Seaboard Sells More Pork at Lower Prices in 2018- Posts Small Loss in 2018 as Tariffs Hammer ProfitsThu, 21 Feb 2019 04:29:13 CST
The Seaboard model in producing and selling pork has always been about selling pork into the global market- to key export destinations like Japan, China and Mexico. In touring the Seaboard facilities in Guymon a few years back, I was impressed with how they were cutting pork carcasses and filling their boxes of products with loins and other parts of the carcass designed to meet the specs of the Japanese market(in particular).
This week- the 2018 Annual Report for Seaboard is out- and it provides a stark look at how the Trump Tariffs on steel and aluminum against Mexico and the Chinese tariffs (mostly at 25% on US Pork) turned the profits of third largest hog producer in the US from being in the black to red ink.
The full company posted a net loss in 2018 of $17 million, or $14.61 a share, compared with a profit of $247 million, or $211.01 a share, the year before. Net sales for the year rose to $6.58 billion, from $5.81 billion in 2017.
For the fourth quarter, the company recorded a loss of 91 million, or $77.58 a share, compared with earnings of 23 million, or $19.38 a share, the year before. Fourth-quarter sales rose to $1.66 million from $1.59 million. More details are available here.
Seaboard Corporation posted lower operating income on higher sales in its pork division in 2018, as it sold more pork products but at lower prices. Operating income for the pork division was $117 million, down from $193 million in 2017. Net sales climbed to $1.77 billion from $1.61 billion a year ago.
The decrease in operating income was primarily due to lower prices for pork products along with higher feed costs. Seaboard sells pork to international customers in China and Mexico, among other countries, and recent incremental tariffs continue to have a negative impact on earnings, the company said.
During 2018, Seaboard invested $86 million in its pork operations, primarily for additional hog finishing barns and an expansion of the companyís Guymon, Okla., processing plant.
The pork segmentís 2019 capital expenditures budget is $217 million, which will be used for the Guymon plant expansion and construction or possible acquisition of additional biodiesel production facilities. The pork plant will continue to operate at full production during the construction.
The Guymon plant has a double-shift capacity to process about six million hogs a year and generally operates at capacity with additional weekend shifts depending on market conditions, Seaboard said.
The pork division also operates biodiesel plants in Guymon and St. Joseph, Mo. Guymon has capacity to produce 46 million gallons of biodiesel a year and St. Joseph has annual capacity for 30 million gallons. Biodiesel is made from pork fat supplied by the divisionís Oklahoma pork processing plant and from other animal fat and vegetable oil purchased from third parties.
The Seaboard Plant in Guymon began processing hogs from the rapidly expanding hog population in Oklahoma, southwestern Kansas and the Texas Panhandle in 1996. A year later, they started the second shift at the plant. In March 2008, High Plains Bioenergy LLC opened a biodiesel plant next to the Guymon pork processing plant. The plant has a capacity to produce more than 46 million gallons annually and uses vegetable oils and animal fat, including pork fat from the Guymon plant, as the feedstock for biodiesel. It is the largest biofuels plant in the state of Oklahoma.
Oklahoma began the journey to becoming a top ten hog producing state in the second half of the 1990s with the opening of the Seaboard Plant- and Seaboard continues to be one of the largest hog producers in the state of Oklahoma. In the end of year Hog and Pigs report from USDA, Oklahoma was the 9th largest hog inventory state in the US, with 2.2 million hogs. Oklahoma is number five in the US breeding (number of sows) and the tenth largest market hog state in terms of market hogs on hand as of December first, 2018. The vast majority of those market hogs end up in Guymon at the Seaboard plant.
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