Heather Jones

Heather Jones asked about the potential impact of recent volatility in beef futures on JBS's North American beef business results for Q4 2025. She also sought an explanation for the sequential improvement in JBS's U.S. pork results, which contrasted with industry benchmarks and competitors, despite tight spreads.

Answer

Wesley Batista Filho, CEO of JBS USA, acknowledged that beef futures volatility creates instability and could impact Q4 results, noting that margins are historically tighter in Q4. For U.S. pork, he attributed strong performance to modern, well-invested plants, increased value-added products, integration on the live and prepared sides, and operational excellence, emphasizing its consistent and stable nature.

Heather Jones asked about the potential impact of recent volatility in beef futures on JBS's North American beef business results for Q4. She also sought an explanation for the sequential improvement in JBS's U.S. pork results, which contrasted with industry benchmarks and competitors, despite tight spreads.

Answer

Wesley Batista Filho (CEO, JBS USA) explained that beef futures volatility creates instability and could impact Q4 results, noting that margins are historically tighter in Q4. For pork, he attributed the strong performance to modern, well-invested double-shift plants, increased value-added products, integration on the live and prepared sides, key customer relationships, and operational excellence, emphasizing its consistent and stable nature.

Heather Jones asked how Tyson Foods is thinking about the seasonality of the Beef segment for Q1 2026, given recent extreme volatility in cattle futures, and if it should be viewed differently than normal, referencing Q1 2024's volatility impact. She also sought clarification on the chicken guidance, asking if it assumes more than normal seasonal improvement in pricing and if September's pricing was considered an aberration.

Answer

CEO Donnie King noted good retail demand in Q1 2026 for beef and continued strong operational performance, including yield and value-added mix diversification. He acknowledged expected volatility in beef but stated the guidance considers current future cattle costs and estimated pricing. For chicken, King confirmed that the guidance generally assumes more than normal seasonal improvement, viewing September's supply increase as an aberration. He expressed confidence in chicken's affordability, strong demand, and Tyson's operational execution, which he believes will lead to a strong 2026.

Heather Jones of Heather Jones Research asked about the significant increase in hedged cattle, questioning if it represents a new, ongoing strategy. She also inquired why recent tariffs on Brazilian beef have not had a more pronounced impact on U.S. beef pricing.

Answer

Group President Brady Stewart described hedging as one component of a holistic and integrated supply chain strategy, rather than a standalone change. Regarding tariffs, he explained there is a significant time lag for such impacts to reach the retail level and noted that other market dynamics, like inflation in fat trim prices, are also influencing the beef complex.

Heather Jones of Heather Jones Research asked if the initial guidance for beef and pork included tariff impacts, and if a resolution could present upside. She also pressed for more detail on the Chicken segment's second-half outlook, questioning if pricing investments were planned.

Answer

CFO Curt Calaway clarified that the company's guidance range provided last quarter did indeed include their outlook on tariffs. Regarding Chicken, CEO Donnie King highlighted the strategy of adding value to dark meat, while Calaway reiterated that the guidance implies a strong second half, contextualizing the performance relative to the very strong first half and planned investments.

Heather Jones of Heather Jones Research LLC inquired about the primary takeaways from the strong Q1 results and the potential net impact of tariffs from Mexico on Tyson's operations, particularly in the pork segment.

Answer

President and CEO Donnie King outlined five key takeaways, emphasizing profitable growth, significant debt and leverage reduction, and successfully managing the beef cycle. Regarding tariffs, King confirmed these risks were factored into the updated guidance and that the company is leveraging its global expertise for contingency planning to mitigate potential disruptions.

Heather Jones of Heather Jones Research sought to quantify the drivers of the Chicken segment's growth, specifically separating controllable operational improvements from market assumptions. She also asked about Beef retail dynamics and the potential for increased promotions.

Answer

Wes Morris, Group President of Poultry, specified that operational improvements unrelated to market conditions contributed over $500 million in a step-change improvement, with another $185 million planned for FY25. Brady Stewart, Group President of Beef, addressed the retail question by noting continued strong consumer demand for beef, especially grinds, and that retailers are employing varied promotional strategies, suggesting demand will remain firm.

