Good morning ladies and gentlemen, thank you for standing by. Welcome to the Hormel Foods Third Quarter Earnings Conference Call. During today's presentation all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. [Operator Instructions]. This conference is being recorded today, Thursday, August 23rd, 2007. I would now like to turn the conference over to Mr. Fred Halvin, Director of Investor Relations. Please go ahead, sir.

Good morning. Welcome to the Hormel Foods conference call for the third quarter of fiscal 2007. We released our results this morning before the market opened around 6:30 AM along with our announcement of our acquisition of Burke Corporation. If you do not receive a copy of these releases, you can find them on our website at www.hormel.com under the Investor section. On our call today is Jeff Ettinger, Chairman of the Board, President and Chief Executive Officer and Jody Feragen, Senior Vice President and Chief Financial Officer. Jeff will provide a review of the operating results and an outlook for the remainder of the fiscal year. Then Jody will provide detailed financial results for the quarter. The line will be open for question-and-answer following Jody's remarks. An audio replay of this call will be available beginning 11:30 AM Central Time today, August 23rd, 2007. The dial-in number is 800-405-2236 and the access code is 11094727. It will also be posted on our website and archived for one year. Before we get started with the results of the quarter, I first need to reference the Safe Harbor statements. Some of the comments made today will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed in or implied by the statements we will be making. Among the factors that may affect the operating results of the company are fluctuations in the cost and availability of raw materials and the market conditions for finished products. Please refer to pages 26 to 31 in the company's Form 10-Q for the quarter ending April 29th, 2007 for more details. It can be accessed on our website. Now I'll turn the call over to Jeff.

Good morning everyone. As previously announced, higher than expected input costs within our Grocery Products segment caused the company to fall short of our original expectations for the quarter. While we are disappointed with the overall results, we were encouraged by the 6% growth in consolidated segment operating profit led by strong year-over-year performance in Refrigerated Foods, Specialty Foods and the International division. We were also satisfied with Jennie-O Turkey Store's progress in offsetting steep grain cost increases through higher pricing. Sales in the quarter for the total company reached $1.5 billion, up 8% from the prior year and up 7% excluding acquisition. Our earnings per share for the quarter were $0.41 compared to $0.43 last year, a decrease of 5%. Higher corporate expenses and an increased tax rate contributed to the year-over-year decrease in earnings. It should be noted that last year's expenses and tax rate were lower than normal and this year's expenses are more typical. This morning, we are pleased to announce the purchase of Burke Corporation, a manufacturer of pizza-toppings and other fully-cooked meat products. Hormel Foods is already a leader in the pepperoni category and this acquisition strengthens our position in the pizza-toping category. It allows us to expand our foodservice product offerings and provides us with added manufacturing capabilities. We are excited to welcome the employees of Burke Corporation into the Hormel Foods organization and believe our similar cultures will facilitate an easy transition. Bill Burke Jr., one of the previous owners will continue to run the business. Annual sales are $125 million and we expect the business to be accretive to our fiscal 2008 results. I will now take you though each of our existing segments. The Grocery Products segment had a mixed quarter. On the plus side, we continue to see significant…

Thank you, Jeff. Good morning everyone. Earnings for the fiscal 2007 third quarter totaled $57.4 million or $0.41 per share compared to the $59.6 million or $0.43 per share a year ago. Earnings for the nine months of fiscal 2007 totaled $200.7 million or $1.44 per share compared to $196.1 million or $1.41 per share a year ago. Dollar sales for the third quarter totaled $1.5 billion compared to $1.4 billion last year, an 8% increase. Acquisitions added about $17 million to the top line in the third quarter. For the first three quarters of 2007, dollar sales also increased 8% to $4.5 billion compared to $4.2 billion last year. Acquisitions added about $60 million to the top line in the first nine months. Volume for the third quarter was £1.1 billion, up 0.5% from fiscal 2006. Acquisitions added £9.6 million to the quarter. Volume for the first 3 quarters of year was £3.3 billion, up 4% from fiscal 2006. Acquisitions added about £34 million to the first 3 quarters of the year. Selling and delivery expenses in the third quarter were 10.4% of sales this year, compared with 11.2% last year. And year-to-date, the expenses were 10.7% of sales compared with 11.3% last year. Freight costs continue to be lower year-over-year, driven by cost saving initiatives that we have implemented. Our marketing investment in the third quarter was $29.1 million or 1.9% of sales compared with $29.2 million or 2.1% of sales last year. For the first 3 quarters of fiscal 2007, marketing expense was 2.1% of sales compared to 2.3% last year. We expect marketing expenses in the fourth quarter to be higher than last year, which will bring our full year results' expense above 2006. Administrative and general expense was 2.7% of sales for the quarter compared…

