United States-Smithfield Foods Inc.

UNITED STATES-SMITHFIELD FOODS.

Losses on hogs and sluggish pork sales led two analysts to trim their earnings forecasts for giant hog and pork producer Smithfield Foods Inc (SFD.N), whose shares fell 3 percent on Thursday.

High feed costs and slower pork sales, stemming from the weak global economy, will likely hurt Smithfield ’s results into fiscal 2010, which begins in May, they said.

Stephens Inc analyst Farha Aslam also predicted the company will likely violate its debt covenants in the August to October fiscal quarter, but should be able renegotiate them at a higher cost.

"We continue to be concerned about downside earnings risk and the likelihood that the company will trip debt covenants," Aslam said in a research note. She rates the shares "equal-weight."

BB&T Capital Markets expects Smithfield to meet its debt covenants, but only by a small margin.

In response to the covenant forecasts, Smithfield on Thursday repeated comments made in March that it has "a very high level of confidence that we’ve got sufficient headroom to make all of the covenants."

High feed grain prices continue to hurt hog producers, and Smithfield warned in March that its hog production unit would probably lose money in the fourth quarter and possibly in fiscal 2010, which runs through April 2010.

Feed grain prices have come down from the high levels in 2008, but remain high, with corn trading near $4 per bushel.

"We are still a long way from $2 (per bushel) corn, which is what the industry is used to" said University of Missouri agricultural economist Ron Plain .

The global recession has also hurt meat companies as sales in the United States and overseas have slowed as consumers buy lower cost foods such as grain-based products.

"The number one factor is feed costs. Number two is the feedback from the overall economy," Jim Robb, economist at the Livestock Marketing Information Center , said of the pressures on hog producers.

BB&T now expects Smithfield to post a loss of 45 cents per share in the fourth quarter and $1.20 per share in fiscal 2009, versus its previous forecasts of a 30-cent loss and $1.12 loss.

"Fourth quarter domestic packer margins were much weaker than third quarter, albeit improved from several weeks ago," BB&T analyst Heather Jones said in a note.

Weak domestic and export demand for pork has increased per capita availability in the United States , she said.

Stephens’ Aslam maintained her forecast of a loss of 48 cents per share for the fourth quarter and a loss of $1.25 for fiscal 2009, but cut her profit forecast to 87 cents per share from $1.50 for fiscal 2010.

Smithfield is scheduled to report fourth quarter and fiscal 2009 results on June 16.

Wall Street analysts, on average, expect a fourth-quarter loss of 50 cents per share and a fiscal 2009 loss of $1.23, according to Reuters Estimates.