Heather Jones of Heather Jones Research asked for a rough breakdown of Viterra's Q3 2025 performance, distinguishing between improved execution by the team and a better industry backdrop compared to a year ago, and inquired about the expected soybean margin structure in mid-2026 relative to 2022-2023 levels, considering RVO, demand, and increased processing capacity.

Answer

John Knepel, Bunge's Chief Financial Officer, stated they hadn't dissected Viterra's year-over-year performance but noted significant improvement and meaningful Q3 contribution, attributing some to improved environmental factors like better Australian crops and higher crush in Argentina. Gregory Heckman, Chief Executive Officer, indicated that while 2026 margins might not reach 2023 levels due to more capacity and fewer dislocations, favorable U.S. biofuel and trade policies, strong global demand, and big crops should stabilize or improve the merchandising side, suggesting the market is at the bottom of its cycle.

Heather Jones asked for a rough breakdown of Viterra's Q3 performance, distinguishing between better execution by the team and a better industry backdrop compared to a year ago. She also questioned how the margin structure would look in mid-2026, assuming anticipated RVOs, relative to 2022-2023, considering robust demand but increased capacity and fewer dislocations.

Answer

CFO John Knepel noted significant improvement in Viterra's performance in Q3 with meaningful contributions, acknowledging that last year presented more challenges. CEO Gregory Heckman outlined a favorable setup for 2026 with U.S. biofuel/trade policy, large South American crops, and strong global demand, expecting the merchandising side to stabilize. He suggested the market is at the bottom of its cycle, while Mr. Knepel added that 2022-2023 had a 'perfect storm' of factors creating higher volatility.

Heather Jones of Heather Jones Research asked about the potential for U.S. refining margins to compress as biofuel demand surges and questioned the normalized range for crush margins given the interplay between oil demand and meal production.

Answer

CEO Greg Heckman responded that Bunge has long expected refining margins to moderate, with some of that value shifting back into the crush margin. CFO John Neppl noted that food remains the primary destination for their refined oil. Regarding the overall setup, Heckman expressed encouragement, citing large crops, strong meal demand, and constructive biofuel policies as supportive of the crush margin environment.

Heather Jones asked for commentary on potential RVO volumes and their market impact, and also questioned how U.S.-China tariffs could affect Brazilian crush margins and capacity expansion.

Answer

CEO Greg Heckman expressed optimism about the RVO outcome, emphasizing a coalition's advocacy for a policy aligned with existing U.S. production capacity. On tariffs, Heckman and CFO John Neppl stressed the flexibility of Bunge's global footprint, which allows them to pivot between domestic crush and exports in key regions like the U.S. and Brazil to adapt to market conditions.

Heather Jones asked for specifics on the offsetting factors causing a softer 2025 outlook for the Merchandising segment and questioned how Bunge's view on the Viterra acquisition has evolved given new biofuel regulations impacting canola.

Answer

CEO Gregory Heckman noted the Merchandising outlook is conservative due to a balanced global supply and demand environment, which creates uncertainty for customers. CFO John Neppl identified lower ocean freight rates as a primary headwind. Regarding Viterra, Heckman highlighted canola's strong, traditional demand in food and dairy, while Neppl stressed the acquisition's long-term strategic value in navigating any trade disruptions.

Heather Jones asked if strong soy oil export demand could offset potential weakness in U.S. biofuel demand and if there were logistical constraints. She also questioned if there was room for further increases in soy meal feed inclusion rates in 2025.

Answer

CEO Greg Heckman confirmed that U.S. soy oil is globally competitive and believes the U.S. has the logistical capacity to handle increased exports. On soy meal, he stated that favorable economics for animal producers and less competition from other feedstuffs support high inclusion rates, a trend he sees continuing into 2025. CFO John Neppl highlighted Bunge's global meal marketing capabilities as a key strength.