Thank you, ma'am. We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from the line of Farha Aslam with Stephens Inc. Please go ahead.

Hi. Good morning.

Hi Farha.

Good morning.

Hey, could you just share with us the weakness in your chili and chicken lines? Was it related to a early buying due to your price increases or something like that?

In the case of chili, we really have had somewhat of a roller coaster year in Grocery Product if you look at a quarter-to-quarter... I mean even as a whole division, Grocery Products had an excellent second quarter and the two chili franchises were key contributors there. Q3, the volumes are definitely are down and it could... looks... looking at it retrospectively, like there was certainly with some of that volume in Q2 that's been detracted from Q3 volume. And in the case of the chunk chicken franchises again it is a little bit of a mix story. The Hormel branded items are still holding their own. We had a weaker quarter on VALLEY FRESH and we kind of reassess our pricing and promotion strategy against that line and look for that improve going forward.

And when you look at pricing overall in Grocery Products; Jeff, you talked about, I believe a 5% price increase in April and historically, you only take pricing in that business once every few years. But given the higher commodity environment, would you anticipate taking another price increase in Grocery Products?

Yes. If the current commodity conditions continue, we are certainly going to have to have that in our consideration set. The other thing we can look at Farha, as you recall, we didn't take it across the board in Grocery Products. So we were selective about which items we went up with at that time. We took the chili up, we took COMPLEATS, hash commodities [ph] some of the microwave cups, but some of the other items we deferred taking pricing and so again that will have to be in our consideration set going forward here, so whether those items now, we need to react as well.

And can you moderate promotional support that you give these businesses as well to try and mitigate some of the impact from higher commodity costs?

Well, you can't, but it is a balancing act. I mean you don't lease our high contributing gross margin items in general on a contribution dollar level, and so if we pull back from promotions aggressively and see major volume declines and that's going to hurt the division's overall results as well. So we are trying to balance the right level of promotion. We are also over time trying to migrate some of those promotional dollars into consumer advertising. You will see that happening somewhat in the fourth quarter as this is a complete television campaign. We will have a year-over-year increase in media and marketing during the fourth quarter, but it's something we definitely look at; but you have to kind of balance that against the other factors.

Okay, that's helpful. And just on your Burke acquisition, kind of what level of accretion could you expect or what sort of margins does that business have?

On the accretion level, given what, that was so late in '07 and we are not in a position to give our total company '08 guidance, we are not going to go out and give a specific number for what type of accretion we are expecting on Burke. We'll give you some sense of that when we do go out with our '08 number at the normal timeframe. Its solid margining business, our Foodservice Group has always been an excellent performance within Refrigerated Foods and it is a growth area in both the pizza-topping business that we already had within our Refrigerated Group more focused on pepperoni and the Burke business have both been growing in the high single-digits over last several years and we expect that to continue. Pizza is a huge category and pizza-toppings obviously are a key component of that category. It's a very fragmented category from the sales standpoint, so our scaling up in this area should give us some excellent opportunity.

Great, thank you very much. I will pass it on.

Thank you. Our next question comes from the line of Bill Chappell with SunTrust; please go ahead.

Hi, this is actually Shahsad [ph] in for Bill Chappell, good morning guys.

Good morning, Shahsad [ph].

Good morning.

