Feb. 17 (Bloomberg) -- Smithfield Foods Inc., the world’s biggest pork processor, said fiscal 2010 should be a “better” year after cutting its U.S. sow herd by 10 percent.

It has been a “miserable” year raising hogs, Chief Executive Officer C. Larry Pope said at the Consumer Analyst Group of New York Conference in Boca Raton, Florida.

Smithfield said today it plans to close six plants by December and cut 1,800 jobs to restructure its pork business to cut costs and boost its return on invested capital. The Smithfield, Virginia-based company expects its hog-production unit, which lost money in the past four quarters, to become profitable in the fiscal first quarter through July.

“Market conditions appear to be moving in our direction with lower input costs, lower protein supplies and stronger-than- expected pork exports,” Pope said during the conference broadcast over the Internet.

U.S. pork supplies may fall 4 percent this year while worldwide supplies may drop 2 percent, Pope said. Except for Russia and China, the top 10 producing countries, which account for 93 percent of global production, will have lower output, Pope said. China’s output will be unchanged, he said.

Smithfield is preparing for corn prices to stay at about $4 a bushel as the U.S. ethanol policy diverts production for fuel use, Pope said. Corn closed today at $3.4925 a bushel.

The company’s restructuring plan, which will reduce the number of independent companies in the pork group to three from seven, will boost capacity use to 87 percent from 81 percent, Pope said.

Smithfield fell 70 cents, or 7.3 percent, to $8.87 as of 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 37 percent this year.

Debt Covenant

The company last week agreed to pay higher interest rates and pledged additional shares of its Spanish unit, Campofrio Alimentacion SA, to amend a 300 million-euro ($385.8 million) secured revolving credit facility. Smithfield earlier this month agreed to higher interest rates and pledged a processing plant as collateral to amend a $1.3 billion revolving credit facility.

These amendments will increase annual interest expenses by about $20 million to $25 million and add fees of $12 million, Chief Financial Officer Robert W. Manly IV said at the conference.

The company also aims to reduce its debt to less than half of its total market capitalization, from 54 percent in the second quarter, Manly said.

Smithfield on Sept. 26 told investors it will be in compliance with all its debt covenants through at least April.

The company said in December profit fell 76 percent in the quarter through October as it lost money in its hog-production and turkey units.

To contact the reporter on this story: Choy Leng Yeong in Seattle at clyeong@bloomberg.net.

Last Updated: February 17, 2009 19:49 EST