Feed prices put the squeeze on meat producers

Posted Aug 26th 2008 2:55PM by Trey Thoelcke
Filed under: Earnings Reports, Smithfield Foods (SFD), Commodities

Rising commodities prices led both Smithfield Foods Inc. (NYSE: SFD), the nation's largest pork producer and processor, and poultry producer Sanderson Farms Inc. (NASDAQ: SAFM) to report quarterly losses on Tuesday.

Smithfield Foods said it lost $12.6 million, or 9 cents per share, in its fiscal first quarter due in part to a $20.1 million write-down in the value of commodity contracts. The Smithfield, Va.-based company had reported a profit of $54.6 million, or 41 cents per share, a year ago.

Revenues rose 20% to $3.14 billion in the quarter. Analysts surveyed by Thomson Reuters had forecast a loss of 4 cents per share on $2.87 billion in sales.

In addition to hurting from high costs for such ingredients as grain and fuel, Smithfield also faces an oversupply of meat on the market, which is keeping prices for pork lower. To help push prices up, meat producers such as Smithfield have announced intentions to cut supply.

Shares of Smithfield fell 88 cents, or 3.7%, to $22.71 in morning trading. That's up from a 52-week low of $16.61 in early July, but shares have fallen about 21% since the beginning of the year.

Sanderson Farms reported a fiscal third-quarter loss of $3.6 million, or 18 cents per share, on revenue of $466.9 million, due in part to high feed costs and declining restaurant traffic. The Laurel, Miss.-based company reported a year-ago third-quarter profit of $30.7 million, or $1.51 per share, on revenue of $394.8 million. Analysts surveyed by Thomson Financial had expected a break-even quarter with revenue of $464.8 million.

For the first nine months of 2007-08, Sanderson said it earned $8.8 million, or 43 cents per share, on revenue of $1.26 billion. For the same period of the previous year, the company earned $54.8 million, or $2.70 per share, on revenue of $1.05 billion.

The company also reported that corn meal prices increased 30.7% from a year ago, while soybean meal prices rose 52.4%.

Sanderson shares fell $4.63, or 11.7%, in morning trading. Shares are down about 17% from a year ago.

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Tags: commodities, earnings, feed prices, grain prices, inthenews, pork, poultry, SAFM, Sanderson, Sanderson Farms, SFD, Smithfield, Smithfield Foods

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Reader Comments (Page 1 of 1)

8-26-2008 @ 3:21PM

william lindblad said...

This is moot. All pricing in food is not considered inflationary. So what if pork costs to much, we can always eat beef and if that get's too high there is always chicken.
Bernanke and the rest of the Fed are vegetarians.
Wait until beer doubles in price.