Question-and-Answer Session
Operator
Your first question comes from Eric Katzman - Deutsche Banc
Eric Katzman – Deutsche Banc
Hi good morning everybody. Congratulations on getting to a successful quarter in a tough period. I guess Larry my first question is in the press release you kind of noted that calling out that the fourth quarter might be a bit more of a challenge in hog production, is that just a function of your hedges or just the market being a bit worse, maybe you could comment a little bit shorter term.
Larry Pope
Well as I look out there Eric there’s no question that the near term outlook for hog prices in our fourth quarter of which we’re now one month into it as I guess this week, hog prices today I guess the live hog market is $43 this morning and clearly with raising costs into the $50s, I guess I wouldn’t say into the $50s, right at $50 that at least the first month of the fiscal quarter it’s not going to be, it’s going to be ugly on the live production side and I think that we can see this all the way, I think there’s going to be some improvement. I’m trying to be careful here and I think it is going to be an improving situation as we go through the quarter. But I think it’s going to be a rough quarter for live production and I think this fourth quarter if we do have increasing raising cost here, I think I’ve explained and I think Carey’s attempted to a couple of times, to explain to you that we went to this mark-to-market accounting I guess it was in the third quarter of last year, so we’ve been only a year so as we have hedges in place we have to mark-to-market those hedges. So in affect the grain cost that you actually see, that we actually see in our raising costs are the cash prices we pay plus the profit or loss change in the hedging position since the last time you measured them. So with these grain cost have gone up, we pick up the hedge benefit early on and in fact you don’t see that benefit. It’s a struggle we deal with all the time. It doesn’t necessarily get matched with a quarter to which these hedges were put in place. That’s the reality of mark-to-market accounting. So I think, I know that’s a very long winded discussion to say I think we’re going to have relatively cheap hogs this quarter and we’ve got a situation of continuing to have increasing raising costs. It’s just that simple.
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