When Smithfield Foods Inc. reported its third-quarter results Thursday, it said it has seen pork prices rising in the past month. As prices come up, meat companies are likely to pass those increases along to retailers, especially as they emerge from several down years.
But retailers are trying to keep their prices low to draw shoppers, creating some tension.
Smithfield CEO Larry Pope discussed the issue on a telephone conference call with investors Thursday:
QUESTION: Larry, you talked about the increases we have seen in pork values here that have gone up pretty sharply over the last several weeks. I wonder why we haven't seen it show up at the retail shops. Have you had conversations with retailers as to when might we see this increase show up to consumers and therefore be able to gauge demand?
RESPONSE: I think that the retailers have done very well on pork for a long time here now. I don't think retailers have to change. I think margins may decline a bit here. I'm not going to talk about any (wholesale) customer on this phone (call) because they are all good customers ... there is a nice margin for retail, let's just say that.
You are going to see retailer margins squeezed a bit and I still don't think you are going to see a lot of retail price changes to the consumer. The consumer won't see that for a good while. I think that you will see export market, export opportunities, fall off first.
