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Smithfield Hog Profits Soar

Smithfield Foods Inc. expects to post a record profit this year as its moves to cut meat supplies are paying off with higher prices, and its shares rose more than 10 per cent.

Smithfield is recovering from two years of losses that resulted from high feed prices, a glut of hogs and a recession that slowed meat sales.

The company responded by trimming down. It now produces about two million fewer hogs a year, it sold off a beef unit, closed an inefficient pork plant, and just recently sold its share in the Butterball turkey operation.

“I am more optimistic than I have been in a very long time,” chief executive Larry Pope said during a conference call with investors.

Smithfield officials said they do not anticipate herd expansion in the United States or overseas.

On Dec. 9, Smithfield reported a record quarterly profit that topped expectations due to higher hog and pork prices.

“The (pork) margins they achieved this quarter were stunning,” said D.A. Davidson analyst Tim Ramey. “I would not forecast a continuance of that, but I am forecasting good margins.”

While the results were impressive, they may be hard to repeat, particularly in pork processing.

Corn prices are above $5 per bushel, which is still historically high. Smithfield officials said those prices should remain high, but stronger hog prices have helped offset that cost.

In the quarter that ended Oct. 31, Smithfield’s hogs, on average, sold for $56 per hundred pounds, up from $36 a year earlier.

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