My first question is just related to China and really it's running around the whole hog situation over there and maybe how that affects pricing and maybe what's your take on all of that is, if you could comment on that.

Definitely. We agree based on what we see from our people on the ground in China that the live issue is a significant problem. It's probably... almost certainly been underreported on a government basis in that country, that's we talked about that in terms of our results of our international division of $80 million, a doubling in their cost in terms of hog procurement to supply our Beijing and Shanghai facilities. That being said, I think it is important to note that, in the terms of aggregate Hormel Foods, it's a little less significant to us than maybe it is to some other players. We are not a big player in raising hogs, overall we raise in our hogs to meet our value-add demand and don't look to sell commodity or surplus meat on the outside. And we really don't have a large portion of international sales that are export basis on the fresh side. The market I think has been buffeted over last few weeks by speculation about what China is going to do about this and whether they would potentially import significant amount of products out of the U.S., time will tell whether that will happen. I guess personally I never underestimate the impact of politics and there are a lot of political reasons why China may well not seek to secure a lot of supply out of the United States. And then, but even if they do and the market therefore goes up in this country, we feel we are in a position to react. We've been through up markets and down markets before and the hog cycle and then we are ready for that as that turns out to be how this plays out.

Okay, thank you. I appreciate that. One last question here on the Burke acquisition, would you say that its operating margins are similar to where your Refrigerated Food segment currently performs, maybe like around mid single-digits, can you comment on that?

It will be accretive to that.

Okay. Thank you.

Our next question comes from the line of Tim Ramey with D. A. Davidson. Please go ahead.

Good morning.

Hi Tim.

You mentioned $55 live cost, Smithfield earlier said $53.50, often times I guess that's an eastern corn belt or western corn belt difference in terms of costs. Is there anything else going on there that you would be aware of?

Tim hi, this is Jody. That's what we actually paid for the quarter. So I am not sure where their number came from, but I can report that that's the numbers that we used.

Okay, and --

I think pretty close to what, I think we estimated a $54 in the second quarter call, so we were pretty close to what our estimate was.

Sounds good. As we think about the China situation that if it hits juxtapose you again to Hormel, but... or to the Smithfield but it was just an hour ago, they said they thought that there was potential for a 4% increase in demand as a result of exports to China. That would be negative for Refrigerated, how would it play out as you kind of think through your business segments?

In Refrigerated, it would quite be more a matter of timing, whether as a precipitous rise versus the gradual rise, we certainly have that situation before where it rises very quickly that there is a little bit of lag on those types on a fresh meat side of pricing. The bigger impact would probably on the Grocery side.

Yes.

Again it's on select items, the raw materials we use for SLAM or bacon bits.

Okay. And Jeff you talked a little about the Burke margins. Would they be pretty consistent with Grocery Product margins overall or at the high or low end of the range there?

I guess I could say a high single-digit would be what we should be thinking.

Okay. Thank you.

So good margins within the Meat Protein segment, but not to Grocery level.

Thank you.

Thank you. Our next question comes from the line of Christina McGlone with Deutsche Bank. Please go ahead.

Good morning.

Good morning.

Jeff,your outlook for corn at the balance of the year was higher than I thought. Are you... is it based on where you are locked in, are you expecting corn prices to rise as the fiscal year progresses?

Well, I guess that we will need to make sure we are taking about the same number. We are kind of trying to give you a near term futures number and we gave a range of 325 to 350, yesterday they were 347, so if anything they are pushing the upper end of our range at the moment. We do also have a certain amount of crop locked in. We really haven't had a practice of disclosing either the price or the percentage that entails, but the range we are giving you is for the open market purchases.

Okay. And then last quarter you had talked about kind of a lot of rationality in the chili market and that allowed you to get a better return on your promotional spending, did that kind of follow-up this quarter?

No.

In terms of --

Yes. What did follow-up was our volume performance. But the margin performance was still quite strong.

But I mean in terms of the competitive climate?

