Smithfield Foods (NYSE:SFD) is the world's largest hog producer and slaughterhouse, also known as a pork processor. Approximately half of Smithfield's profits come from processed meats sold under one of Smithfield Foods' private brand names, a percentage that the firm hopes to increase in the future. These products are sold at higher margins, even in times of rising commodity prices - whereas fresh meat is sold to butchers, who then mark up the product to earn a profit. Processing the meat itself allows the company to earn maximum profit from each sale and to pass a higher percentage of input costs onto consumers. The company earned $11.2 billion in revenue but incurred a net loss of $101 million in 2010.^[1]

By vertically integrating its hog production and processed pork segments, Smithfield is insulated from the hog commodity market. It is not, however, insulated from feedstuff commodity prices, like grain, since 60-65% of the cost of raising hogs is feedstock prices. Corn makes up 85% of a pig's diet, and demand for corn, spurred by ethanol production as well as an expanding global population, has led corn prices to rise nearly 60% since 2007. Increased commodities prices depress margins as Smithfield Foods is unable to completely pass on feed prices to consumers.

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