Source:  Rita Jane Gabbett, MEATINGPLACE.COM, 3/8/10

BB&T Capital Markets has improved its Smithfield Foods earnings forecasts for both 2010 and 2011 on improved margins and futures prices that imply an almost $20 -per -head profit for the remainder of 2010.

BB&T analyst Heather Jones improved her earnings estimate for fiscal 2010, which ends in April, to a loss of 9 cents per share from an earlier estimated loss of 34 cents per share.

She noted packer margins have also strengthened on better cutout values that have more than offset the hog price rise. She estimated Smithfield will be able to pass through 60 percent higher live hog costs in its packaged meats business.

"Together, we believe live hog prices have benefitted from reduced supplies and very poor winter weather, resulting in sustained lower slaughter levels," she wrote in a note to investors. "We believe that lower supplies are a function of reduced imports from Canada, slower weight gain from poorer quality feed, and a possible overestimation of inventory levels by the USDA."

Looking ahead, she expects packer margins to stay at relatively strong levels, particularly for Smithfield as it is removing a significant amount of costs from operations and making improvements to its structure and product mix.

Jones noted solid export demand has also contributed to the improvement, noting pork export volumes increased 11.3 percent and 16.5 percent in November and December, respectively, year on year.

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