Yes. I think the picture is similar to what we talked about last quarter that what were new entrants to the category that were very significant plays three years ago have now become kind of normalized, Campbell's and Bush have certain niches, where they are holding their own and others were frankly, they are not doing all that well and probably struggling the whole distribution. And then there has always been other regional competitors within the chili category there that also are holding their own. But overall, we've seen a significant swing back to more normalized return within the chili franchise.

Okay. And I guess just last question, are you still promoting, is the SPAM promotion... does that continue into the fourth quarter or was that very third quarter weighted?

No, the promotion does continue into the fourth quarter and it's on a... frankly, it's on both the domestic and international basis and we've seen very good international results against it as well.

Okay, thank you

Thank you. Our next question comes from the line of Jonathan Feeney with Wachovia. Please go ahead.

Good morning, thank you.

Hi Jonathan.

Jeff, when you look at the acquisition... the Burke acquisition you've just made, is this a kind of size and type of acquisition you are looking for and we should expect that you in the future or was it just something that go into your lab and what was the kind of the process on this?

Well, it's absolutely within our sweet spot or the platform that we like to see some growth in, but acquisitions have... some come quickly, some take a long time. What we thought was Bill Burke Jr. and his dad for 6 or 7 years prior to finally a decision by their family that this was the right time to make this move and to be able to grow with Hormel. But clearly in terms of the product category we like, in terms of the growth profile, in terms of the cultural fit, the price we paid we are in the 7 to 8 times EBITDA range that has been fairly typical for our deals and we are very comfortable at that level. So this is an excellent deal for us. And if you guys have more of these in your pocket, give me a call, but... we are always looking for this. But this one is definitely very much within our profile of what we were looking for.

I guess what I am getting at is you've seen a sort of dry up in the availability of liquidity for some of your financial sponsor, competitors for deal. I know historically it seems a lot like a deal that you've always done, financial sponsors we aimed over the past two or three years, I wonder is there a greater opportunity do you think to do larger deals. I mean you have got a lot of dry powder here to do larger deals and now that the financing environment will for some of your competitors?

Well, I think there are two elements to your question. And I think the answer to both of them is a guarded yes. I think we would be willing... we would have I think good luck over the last few years with our acquisitions, and I think we would be prepared and have the confidence potentially to make a bigger deal. And then in terms of the relative competition from financial purchaser, yes, that may dwindle from that and that may make us a more leading player on certain properties going forward.

So, you really haven't seen like tangible evidence of that yet?

And I guess I would add that we keep the same discipline in place and that discipline made that easier to execute in the marketplace to complete transaction now that some of the fast monies on '08.

Thanks. And just finally, I guess probably for Jody; is there anything... I know you are anticipating increases in supply. Is that just based on the government data for hog on that $49 hog price, because it looks like we are tracking about $54 here quarter-to-date and I know markets got killed recently, so is --

It's really kind of settled down. We have those two weeks where it got churned down and had and it's really settled down. And I'll tell you looking back in history that these large process numbers that we are seeing day after day, then I think the potential is there to have a lot more in the marketplace.

Okay. Thanks so much.

Thanks Jon.

Thanks.

Thank you. Our next question comes from the line of Eric Larson with Piper Jaffray. Please go ahead.

I know it's a complicated name.

Scandinavian?

Yes, particularly in Minnesota, right?

Yes.

Good morning everyone. Just a couple of quick questions. Jody, I know you're not giving any guidance for '08, but is a reasonable way to look at your tax rate is to take maybe '06 and '07 and average them, you are giving your comments that they were sort of unusuals in both years. Is that a reasonable first half as to how we should look at an '08 tax rate?

No Eric, we have a new dimension that will be coming at us. For the first quarter of fiscal 2008, we'll be adopting FIN 48, which is another tax effect. And I would expect that we'll be slightly higher than where we've been this year.

Okay, alright, that's right.

And that's truly mechanics of the accounting that goes with FIN 48.

Okay, alright. And that's fair, I just... your tax rate have been a little more volatile, so that's why I sort of asked that question.

And we will continue to see that volatilities and new accounting pronouncement does not change that volatility element. And we are not alone in this; everybody is going to have it.

