Why Pork Is Poised for a Rebound
Justin Rohrlich March 12,
2010 2:10 PM|
Smithfield and Tyson report slower sales of the other white meat, but a turnaround appears imminent..
the bell on Thursday, Smithfield Foods
(SFD) posted its first quarterly profit in more than
a year, with net income of $0.22 per share -- beating
consensus estimates of $0.19 and rallying back from
last year’s loss of $0.74 per share.
numbers weren’t helped by slipping consumer demand for
pork, which makes up two-thirds of the company’s business.
month, Tyson Foods (TSN) also beat
analysts’ estimates, with first quarter net income of
$160 million, or $0.42 a share (expectations had been
$0.17), thanks to its chicken and beef divisions. It
was a marked improvement over last year’s net loss of
$102 million, or $0.27 a share. But, like Smithfield,
Tyson recorded a drop in pork sales.
only accounts for 12% of Tyson’s meat portfolio.
Corporation’s (SEB) pork operations also faced
stiff headwinds, losing $15 million in 2009 according
to a report released yesterday, though it was a good
deal better than the $46 million pork-related loss the
outfit posted in 2008.
(HRL) also reported soft demand for pork, bacon, and
ham while realizing strong gains in turkey.
beef dominate the American dinner plate, with pork and
fish running a distant third and fourth.
worked for many years to try and change its image --
the whole premise behind The Other White Meat campaign
was to position pork alongside chicken as a leaner product,”
Gary Truitt, president of Hoosier Ag Today, tells Minyanville.
“Pork has historically had an unfortunate image as being
high in fat, but with the new genetics and new feeds,
we’re breeding leaner, trimmer hogs.”
industry has also failed to “make pork exciting.” Truitt
says the chicken and beef industries have introduced
new offerings, like chicken strips and flatiron steak,
but “pork chops and ham sandwiches don’t have the pizzazz
to compete.” He notes that “pork is just not as sexy
as the other products in the meat case.”
Truitt is bullish on pork. “Feed costs are coming down
somewhat, though the days of $2 corn are not coming
back,” he says. “The industry has to do some retooling
to raise hogs profitably when corn is $3 to $3.50 a
bushel. And they will. Additionally, the USDA supply
and demand report that came out on Wednesday doesn’t
forecast corn trending much higher and should remain
below $4,” which also bodes well for pork producers.
in grain prices in 2008 created substantially higher
feeding costs that forced farmers to cull their herd
sizes,” says Shawn Hackett, president of Hackett Financial
Advisors, a firm with a focus on agricultural commodities.
“That’s no longer the case, with the downturn in wheat
and corn prices, so we’re in a pretty good situation
now. The best situation since 2007, as a matter of fact.
And since the herd sizes have gotten smaller and smaller
and smaller, we’re seeing demand start to exceed supply,
which has caused futures prices to skyrocket 20% to
do seem to show a nascent rebound. Bloomberg noted last
week that wholesale pork prices, which hit a six-year
low in August, have risen 48% since then.
So, what to make of the Smithfield, Tyson, and Seaboard
reports of weakness in pork?
those reports is almost like looking in the rearview
mirror,” Hackett says. “Since they’re generally released
about 45 days after the end of the quarter, they still
refer to conditions that were in place in the fall.”
the market is “starting to turn” and he is “looking
at improved performance going forward. Future operations
should see a very healthy improvement, which actually
may hurt beef performance, believe it or not.”
The USDA estimates meatpackers will ship 2.1 million
pounds of choice beef, the least since October 13, 2009.
And retailers may reduce beef purchases after choice
wholesale prices, which are more expensive than pork,
rose to $1.5039 at the end of February, the highest
level since April.
vice president of Agri-Business Capital at AgStar Financial
Services, points to renewed demand in the Russian export
market, the fifth-largest market for US pork, as a bullish
sign, now that Russia has lifted import bans imposed
after claiming to have found traces of banned antibiotics
an economist with the US Department of Agriculture’s
Economic Research Service, agrees.
Russia lifting restrictions will increase pork exports
to a larger than projected level,” he said.
there’s every logical reason to believe pork is poised
for a run, there are still 7.3 million people living
in the United States the pork industry will never, ever
bring into the fold: