071205 Stock Watch: Meat SectorNovember 29, 2007New York - Shares of meat producers were mixed after Smithfield Foods Inc. reported a lower fiscal second-quarter profit, and a Stephens Inc. analyst predicted earnings will drop at Sanderson Farms Inc. Sanderson Farms shares dropped $2.14, or 6.5 percent, to $30.57 in midday trading after analyst Farha Aslam said in a note to investors the shares will likely trade lower in the next three months. "It is our opinion that there will be a time over the next three months to buy Sanderson Farm shares," she said. "However, now is not the time because we believe earnings are going to get worse before they get better." Aslam noted that boneless skinless chicken breast meat prices have been weaker than she expected due to a heavy supply of poultry while production costs have increased due to higher grain prices. The cost of corn has skyrocketed in the past year due to demand for the alternative fuel ethanol. Corn is used to make both ethanol and animal feed. Meanwhile, shares of Smithfield Foods jumped 86 cents, or 3.1 percent, to $29.04, even after the company reported a 61 percent drop in profit in its second quarter. The drop was mainly due to costs associated with an outbreak of swine fever at several of the company's hog farms in Romania, and lower hog prices. Higher hog raising costs also hurt earnings. JPMorgan analyst Pablo Zuanic said he expected the shares to be down during the day. "With worsening trends in the January quarter, we would expect the stock to be down on what we see as a poor quality quarter," Zuanic said. However, Banc of America Securities analyst Edgar Roesch said in a note to investors that the company's strong pork processing sales appear to be continuing into the second half of the fiscal year, which could point to better earnings power ahead. Elsewhere in the sector, shares of Tyson Foods Inc. rose 29 cents to $14.95 in midday trading and Pilgrim's Pride Corp. shares rose 62 cents, or 2.5 percent, to $25.76.
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