Okay. Yes, that's what I am hearing from other companies as well. And then Jody, this is a very specific question. But in your cash flow statement, every quarter you're obviously taking cash away... the earnings from your JVs obviously is a negative, because you are not getting that cash. Is there a way for you... for Hormel to repatriate some cash out of your joint ventures, because somehow you're doing quite well, I assume that there is cash build upon those balance sheets. Do you get dividend paybacks for that or anything or how do you repatriate cash in your JVs?

For some of our JVs, we get dividend, repatriations and that's in the case with our Mexican joint venture. Our Purefoods joint ventures have been in an investment mode with the expansion and operations over in the Philippines and so we haven't seen dividend therefore over the last couple of years. But certainly as their results improve, we'll look at that. Many times we don't repatriate all the way back to the Untied States, because we like to have available funds overseas to invest in other opportunity.

Sure. I mean that makes perfect sense.

Right.

And then just maybe a final question for Jeff and I will turn it over. You've had extraordinary growth obviously in your Specialty Foods in your All Other category. One cannot expect that will sort of continue. When you look over the next several years, what might be sort of a normalized top line? I think that you said in Specialty that you believe that that can grow as 5% top line and 10% EBIT, sort of inline with your corporate goals. Is that what we should expect for Specialty as well going forward?

Yes. That was the comment. I do think overtime our expectations for the Specialty division will be more comparable with the company averages. They've had a terrific couple of years here. They had a couple of franchises within the business that were as a few years ago, quite bit underperforming and so that certainly has added to their ability to register these kind of increases. But over the long haul, the company average is 5% top line and 10% bottom line would be a better expectation for that and the Other Group.

Okay. I will ask one more question. The Burke acquisition, can you give us... it's $125 million of sales; can you give us a little flavor for where they might sell graphically, what you can do with that from maybe... its mainly foodservice, so an ACV, it really is irrelevant, because that is a grocery related, but if you look at ACV kind of related to the foodservice industry, what are you selling opportunities for Burke and are they significant?

Yes. It is very difficult to come off with that kind of data. That's not reported, there are no scan or information obviously, but we know the pizza category in general is massive. We know that toppings are one of the major elements to go into pizza manufacturing. We know it's a very fragmented category; there is one larger player Tyson owns the entities of a large player and this will make us certainly if we are not number two or number three, for that we have to be right in there. It is a growing category, and there is a great fit between their approaches of the Hormel Foodservice Group and Burke. We are obviously a very full service, full line supplier at Hormel Foodservice with a lot of national distribution partners and so forth. Burke is really focused on the specialty pizzeria area, and has a sales force and a system that's aimed at really maximizing returns out of there. And so that will continue. There maybe some overlapping customers and where there is, our Group bode together to figure out the best approach to service that customer. But overall, we see lots of opportunities for growth, and we are going to turn both groups loose to go get that growth.

Okay. Do they have any regional brand names in the grocery... in grocery retail?

No, they are not in grocery at all.

Okay. Good, thank you everybody.

Thanks Eric.

Thank you. Our next question comes from the line of Oliver Wood with Stifel Nicolaus. Please go ahead.

Great. Thanks a lot.

Hi Oliver.

Good morning. Just a follow on to the previous acquisition question; could you comment at all on your acquisition pipeline currently?

We... no, we really can't comment... don't comment on any specific deals, on where we are at with them other than to say when we've identified in the past, we understand we are a generator of significant positive cash flow that our shareholders don't expect us to just sit on that cash that we... and that we... if we can find out the news with good returns to grow our business, we will certainly continue to look for those, and we are always looking. And over time, if we were not able to do that, we would be more aggressive about other areas of returning cash to the shareholders.

Okay, fair enough. And then if you could also comment on the broader turkey industry on the fresh side, really around high trends currently. We've seen some pretty big exit numbers recently, just wondering what are your expectations are there from a broader market stand point.

