Pork, still the world's most popular meat

 

 

Pork remains the world's most popular meat by volume consumed, ahead of beef and chicken, and an expected 2 percent fall in global production this year provides an example of the tough global economic climate.

 

Virginia-based Smithfield Foods Inc., the world's largest hog producer and pork processor, will provide a snapshot Thursday on what is being placed on global dinner tables when it reports its fiscal third-quarter results.

 

The agribusiness sector, and low-cost US providers in particular, rode a wave of growth until this past summer as rising household wealth in emerging markets such as China saw diets transformed with more meat and fewer vegetables and pulses, or legumes.

 

Meat producers have endured a torrid 12 months, as the softening of once-booming export demand collided with the spike in feed and transport costs.

 

Oversupply, weak pricing and wrong-way hedges on the cost of feeds such as corn and soymeal drove some firms like Pilgrim's Pride Corp., the largest poultry producer, into bankruptcy-court protection.

 

Most others have had to restructure debt, trim production and costs in an effort to restore liquidity, while waiting to see just where consumers will make their own budget cuts.

 

Smithfield Foods, with revenue of US$11.4 billion in its fiscal year ended April 27, has fared better than most, but is still expected to report a quarterly loss this week. The analysts' consensus is for a loss of 27 cents a share.

 

Its shares closed Friday (March 6) at US$5.93, losing 83 percent over the past year compared with the 49.5 percent decline in the S&P 500.

 

The company raised 31 million hogs in its latest fiscal year, but has cut two million sows, or 20 percent of its herd, over the past year, to counter oversupply. It has also reduced jobs and closed plants, sold its beef business to a Brazilian company and a 5 percent stake to China's Cofco Ltd. to strengthen its balance sheet.

 

China is by far the largest pork producer and consumer, and industry estimates are for the country's pork production to be flat this year, though official forecasts are for a 3 percent rise despite recent intervention to put a ceiling on prices.

 

The new round of stimulus measures announced last week, albeit focused on the infrastructure sector, may also stimulate household demand, and potentially reinvigorate agricultural imports.