Heather Jones asked for clarification on ADM's Q3 2025 crush performance and Q4 outlook, seeking to reconcile it with strong U.S. meal basis and cash margins observed during the period. She inquired if ADM's physical meals were sold before the rally or if the company was short on beans. She also asked about the Q1 2026 replacement margin outlook.

Answer

Juan Luciano, Chairman and CEO, ADM, indicated that ADM was likely mostly sold before the meal rally, which was short-lived. He noted that farmers and customers are currently reluctant to book long due to policy uncertainties, making it difficult to reflect market conditions in the P&L. Monish Patolawala, EVP and CFO, ADM, added that replacement margins declined as Q3 progressed, leading to Q4 crush margins being flat to slightly up from Q3 but still down year-over-year. For Q1 2026, Monish Patolawala stated that current bookings show margins flat to Q4, with significant upside dependent on the timing and specifics of regulatory clarity.

Heather Jones asked for clarification on ADM's third-quarter crush performance and fourth-quarter outlook, given strong U.S. meal basis and cash margins observed during those periods. She questioned if ADM's physical meals were sold before market rallies or if the company was short on beans. She also asked for an extrapolation of replacement margins for Q1, assuming RVO clarity in Q1, and visibility on farmer/customer booking trends.

Answer

Juan Luciano, Chairman and CEO of ADM, indicated that ADM was likely 75% sold for the next quarter by the time of the earnings call, suggesting sales occurred before the meal rally. He noted that Q4 bookings are similar to Q3, with commercial teams performing well despite softer ag services. He highlighted that farmers and customers are reluctant to book long due to uncertainties in the China trade deal and biofuel policy. Monish Patolawala, EVP and CFO, added that replacement margins declined as Q3 progressed, leading to Q4 crush margins being flat to slightly up from Q3 but still down year-over-year. For Q1, Mr. Patolawala stated that current bookings show flattish margins compared to Q4, with significant movement dependent on the timing and specifics of regulatory clarity.

Heather Jones of Heather Jones Research asked a two-part question about the crush business: first, for a clarification on the 'replacement curve,' and second, for a big-picture view on ADM's positioning for 2026-2027 if biofuel policies play out favorably.

Answer

CFO Monish Patolawala clarified that the 'replacement curve' refers to cash margins. CEO Juan Luciano added that favorable biofuel policies (RVOs) are expected to significantly increase soybean oil demand, shifting value to the crush and biodiesel parts of the value chain. He noted that historically, when oil's share of crush value rises to around 50%, margins improve significantly, positioning ADM well for the future.

Heather Jones of Heather Jones Research asked a two-part question about the crush business, seeking clarification on the term 'replacement curve' and inquiring about ADM's strategic positioning for 2026-2027 if biofuel policies play out favorably.

Answer

CFO Monish Patolawala clarified that the 'replacement curve' refers to realized cash margins, not just board crush futures. CEO Juan Luciano added that favorable RVOs would significantly boost soybean oil demand, likely benefiting crush and biodiesel margins while potentially squeezing refining margins. He noted that historically, when oil's value share of crush rises, overall margins improve, positioning ADM well for that scenario.

Heather Jones asked whether ADM's guidance includes any expected impact from potential trade tariffs and requested commentary on how such tariffs might affect its North American operations.

Answer

CEO Juan Luciano confirmed that the guidance does not include any impact from tariffs due to their unpredictability. He explained that while U.S.-imposed tariffs can be slightly beneficial, the primary risk comes from retaliatory measures. He emphasized that ADM's global origination and destination marketing footprint provides significant optionality to navigate trade flow disruptions, making the net effect uncertain.

Heather Jones asked for quantification of two potential earnings tailwinds for 2025: the negative impact from take-or-pay contracts in 2024 and the costs associated with unplanned operational downtimes. She also followed up for an estimate of reinsurance proceeds expected in 2025 and 2026.

Answer

EVP and CFO Monish Patolawala quantified the year-to-date impact from take-or-pay contracts at approximately $40 million but did not quantify the cost of unplanned downtime. Chair and CEO Juan Luciano added that automation projects should create future upside. For the follow-up, Patolawala gave preliminary loss estimates for the Decatur incidents and projected reinsurance proceeds in the range of $50 million to $100 million for 2025, with the remainder to follow.

