfield Foods Inc. swung to a loss in its fiscal first quarter as high commodity costs hurt the nation's largest pork producer and processor, which owns Circle Four Farms in Utah.

The commodities market is so volatile, its chief executive said, the company doesn't even want to try to predict its future earnings.

Costs for key ingredients like corn and soybean meal were up more than 33 percent in the quarter and the price it took to raise hogs soared 25 percent. The hog production sector lost $38.8 million — down from a profit of $93 million a year ago — on the higher costs.

Overall, Smithfield said Tuesday, it lost $12.6 million, or 9 cents per share, in the period, down from a profit of $54.6 million, or 41 cents per share, a year earlier. The company said the loss was due in part to a $20.1 million write-down in the value of commodity contracts, which hurt earnings by 15 cents a share.

The commodity markets seem to be improving a bit, said C. Larry Pope, Smithfield's president and chief executive. But he told investors in a conference call that the changing market is "staggering to us on a daily basis." The company declined to predict the rest of its fiscal 2009 year because of it.

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Smithfield, like other meat producers and food makers, is hurting from high costs for top ingredients like grain and fuel. Chicken producer Sanderson Farms Inc. said Tuesday it posted a third-quarter loss of $3.6 million, or 18 cents a share, on the higher feed prices. A year earlier, the Laurel, Miss.-based company earned $30.7 million, or $1.51 per share.

Companies are also hurting because an oversupply of meat on the market is keeping prices down. So Smithfield and others are cutting production to boost that back up. They're also raising prices too. Pope said there will be fewer hogs on the markets in 2009 compared to this year. The company also said Tuesday that Butterball LLC, its joint-venture turkey operation, will look at cutbacks as well. Pope declined to give a number other than saying the company was "reacting to the supply issue significantly."

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