Source: MEATINGPLACE, 5/14/14
 
WH Group subsidiary Smithfield Foods Inc. said its earnings climbed to a record high in the first quarter as the crisis over porcine epidemic diarrhea virus (PEDv) drove a meteoric rise in pork prices.

Smithfield’s net income surged almost 500 percent to a first-quarter record of $105.3 million, while operating profit nearly tripled, to $196.4 million, from the year before.  

Concern about the impact of PEDv on the U.S. hog herd and meat supplies sparked higher values across the entire pork chain, Smithfield Chief Financial Officer Ken Sullivan said on a conference call for bond investors.

“Nobody can remember a hog rally like the one we witnessed in late February and March,” Sullivan said.
Analysts’ projections for a reduction in pork supplies of between 3 percent and 8 percent due to the spread of PEDv are the “right goal posts,” Sullivan said. Higher hog weights will offset some of the head loss, he noted.

PEDv has affected Smithfield’s herds, but the company’s customers need not worry, Sullivan said. “We expect to meet all of our customer needs,” he said.

Smithfield’s own hog production could be 3 percent to 7 percent below normal levels, with heavier hog weights potentially offsetting as much as half of that loss.

Plant utilization
To adjust for the reduced number of animals, some of the company’s plants are taking Saturday shifts off of their schedules, and sometimes a Friday or Monday off. Eastern U.S. plants are most affected, with such closures likely to move into the Midwest in summer.

Smithfield said total sales rose 3 percent to $3.4 billion, helped by strong export demand and growth in the China market. Volumes declined in the packaged meats unit due to the late timing of the Easter holiday. However, the hog production business turned profitable.

China and Russia
Smithfield is shipping fresh and frozen pork into China, where it has opened Smithfield kiosks within retail stores. The company plans to open more than 20 such kiosks in China this year.

The company is building one plant in China, with three more expected to come on line in the next 18 to 24 months to produce Smithfield brand ham, sausage and bacon products.

Smithfield also has begun shipping products to Russia, a key swing market.

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