Heather Jones with Heather Jones Research asked about Smithfield's strategy to reduce the number of hogs produced to a 30% vertical integration target, especially in light of increasing competition and new capacity in the packaged meat environment, and how this vertical integration serves as a competitive advantage. She also inquired about expected volatility in belly markets due to widespread disease and potential mitigation strategies given less product available on the open market.

Answer

Shane Smith, President and CEO, explained that the reduction from 17.6 million hogs in 2019 to an expected 11.5 million in 2025 (40% integrated) involved removing highest-cost farms, which would have been unprofitable even in the current market. He affirmed the 30% target remains the right strategy to reduce commodity volatility without negatively impacting hog availability for fresh pork and packaged meats. Shane Smith and Donovan Owens, President of Fresh Pork, discussed that while hog producers are seeing profitability, significant expansion is not expected. They noted recent pressure on the belly market but anticipate it remaining relatively high into 2026, with strong overall pork demand due to elevated beef prices.

Heather Jones from Heather Jones Research asked about Smithfield Foods' strategy to reduce its self-produced hog volume to 30% of processing needs, especially in light of increasing competition and new capacity in the packaged meat sector. She questioned how this reduction impacts Smithfield's vertical integration as a competitive advantage. Jones also followed up on input cost volatility, specifically regarding belly markets, given widespread disease in the industry. She asked if Smithfield Foods anticipates more volatility in the coming years as more of the industry integrates forward into packaged meats, and what mitigation strategies are in place.

Answer

Shane Smith, President and CEO, clarified that the reduction from 17.6 million hogs in 2019 to an expected 11.5 million in 2025 (40% vertically integrated) and ultimately to 10 million (30%) involves removing highest-cost, geographically displaced farms. He emphasized that this strategy aims to reduce commodity volatility without negatively impacting hog availability for fresh pork and packaged meats, maintaining vertical integration as a profitable model. Smith noted that hog producers are seeing profitability into 2026, but there's no material expansion. Donovan Owens, President of Fresh Pork, added that a robust product market is expected into 2026, with elevated pork markets due to high beef prices. He acknowledged recent pressure on belly markets but expects them to remain relatively high historically, with Smithfield Foods intentionally managing pricing and promotions to protect profitability.

Heather Jones of Heather Jones Research asked about the expected profitability cadence for packaged meats in the second half given cost inflation and questioned if the Hog Production guidance was conservative.

Answer

Management noted that Q3 is seasonally softer than Q4 for packaged meats. Regarding hog production, CEO Shane Smith confirmed the outlook anticipates being at the "higher end of the range" and acknowledged that there "probably is some conservatism baked in" pending further visibility into Q4.

Heather Jones of Heather Jones Research inquired about the expected cadence of profitability in the packaged meats segment for the second half, given accelerating cost inflation, and sought clarification on the level of conservatism in the hog production guidance.

Answer

Steven France, President of Packaged Meats, reiterated confidence in their full-year guidance, citing strategies to manage costs. CFO Mark Hall noted that Q3 is seasonally softer than Q4. Regarding hog production, CEO Shane Smith acknowledged the guidance likely contains some conservatism and that based on current visibility, they anticipate results toward the higher end of the range.

Heather Jones of Heather Jones Research inquired about the progress of the genetics transformation in the Hog Production segment, asking how much benefit has been realized versus what is still to come, and if there are any offsetting factors. She also asked for the company's perspective on industry-wide herd health challenges and their potential impact on hog supply in 2025.

Answer

President & CEO Shane Smith explained that the company is in the final stages of a five-year genetics project and is beginning to see financial benefits, primarily from improved sow productivity. He noted a minor trade-off in herd health, which he believes is manageable. Regarding industry health, Smith acknowledged hearing reports of increased disease but stated that Smithfield's operations have been less affected than others. He expects disease to remain a challenge for the industry through 2025. CFO Mark Hall added that while hog supplies are tighter, this was anticipated and the overall market remains balanced.

