Source:  Lisa M. Keefe, MEATINGPLACE, 5/25/11

JPMorgan equity analyst Ken Goldman cut his 2012 earnings forecast for Smithfield Foods Inc., citing higher input prices and lower pork margins.

Goldman now expects Smithfield to earn $1.97 per share for the fiscal year ending in May 2012, down substantially from its previous level of $2.77 per share. It is, Goldman noted, the lowest estimate among analysts according to Bloomberg.

“Since we last wrote on Smithfield, three critical fundamental areas have worsened,” Goldman wrote, citing rising corn prices, falling hog prices and narrowing margins for fresh pork. Further, he warns, “If the weather in the Midwest stays wet and unfavorable for corn plantings/yields, we may have to lower our numbers further (and vice-versa).”

Goldman sees prices for corn going up: A wet spring means that 2 million to 3 million acres normally planted with corn will either lie fallow this year or will go to other crops. Also, yield may drop if the quality of the corn this year deteriorates because of the weather.
 

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