Source:  Chris Scott, MEATINGPLACE.COM, 1/25/11

Analyst Heather Jones at BB&T Capital Markets today downgraded Smithfield Farms and Tyson Foods to 'hold’ from 'buy’, primarily in response to high grain prices to feed hogs, cattle and poultry.

Jones applauded Smithfield management for making improvements in its packaged meats division over the last few years, but lowered estimates for fiscal 2012 earnings to $1.80 per share from $2.20 due to higher grain cost assumptions. And while pork fundamentals remain strong, Jones said Smithfield shares have little upside potential from current levels in the next fiscal year.

Similar concerns prompted Jones to downgrade Tyson to hold from buy and to reduce its fiscal 2011 earnings estimate to $1.55 from $1.64. Jones said she believes Tyson likely has some feed coverage in place through the fourth quarter, but is concerned that the company hasn’t hedged all of its exposure.
Tyson’s fundamentals appear mixed, Jones added, citing robust pork margins and a recent rebound in beef margins following several weeks of negative showings  as a result of a surge in live cattle prices.

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