Swine flu fears take a bite out of Smithfield Foods' sales

SMITHFIELD

Hurt by falling sales of fresh pork because of fears about swine flu, Smithfield Foods Inc. has cut production at its slaughtering plants by about 10 percent and reduced workers' hours, its CEO said Tuesday.

Consumers remain confused about pork's safety despite repeated assurances by federal and state officials that the meat isn't affected by the recent outbreak of swine flu, said C. Larry Pope, president and CEO of the nation's largest producer of pork and live hogs.

"We had a bad week in retail last week," he said. "The housewife with three kids just doesn't know whether to serve those pork chops or throw them in the trash can."

Uncertain shoppers are opting for chicken or beef, Pope said.

The National Pork Producers Council, an industry trade group, said losses for the nation's hog farmers last week amounted to $7.2 million a day.

In a case of what Pope called "mistaken identity," some consumers wrongly assume that swine flu can be contracted by eating pork.

"Pork is safe," said Pope, who reached out to the media Tuesday in an effort to address the crisis. "Our pigs are safe. Our workers are safe."

While he declined to provide specific sales data about fresh pork, Pope did say that sales of Smithfield's bacon, hot dogs, ham and other processed meats haven't been affected by concerns about the flu virus, he said. And the company's hog farms also haven't cut back on breeding animals, he said.

"We believe that by the time those pigs are born and come to market, this thing will be long behind us," Pope said.

In addition to losing sales in the United States, Smithfield has seen its exports of fresh pork hurt by barriers imposed against U.S. pork by China and other countries, he said.

The pork producers council on Tuesday asked the Agriculture Department to help boost cash prices of hogs by buying $50 million of pork products. The group also urged President Barack Obama to work with other countries to remove restrictions on exports of U.S. pork.

After skidding last week, Smithfield's share price soared 24 percent Tuesday to close at $12.25, up $2.38.

Pope contrasted the misplaced fears about pork with food products that were tainted and had to be recalled.

"This is not a peanut-butter scare. This is not contaminated beef," he said, referring to shipments of peanut butter that were tainted by salmonella and beef contaminated by mad-cow disease. "It's not a food-safety issue here."

U.S. farmers and food producers have been hurt in recent years by food-borne illnesses and fears about them. U.S. tomato farmers were affected last summer by an outbreak of salmonella that was later traced to peppers from a Mexican plant. Three years ago, California spinach farmers suffered lost sales after an outbreak of E. coli sickened some individuals.

Falling pork sales have become a bigger problem for Smithfield than early reports that its Mexican hog farms could have contributed to the outbreak.

Last week, Smithfield responded to questions about conditions at a hog farm it partially owns in the Mexican state of Veracruz by sending a team of six senior employees from the United States to the farm, Pope said.

"Mexican officials were at the farm last week and declared, 'There are no issues here. The case is closed,' " he said.

Still, Smithfield sent a larger team back on Monday to re-examine the farm. The new eight-member team includes a former North Carolina State University professor who specializes in environmental matters and an animal-health professor from the University of Minnesota who specializes in infectious diseases.

Pope said he told the two independent members of the team, "You guys go look and tell us if there is anything we should improve."

"We're taking every single precaution possible to make sure that public health is not endangered," Pope said.

The Veracruz farm and other Smithfield hog farms in northwestern Mexico are joint ventures partially owned by Mexican investors. The farms, Pope said, produce hogs for Mexico's domestic pork market.

Dennis H. Treacy, a Smithfield vice president, said the company has been monitoring developments around the clock partly because of inquiries from the company's overseas operations. The process has included sending letters to Smithfield employees and customers and fielding phone inquiries, he said.

The fears came at a difficult time for Smithfield. The high price of corn for its livestock has driven up its costs.

However, "we can't pass along the price increases" because of resistance from retailers and consumers, Pope said. The company, whose latest fiscal year ended Sunday, suffered its first loss in 30 years, "and it continues to be very tough in this business," he said.