Yes. We've noticed that as well and we're not generating as I can tell you that, our numbers within our system are much more steady state in terms of what we need for our business. I guess our attitude of our managers of that Group right now is sort to wait and see as to whether this few week phenomena and so far with exit staying higher and sort of dropping off on a seasonal basis represents some kind of new level for the industry or whether it's more just okay. People made the different decision for a matter of few weeks. The industry has continued to be challenged by both livability and weight issues, and so to the extent those continue and as we said here today, they are a part of the existing reality. Those would also mitigate against higher egg numbers and just because the eggs that doesn't have plenty and that translates into breast meat into the market.

Any explanation on the livability and weights or have you anything there?

There is a lot of theories, there are things we're working on, couple of which seem promising. But no, there is no universal thing I could really point you to is that now here is what's happened and here is the turnaround. But no, it's obviously something of keen interest to us and then the others who are big players in the segment.

Great, thanks a lot.

Thank you. Our next comes from the line of Todd Duvick with Bank of America. Please go ahead.

Yes, good morning

Hi Todd.

I have just a couple of housekeeping questions and then kind of a larger picture question. With respect to Burke that did close at the end of the quarter or I guess after the close of the quarter and Jody, I think you indicated that you used your credit facility to finance that.

Yes, we did.

You also had $105 million of cash on the balance sheet; was that a combination of cash and debt that you used or just your credit facility?

Right. We've had some large payment that went out since the close of the quarter; we had a dividend payment and some tax payment. So we financed part of the acquisition. I fully expect that our cash flow will allow us to repay that in short order within the next six months for sure.

Okay. Well that was my next question; and I take this will be reported in the... in your Refrigerated Meat segment.

That's correct.

Yes.

Okay. And then just kind of a bigger picture question; in the consumer product space in general over the last... actually several months, there have been a number of companies that have just kind of bite the board and said, we are going to take more aggressive financial policy, either do accelerated share repurchases or just setup large share repurchase programs over time, and many of them have levered up somewhat and taken the hit to their credit rating. Given that you are not a big commercial paper issuer, it seems to me that you know that's not a necessarily a deterrent to taking a more aggressive financial policy. Can you just kind of update us on your financial policy and if you would consider doing like a large share repurchase?

We've continued to look at opportunities to optimize our capital structure. I think if you see us do anything it will be more incremental rather than transformational, for that gives you an idea. We certainly did step up with share repurchase this past quarter. Unfortunately, we seem to hit most of those purchases at the beginning of the quarter, so we are reassessing what we would do for our plans in the fourth quarter. I certainly would like to take the opportunity to get to a more optimal capital structure. So we continue to take a look at that and hopefully more acquisitions will come our way and help us do that naturally.

Okay. Have you discussed at all a large negotiated share repurchase with the Hormel Foundation?

No.

Okay, alright. Thank you very much.

Thank you. Our next question comes from the line of Edgar Roesch with Banc of America Securities. Please go ahead.

Hi.

Hi Ed.

So just following up on these questions about China; I mean we've seen the most immediate impact in the hog futures, but I mean there is no reason to think that pork pricing wouldn't also rise if you start to see large demands from China, right?

Yes. I mean overtime, there are certainly a strong relationship and if there is significant flow of supply out of the country there that would be our expectation as well.

Right. So timing aside, I mean in the end, you only end up with the Grocery Products and that was I think what you indicated earlier.

Yes. Grocery is the one that really doesn't have the obvious offset. I mean if there are tighter supplies in general within the refrigerated side, then we would expect our Refrigerated Group to price accordingly and to hold our margins, but when you're dealing with the consumer products and grocery, where as far I mentioned at the beginning of the call, we tend to only price every couple of years, then the squeeze becomes more... it happens much more quickly and it's harder to react to.

Okay. Thanks for that clarification. And then I've seen that a competitor is come out with shelf stable entrees. I am just wondering if you've noticed any impact from that or is it a matter of that category having a nice tailwind and everyone can participate and not at each others expense at this point?

