August 27, 2008
Smithfield Foods has suffered a first-quarter loss of US$12.6 million, compared to a profit of US$54.6 million in the same period in 2007.
Smithfield's first quarter result was hurt by hedging losses on feed grain, live hog contracts and asset disposals from a joint venture in Spain.
The loss came despite pork exports increasing 124 percent, earning US$61.7 million compared with US$26.5 million a year ago. A weak US dollar has helped to tremendously increase exports to China, Japan, Russia, Mexico and the EU, and the company's sales jumped 19 percent to US$3.1 billion.
Smithfield said hog-raising is increasing expensive as it paid 39 percent more for corn and 33 percent more for soymeal in the first quarter compared to last year. Cash raising costs jumped to US$61 per cwt from US$49 per cwt last year.
For the company's operations in Europe, cash raising costs are as high as US$90 per cwt, which makes it difficult to pass the costs to consumers.
Smithfield's beef and cattle unit is listed as discontinued operations but it managed to earn US$15.9 million for the company. This unit is set to be sold to Brazil's JBS, which is moving into the US through acquisitions. The deal, still subject to antitrust review, is expected to close by year-end.
Chief executive officer Larry Pope again warned that the country's ethanol policy is flawed and needs to be revised.
Smithfield called the outlook for hog production "unfavourable" for the rest of 2008.