Source:  Rita Jane Gabbett, MEATINGPLACE.COM, 8/10/09

J.P.Morgan lowered its fiscal 2010 earnings forecast for Smithfield Foods while Standard and Poor's lowered its credit rating after the pork processor said its first quarter earnings were weaker than expected on poor hog production results

"During the first quarter of fiscal 2010, the record performance of the packaged meats business of Smithfield Foods, Inc. was more than offset by greater than expected losses in the company's hog production segment," Smithfield advised in a filing with the Securities and Exchange Commission on Friday.

Smithfield is scheduled to report its first quarter earnings on Sept. 8.

On Monday, J.P.Morgan analyst Ken Goldman widened his fiscal 2010 per share loss forecast for Smithfield to a loss of $1.33 per share from a loss of 37 cents per share earlier.

"Though we remain bullish long term because the stock's upside potential is excellent, we are increasingly frustrated that an industry in the red for two years refuses to make one simple change: produce fewer hogs," Goldman wrote in a note to investors.

Sow slaughter

Goldman said last week he spoke to two CEOs of major hog producers, a renowned Midwestern university professor and a senior manager for one of the nation's leading providers of sows for farms. "Alas, none could provide a data point to suggest that sow slaughter is about to begin in earnest."

Smithfield, however, is pinning its earnings hopes on the belief that industry sow slaughter will begin.

"While results for the first quarter of fiscal 2010 are below the company's expectations, further industry herd reductions and lower grain costs are anticipated to improve hog production results during the second half of fiscal 2010," Smithfield predicted in its SEC filing.

Deb rating

Meanwhile, Standard and Poor's Ratings lowered its corporate credit rating on Smithfield further into junk status to a "B-minus" rating from "B" based on Friday's SEC filing and said it might lower ratings further if liquidity worsens.

Smithfield, however, said the company has maintained a very strong liquidity position as of the end of the fiscal quarter, with approximately $1.1 billion of cash and available borrowing capacity.

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