Meat + Poultry - February 2006 - 33

Seaboard

Even further, the aroma of bacon arouses in many people a positive emotion.
Just the word bacon conjures nostalgic,
happy feelings."
Seaboard sells fresh pork under the
PrairieFresh brand at retail, as well as
private label. Daily's bacon and other
further processed meats generally are
sold to foodservice customers.
"We will grow both our branded
and private label business in the years
ahead," Brenneman says. "We have
great opportunities. With consolidation
among retailers, you have major players
in the retail segment looking for both
branded and private label sources."
Export excellence
In international markets, Seaboard
will continue to sell its products under
the Seaboard Farms brand, Brenneman
says. Between 21percent and 22 percent of Seaboard's sales volume is
shipped to export customers versus the
industry average of 13 percent.
Many customers, such as Japan, simply do not have the resources (large,
open expanses of land) needed to accommodate a vertically integrated pork

All photos courtesy of Seaboard

Seaboard's PrairieFresh Premium Pork product
line is marketed at retail as antibiotic residuefree and without added hormones.

says. That has been the case for the
past two years.
"Supply is abundant, but industry demand has been extraordinarily strong,
especially in exports, which have been
up 20 percent or more per year for the
last two years," he says. "Exports have
risen in every year since 1990."
Export demand for pork has been
boosted by scares about bovine spongiform encephalopathy (which cut
into demand for beef) and avian influenza (which reduced demand for
poultry).
"Demand in Japan and South Korea for pork has risen significantly in
the past couple of years," Brenneman
says. "Two years ago, the protein craze
was another key driver, along with the
weakness of the U.S. dollar."
While still well above historical averages, pork prices have been falling

"We're certainly working toward
increasing value-added business.
That was behind the decision to
buy Daily's. We will continue to
move further in that direction."
operation such as the one Seaboard
runs in and surrounding Guymon.
Export demand has been a key to
the strength in the pork market during
the past two years. Feed accounts for
60 percent to 70 percent of the cost
of raising hogs, but pork prices often
are dictated by a different set of supply and demand factors, Brenneman
36

MEAT&POULTRY

February 2006

steadily in recent weeks. Pork belly futures prices recently declined to about
75 cents per pound, near contract lows
and well below highs that approached
$1. While domestic pork production
overall has been flat at levels just above
50 pounds, bacon consumption has
been moving upward.
Given the lack of growth in overall

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pork consumption, concerns have been
expressed about the likely effects of a
number of new North American pork
processing capital expansion projects that have been announced in recent months. In addition to Triumph,
Smithfield Foods, Premium Standard
Farms and Maple Leaf Foods all have
announced either expansions or new
plants. Brenneman says despite the
additional facilities, he doesn't necessarily expect to see capacity suddenly
increase throughout the industry. He
says certain capital projects may have
been tabled for a period, while others
are designed to offset production at
some older, inefficient.
"The pork supply continues to increase, but at a reasonably slow pace,"
Brenneman says. "Historically, the
industry has gone through four-year
cycles, but it is too early to say whether
this pattern is going to hold right now.
The industry went through a terrible
trough in 1998 that everyone, including bankers, remembers well. Hopefully, there will be a reluctance to build
too much capacity too fast."
Even after acquiring Daily's, the
company is fully capable of further
acquisitions with public filings reporting just under $300 million in cash
and short-term investments as of Oct.
1, 2005, up from only $124 million on
Dec. 31, 2004.
Joshua Sosland is editor of Food
Business News, a sister publication
to M&P, published by Sosland
Publishing Co.
We would like to hear from you- your comments
and questions about this article are welcome.
E-mail the author at: meat&poultry@sosland.com

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Meat + Poultry - February 2006

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