Heather Jones of Heather Jones Research inquired about the Hog Production segment's genetics program, asking how much of the benefit has been realized and if there are any negative offsets. She also asked for the company's perspective on industry-wide hog health challenges.

Answer

CEO Shane Smith explained that the five-year genetics project is in its final six months, and the financial benefits, primarily from sow productivity, are beginning to manifest. He noted a trade-off with the new genetics being slightly more challenging from a health perspective, but this is being managed. Regarding industry health, Smith acknowledged hearing about more disease across the industry post-winter but stated Smithfield has only seen slightly elevated cases regionally and believes it won't be as significant an issue for them as for others.

Inquired about the progress and remaining benefits of the Hog Production genetics program, including any potential trade-offs. Also asked about the impact of industry-wide animal health challenges on processing volumes.

Answer

The 5-year genetics program is nearly complete, with financial benefits from increased sow productivity just starting to materialize and expected to fully ramp up through 2025-2026. A minor trade-off is a greater health challenge, which they are managing. They acknowledged industry-wide disease issues are tightening hog supply but believe the market remains balanced and this was anticipated.

Heather Jones asked if Darling had implemented minimum levels or similar contract structures for its U.S. protein business, akin to some fat pricing contracts. She also inquired about the impact of Europe extending tariffs on RD/biodiesel imports to SAF, and whether a full Q4 of SAF production would offset this.

Answer

CFO Bob Day explained that while some contracts include minimum processing fees for protein, the focus is more on fat price volatility. CEO Randall Stuewe added that the protein business has been disrupted by tariffs impacting low-ash poultry meal exports to Asia and slowed growth in domestic pet food demand. Day stated that the European SAF tariff impact would be felt later, as current SAF production is pre-sold, and tariffs would affect new contracts, with Darling still having access to voluntary U.S. markets.

Heather Jones asked if Darling Ingredients had implemented minimum pricing levels for its U.S. protein business, similar to some fat pricing contracts. She also inquired about the impact of Europe extending tariffs on RD/biodiesel imports to Sustainable Aviation Fuel (SAF), and if a full Q4 of SAF production would offset this.

Answer

Robert Day (CFO) and Randall Stuewe (CEO) explained that while some contracts include minimum processing fees for proteins, volatility is more pronounced in fat prices. They noted that tariffs and changes in domestic pet food demand have impacted low-ash poultry meal. Robert Day (CFO) stated that the impact of European SAF tariffs would be felt later, as SAF is not sold in a spot market and most 2026 SAF is already sold. Tariffs will affect new contracts, but DGD retains access to voluntary U.S. markets.

Heather Jones of Heather Jones Research asked for clarification on the reported year-over-year decline in UCO pricing, which seemed to contradict spot market trends, and questioned if Q2 was a 'clean' quarter for modeling purposes.

Answer

CFO Robert Day and CEO Randall Stuewe explained the UCO pricing discrepancy was due to a lag effect in a rising market, where forward sales were priced before procurement costs increased. They expect margins to normalize as prices flatten. Day acknowledged this lag was a significant impact, making the quarter less than 'clean' for comparison. Stuewe also noted a contingent consideration adjustment related to a Brazilian acquisition.

Heather Jones of Heather Jones Research asked what management considers a suitable 2026 RVO number and questioned why Feed segment EBITDA was flat year-over-year despite higher fat prices.

Answer

COO Matt Jansen stated that the industry is hopeful for a 5.25 billion gallon RVO for 2026. Regarding the flat EBITDA, Jansen explained that a 60-to-90-day forward sales book creates a lag in realizing higher prices. CEO Randall Stuewe added that Q1 2024 was a deflationary market while Q1 2025 is inflationary, making direct year-over-year comparisons of price realization complex.

Heather Jones asked about the drivers for the recent surge in U.S. and European fat prices, questioning if it was due to a halt in imports or new demand. She also sought specific drivers for the strength in European animal fat prices.

