Smithfield CEO expects pork prices to keep rising
2011-03-12 12:03:18
Smithfield Foods CEO Larry Pope declared Thursday that pork wholesale prices are "the best I've seen in 30 years in the business" and said retail prices will likely rise further this year.
"There's still more pressure on prices," said Pope, who notes hog producers now are feeding corn priced at $6 to $7 per bushel. He said pork bellies, from which bacon is made, may go to $2 a pound by summer, from $1.17 now.
"That's unheard of. Retailers understand there will be more price pressure, whether they like it or not," Pope said.
Pope marveled at the recent run-up in hog prices, from below $50 per hundredweight in mid-2009 to $89.30 Thursday for April delivery on the Chicago Mercantile Exchange.
Prices for delivery during summer months have reached $100 per hundredweight.
Pope made his comments as Smithfield, boosted by what it called excellent margins, reported a record profit of $202.6 million for its fiscal third quarter ending Jan. 31, significantly up from $37.3 million in the same quarter last year.
The company's operating profit for pork production soared from $154.8 million in the third quarter last year to $254.8 million in the latest quarter. Sales were bolstered by a 24 percent rise in exports.
Virginia-based Smithfield has Iowa processing plants in Sioux City, Sioux Center, Mason City and Carroll. It sells under the Armour-Eckrich, Cudahy, John Morrell, Cook's Ham and other name brands.
"Our earnings have surpassed that of our last record year, owing to the strength of our restructured pork segment," Pope said. Part of that restructuring included the closing of a John Morrell plant in Sioux City last April.
The company anticipates that hog production will be profitable in fiscal 2011 and beyond, despite higher grain prices, he said.
An avowed opponent of ethanol subsidies, Pope said: "We are encouraged by the recent change in the tone of the conversation surrounding the current ethanol policy by the Obama administration and others in the private and public sectors. We are hopeful that this is the result of the realization that this policy raises food prices and hurts those in America who can least afford it. We applaud this move toward a more rational energy policy."
Smithfield is the world's largest hog producer, fresh pork processor and producer of packaged meats.