Mary Kissel: It's Harder to Bring Home the Bacon

by Mary Kissel (Orange County Register) ...Mr. Pope is the chief executive officer of Smithfield Foods Inc., the world's largest pork processor and hog producer by volume. He doesn't mince words when it comes to rapidly rising food prices. The 56-year-old accountant by training has been in the business for more than three decades, and he warns that the higher costs may be here to stay.
...Some "60 to 70% of the cost of raising a hog is tied up in the grains," Mr. Pope explains. "The major ingredient is corn, and the secondary ingredient is soybean meal." Over the last several years, "the cost of corn has gone from a base of $2.40 a bushel to today at $7.40 a bushel, nearly triple what it was just a few years ago."
...What triggered the upswing? In part: ethanol. ...The rapidly depreciating dollar is also sparking inflation...
...Weather is a factor, too. "We've had the luxury for the last three years of extremely good corn crops, with high yields and good growing conditions. We are just one bad weather event away from potentially $10 corn, which once again is another 50% increase in the input cost to our live production."
...So what's the solution? First, Mr. Pope says, get rid of the ethanol subsidies and the tariff. ...He also advocates lifting regulatory and tax burdens on business. "I fundamentally don't understand the logic of corporate income taxes," he tells me. "If I have a 35% tax, all I do is take that 35% tax and I transfer it into the price of bacon and the price of pork chops."
...He's assigned one of his senior executives the task of figuring out what else Smithfield could possibly feed hogs, other than corn. Could Mr. Pope have envisioned setting up such an enterprise a few years ago? "Absolutely not" he says. "It's me trying to change our business model to adapt to the realities that I have to live in." READ MORE and MORE (Advanced Biofuels USA)