Answer

An executive explained that a slowdown in imports since December and the refilling of market pipelines contributed to U.S. price strength. CFO Bob Day added that significant new SAF demand is tightening the market. CEO Randall Stuewe attributed European strength to strong global demand for animal fats, supported by both 45Z and European SAF mandates.

Heather Jones questioned the basis for management's confidence in imminent clarity on the 45Z tax credit and asked for reasons behind the expected step-up in Diamond Green Diesel (DGD) margins in Q4.

Answer

COO Matt Jansen expressed optimism for imminent provisional guidance on 45Z based on ongoing discussions. An executive explained the positive DGD outlook for Q4 and 2025 is driven by market positioning for the new year, as companies needing low-CI feedstocks will support margins, and by expectations of a positive LCFS outcome.

Heather Jones of Heather Jones Research challenged the Texture & Healthful Solutions (THS) outlook, noting the guidance implies minimal back-half growth despite strong performance, and asked about the volume cadence through the quarter.

Answer

EVP & CFO Jim Gray stated the second-half outlook for THS is appropriately cautious due to potential cost shifts from newly announced tariffs. President & CEO Jim Zallie added that while direct tariff impacts are minimal, they are being prudent about indirect effects on customers. Regarding cadence, Zallie confirmed they are not seeing any abrupt negative changes in trends exiting Q2 and entering Q3.

Heather Jones of Heather Jones Research asked for clarification on the pricing dynamics in Argentina, questioning if the benefit from pricing actions in Q1 2024 has been fully lapped. She also requested specifics on the upside and downside drivers for the full-year EPS guidance range.

Answer

CFO Jim Gray clarified that due to ongoing high inflation in Argentina, their JV partner continues to price ahead, so it is not a one-time event that gets lapped. For the guidance range, CEO Jim Zallie listed upside drivers as a quick tariff resolution and stronger-than-assumed volumes. CFO Jim Gray identified downside risks as the full implementation of suspended tariffs and a potential shallow U.S. recession.

Heather Jones asked for the key drivers behind the significant expected profit improvement in the 'All Other' segment for 2025. She also inquired about what is driving the mid-single-digit EBIT growth outlook for Latin America, given the segment's already strong performance in the prior two years.

Answer

President and CEO Jim Zallie detailed that the 'All Other' segment's improvement is driven by growth in the profitable Pakistan and sugar reduction businesses, a ~$10 million positive impact from a plant closure, and steady improvement in the protein business. For LATAM, EVP and CFO Jim Gray and CEO Jim Zallie cited continued opportunities in Brazil, strong momentum in the Andean region, and a strategic focus on network optimization and product mix upgrades as key drivers for further profit growth.

Heather Jones of Heather Jones Research asked for an outlook on 2025 net financing costs and inquired about the expected improvement trajectory for the protein fortification business.

Answer

EVP and CFO Jim Gray explained that 2024 financing costs were lower due to favorable FX and reduced borrowing needs from strong working capital performance. For the protein business, President and CEO James Zallie confirmed they expect a proportional year-over-year improvement in operating income for 2025, similar to the significant improvement seen in 2024, driven primarily by the higher-value pea protein isolate business.

Heather Jones asked for more detail on the supply chain for the new Walker County plant, questioning if it would involve converting small bird capacity to NAE. She also asked for an updated perspective on the company's ideal US business mix, moving beyond the 'a third, a third, a third' framework.

Answer

President & Global CEO Fabio Sandri explained that the company continuously adjusts its portfolio to meet demand, which is currently strongest in case-ready and big bird segments. He confirmed a big bird plant is being converted to case-ready to support NAE growth. CFO Matthew Galvanoni added that the prepared foods business sources from both internal and external suppliers. Sandri reiterated that a balanced approach across bird sizes remains the goal, even while converting capacity to meet growth in differentiated offerings.

Heather Jones asked for clarity on U.S. volume growth expectations for 2025, considering plant ramp-ups and conversions. She also inquired about the timing of the new greenfield plants, specifically asking if permitting for the protein conversion facility was facing delays.

