Hormel Foods executives told analysts Tuesday that the company spent an extra $80 million in feed costs in 2007 and expects to pay an additional $40 million in 2008. Chairman and CEO Jeff Ettinger said most of the increased feed costs, much of it for poultry, are expected in the first half of 2008 and are based on price expectations of $3.50-$4 per bushel for corn. The company expects soymeal costs "in the mid to upper-mid $200 per hundredweight range."

At the same time, the company expects lower hog prices in 2008. Hormel CFO Jody Feragen said company forecasts are based on an expectation that live hog prices will average $41 per hundredweight in the first quarter, down from the $49 per hundredweight Hormel paid in the third quarter of 2007. Hog prices have dropped sharply in the past couple months.

Despite a run-up in hog futures prices on Tuesday due to rumors that China might be back in the market for more U.S. pork, Hormel executives said they had seen no evidence of that. Feragen said she expects the U.S. hog supply to increase by 2 percent in 2008.

Hormel's refrigerated foods segment has benefited from strong packer margins for pork in the fourth quarter. Responding to a question, Ettinger said the company expects to be able to maintain product price increases despite lower live hog costs. "We are comfortable with our ability to hold those prices," he said, noting that fresh pork, ham and bacon prices are driven more by demand than cost, and that Hormel has been strategic about its price increases on value-added products.
Source: Meatingplace.com