Smithfield CEO says ethanol hurts hog production

By Craig A. Johnson | August 10, 2009
Report posted Sept. 15, 2009, at 2:51 p.m. CST

Smithfield Foods CEO C. Larry Pope is no fan of ethanol. At a Back-to-School Consumer Conference, hosted by Barclay's last Thursday, Pope said the ethanol strategy has been "extremely disruptive to those who use grains as a baseline raw material input for their product."

Smithfield Foods is the world's largest pork processor and hog producer, with revenues exceeding $12 billion in fiscal 2009. In the past seven quarters, Smithfield has seen revenues from hog production decline, which Pope attributes to competition in the grain market.

Speaking to investors, Pope said, "This ethanol policy going and the potential increase in the blending allowances from 10 percent to 15 percent and the continuing push forward to use 30 and 40 percent of the corn crop in this country to burn into fuel to us makes absolutely no sense at all, and Smithfield's been very forward in saying that."

Pope continued, describing ethanol in self-destructive terms, "It's not good economics. It's sort of like burning the carpet in your house to stay warm in the winter. There's another way to stay warmer at a cheaper rate, you don't have to take an alternative that's expensive. There are much cheaper alternatives."

According to Pope, ethanol also damages rural economies, a charge the ethanol industry has long-endured. "And it's certainly been devastating to small farmers in this country. I believe somewhere between 25 and 50 percent of all the equity of all the hog farmers in the United States has been wiped out. We are wiping out and ruining families in the Midwest part of the United States in order to support an energy policy that simply does not make any economic sense."

Smithfield lost $108 million in the first quarter of fiscal 2010 with its hog-production unit posting a $162 million loss.