Answer

CEO Fabio Sandri projected that U.S. volume growth would be slightly ahead of the market, driven by support for key customers and improved live operations. He noted the volume impact from a plant conversion would be more significant in 2026. Regarding greenfield projects, he acknowledged that negotiations with municipalities are standard but expressed confidence in moving forward, citing new technology that minimizes operational impact.

Heather Jones requested clarification on which U.S. export partners have switched to county-level restrictions for bird flu. She also asked if operational issues at the Douglas, GA complex contributed to the lighter-than-expected U.S. profitability and when that facility would return to normal.

Answer

CEO Fabio Sandri clarified that Taiwan is creating a new procedure to move towards zonal bans, a significant positive change. Regarding the Douglas complex, he stated that while it was impacted by a storm, the company managed production by moving birds from other regional operations, preventing a material impact on results. He expects the housing ramp-up at Douglas to be complete around Q3 or Q4 2025.

Heather Jones inquired about Pilgrim's U.S. production growth outlook for Q4 following the hurricane impact and questioned broader industry production trends, highlighting a persistent gap between chick placements and actual slaughter numbers.

Answer

President and CEO Fabio Sandri stated that despite hurricane disruptions at one facility, production will be managed across the network, and Q4 volumes should be comparable to the prior year. Regarding the industry production gap, he attributed it to ongoing hatchability and mortality challenges with the current primary broiler breed, which limits the industry's ability to significantly increase production despite high hatchery utilization.

Heather Jones inquired if Hormel is gaining share in ground turkey as competitors close facilities and asked if the Retail segment's volumes, down significantly since 2021, are nearing a stabilization point.

Answer

CEO Jim Snee noted that while competitor supply is tightening, the full impact is yet to be seen, and Hormel remains focused on driving its own demand. EVP of Retail John Ghingo highlighted strong consumer trends for Jennie-O. Regarding retail volumes, Ghingo explained the Q2 decline was driven by lower commodity shipments and promotional timing, not core brand weakness, and expressed confidence in driving demand in the second half.

Heather Jones followed up on the turkey market, asking if the full-year outlook assumes any benefit from potentially improving whole-bird pricing or if it only accounts for passing through costs on value-added items. She also questioned the path to the company's 2026 EBIT target from the Analyst Day, noting it implies substantial 15-25% growth in 2026, and asked what drives that level of expansion.

Answer

CFO Jacinth Smiley stated that the company's assumptions for whole-bird turkey markets have not changed in their plan; the referenced pricing actions are specific to the rest of the value-added turkey complex. CEO James Snee reaffirmed confidence in the 2026 target, explaining that it will be achieved through a combination of underlying business growth and the accelerating benefits from the Transform & Modernize (T&M) initiative, which he described as a 'powerful growth flywheel.'

Heather Jones asked if the fiscal 2025 guidance accounts for further SKU rationalization and inquired about the company's strategic plans to reduce commodity volatility in its turkey business, similar to actions taken in its pork segment.

Answer

CEO Jim Snee confirmed that the impact of portfolio optimization, including SKU rationalization, is embedded in the guidance. VP of Corporate Development Nathan Annis added that this process creates room for innovation. Regarding the turkey business, Snee explained that the long-term goal is to create a 'demand-driven business' focused on value-added products like lean ground turkey and foodservice offerings to minimize volatility, a process that was hindered but not stopped by recent avian influenza outbreaks.

Heather Jones of Heather Jones Research LLC noted that whole bird turkey and contract manufacturing drove most of the sales decline and asked if they were a larger part of the volume decline and when the comparisons would ease. She also questioned if the 2026 EBIT improvement target was still achievable.

Answer

CEO James Snee stated the volume decline was fairly proportional to the sales decline and that a clear read on the turkey cycle would likely not be available until spring 2025. CFO Jacinth Smiley reaffirmed that the company is tracking well towards its $250 million EBIT improvement target by 2026, noting that 2024 was a planned investment year and that a significant ramp-up is expected in 2025 and 2026.