UPDATE 1-Smithfield CEO tells investors it remains strong

(Adds shareholder approval of increase in authorized shares)

WILLIAMSBURG, Va., Aug 26 - Smithfield Foods Inc, has closed plants, renegotiated debt, sold assets, and reduced its hog herd in the past year, and has a strong balance sheet, the company's chief executive officer told shareholders on Wednesday.

The pronouncement followed a rough fiscal year, when the company in June reported its first annual loss in more than 30 years, due in part to an oversupply of hogs.

While the company is working to return to profitability, problems remain.

"We (the industry) still continue to suffer from an oversupply of livestock," Smithfield CEO Larry Pope told shareholders at the company's annual meeting.

Smithfield's hog unit will likely lose money throughout its current fiscal year, which runs through April 2010, Pope told Reuters on the sidelines of the meeting.

Hogs, on average, have lost money for all U.S. producers since late 2007.

Smithfield Foods, like other U.S. meat companies, has struggled this past year, hurt by the recession, high feed costs, H1N1 flu, and slowing export sales. All of which, has meant the U.S. pork industry is producing too many hogs.

H1N1 flu, commonly called swine flu, hurt pork sales here and overseas largely because of the nickname even though the flu is not spread by hogs or pork. Should the flu start spreading again, as some expect, it could hurt pork exports, Pope said.

Smithfield, the largest U.S. hog and pork producer, has reduced its hog breeding herd by 13 percent, but Pope has said other producers need to reduce as well to bring supply in line with demand.

In June, the company reported a loss of $190 million for the fiscal year ended May 3, its first annual loss since 1975, largely because of losses on hogs.

Sales in Smithfield's pork and packaged meat business are doing well and Pope predicted the packaged meat results would be 'a very good number' in the upcoming quarterly earnings.

For fiscal 2009 the company's hog unit reported an operating loss of $521.2 million, while its pork unit, which includes packaged meats, had an operating profit of $395.2 million.

"We are structurally strong and have a strong balance sheet," Pope told shareholders. "As of today, this company can write a check for $1 billion and the check will clear."

Much of the livestock industry's problems began when the price of corn, an important feed, shot past $7 a bushel in 2008. Blame for much of that increase was placed on the use of corn to make ethanol.

Corn prices have since dropped to under $4, but on Wednesday Pope warned of more grain price volatility if the Environmental Protection Agency gains approval to increase ethanol use in auto fuel to 15 percent from 10 percent.

In addition to higher feed costs for livestock producers, Pope warned "the end result of this has to be substantially higher food prices."

Shareholders approved an increase in the number of authorized common shares to 500 million from 200 million.

Shareholders rejected a proposal from an animal rights group to set a timeline for raising sows in larger pens. During the meeting, Pope said he supports such a transition to pens, but that the company's finances need to improve first.