Worldwide hog production shrinks and Smithfield rocks

Sunday, February 6, 2011

Only last June, a troubled Smithfield Foods Inc., based in Virginia, was denying published reports from Brazil that it was going to sell its pork production to JBS, the Brazilian meat packing giant that had already purchased Smithfield's beef operations.

What a difference a few months make for the self-described world's largest pork processor and hog producer. While worldwide hog production shrank two per cent, Smithfield reported record high earnings in the quarter ending Oct. 31.

Smithfield made money on both pig raising and processing. Live hog market prices rose 54 per cent to $56 per hundredweight from $36. Cutout prices rose more. "Smithfield is performing at record levels and we are focused on continuing to deliver strong earnings in the second half of fiscal 2011. All indications are that fiscal 2011 will be a record year for the company," said C. Larry Pope, president and chief executive officer, in a December press release.

Published reports indicate that Smithfield managed to pay down half of a US$1 billion debt in bonds that were due in 2011. The other half may not be as easy, since recently the U.S. government renewed an ethanol subsidy that keeps grain prices high. BP