13 April 2010

3 minute read

North America

In a filing to the Securities and Exchange Commission the company said the slight decrease in net sales resulted primarily from an average decrease in sales prices per head of 0.4 per cent in the 26 weeks as compared to the same period in the prior year while the volume of cattle processed increased by approximately 0.1 per cent.

Net income for the 26 weeks ended was approximately $90.6 million compared to a net income of approximately $27.7 million in 2009, an improvement of approximately $62.9 million.

A relatively stable demand for beef products and lower cattle prices allowed for increased sales prices to cover the cost of the live cattle that we processed during the twenty-six week period of fiscal 2010 as compared to the same period of fiscal 2009.

In the statement, the company said: "Beef prices have responded positively since the beginning of 2010 due to weather related carcass weight declines, fewer cattle on feed, improved beef exports and smaller beef imports.

"The smaller than expected domestic beef supply has also found modest support from a economy working its way slowly out of recession.

"Meanwhile, competing meat supplies do not appear burdensome which should keep the overall protein supply in check and continue to support stronger year on year cattle and beef prices. We believe that global beef and beef by-product demand will continue to improve on gradual economic gains and smaller global protein and by-product production. For the remainder of 2010 and beyond, we expect that the cattle industry will continue to struggle with the long term implications of a herd reduction."

The company added: "Export markets for US beef products remain constrained since the discovery of a single case of BSE in the State of Washington in December 2003, as well as other isolated cases. In July 2006, Japan agreed to reopen its market to U.S. beef from cattle aged 20 months and younger.

"In April 2008, our Brawley facility was suspended from shipping beef to Japan following the discovery of a short loin which included a portion of a spinal column, a specified risk material, prohibited by Japan.

"Our Brawley facility was subsequently cleared to resume shipments to Japan on September 19, 2008. South Korea announced a provisional opening of its border to US beef from animals 30 months and younger in September 2006 but subsequently closed its border again in October 2007.

"South Korea reopened its border and started inspecting US beef near the end of June 2008. Our Dodge City facility was removed for two days from the eligible supplier list to Mexico beginning on December 23, 2008 for an alleged issue that arose in September of 2008 on a basis, which we believe to be untrue and unfounded. These constraints and uncertainties have historically had a negative impact on beef margins during the periods in which they occurred.

"We cannot presently assess the full economic impact of the consequences of BSE on the US beef packing industry or on our operations. Existing or new import restrictions or additional regulatory restrictions or disruptions in domestic and foreign consumer demand for beef could have a material adverse effect on the Company's revenues and net income."

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