Well, we've seen some competitive entry and some people trying some items within certain sub segments of the category. We obviously feel our proposition is very strong and we are not looking to... we are not going to deceit any territory in the category, but it doesn't surprise that others are going after it. We are the ones that have created the growth in the category. We should have significant first mover advantage. We also have an excellent brand for this, I mean not only the new complete sub brand, but it just ride down the sweet spot of what Hormel stands for of convenient meals featuring protein, and we bring some expertise on the production side, so that our product line has both casserole type product and whole-muscle meat type products. And so I think all those advantages will continue to allow us to maintain the very strong share leadership position in that category.

Great. And just one last small question, if you give us the latest indication of what the whole NATURAL line could represent in sales?

Our HORMEL NATURAL CHOICE line has been kind of 100... $50 million to $100 million range today is what we will be looking at on a annualized basis and what it could represent, I guess time will tell. And we are only a year and half into it. We just added some new pieces of that product line, just within the last few months on Bake and in the Deli category and chicken strips and so forth; thus far those are doing well. And so we think it's the right platform for the time and it was a good entry for us into those categories and we will see how big it can get.

Okay. Thanks for your help.

Thank you. Our next question comes from the line of Pi Aquino with Credit Suisse. Please go ahead.

Good morning

Good morning.

Just a quick question on turkey. I think you said feed costs were up $26 million year-over-year and about $5 million of that was not offset by higher pricing. Are you still taking pricing increases in turkey and do you expect your fiscal fourth quarter here to kind of by year-end I think you had thought that you would be able to catch up with the higher feed cost?

Yes. That is correct. We are... there are still elements of our business, particularly in the Deli and Foodservice side, where you sometimes have contracts in place and the whole level of pricing activities are little slower, but those are gradually getting into place and that is our anticipation for the unit would be to bring it back to even by the end of year-end and give it hopefully a good platform for growth for next year.

Right. And just as a quick follow-up. Can you remind me I think normalized margins in the turkey business are like 9%? Are you thinking you can get there next year or is that really just something that you are sort of waiting to see what feed costs are doing going into next growing seasons?

Yes, I really can't give you a next year number yet. You will see a number like that for Q4, but Q4 is traditionally a stronger margin quarter than Q3 as anyway. So that will be more the reason why that should be up. But we'll... you will have stay tuned I guess for the '08 outlook.

Got you. Thank you.

Okay.

Thank you. [Operator Instructions]. Our next question comes from the line Tom Claugus [ph] with Graham Partners. Please go ahead.

Yes, hi. I am a relatively new shareowner. The pricing on grocery items, how often can you raise that? I know somebody discussed that and then can you give us some relative sense of exposure to the three commodity meats there? I am assuming you have more beef and chicken exposure than pork, although with SPAM I am not sure if that's the case. I was just curious as to if you could give me some kind of idea on the Grocery Product side the exposure to each commodity?

Okay.Well I take your second question first. There the commodity meet impact has certainly been more significant on beef and chicken for that division than it has pork. But it was... there was some element of negativity in pork as well although the overall pork numbers were above what we expected for the quarter. When you look at sub raw materials and the ones we use say, for bacon bits or for SPAM luncheon meat. Those did experience increases that we hadn't anticipated. So that's factored in as well. On the pricing side, I mean our typical pricing philosophy has indeed been on that side of the business that okay, you take kind of general inflationary pressures, your wage increases and packaging increases and so forth and you try to price for those every three to four years and just make sure you just kind of staying at some kind of equilibrium. What we have experienced this year was the input cost increases is not at a normal equilibrium situation and so that may well cause us to re-evaluate whether this is different that there is a new level of cost that we are going to have to be recovering for and if that means being a little more aggressive on pricing and taking it sooner rather than waiting that kind of timeframe.

And one follow-on. With the consumer apparently weakening according to retail for sure, are you seeing any signs of that in the Foodservice side since you guys have a large portion of Foodservice in both your pork and turkey?

No. We had a... all we can... I guess tell you about in the Foodservice side is what our businesses look like. Again it's hard as I was mentioning to one of the earlier calls and that's an area it's much harder to get aggregate data. But we had excellent quarters for both Hormel Foodservice and Jennie-O Turkey Store foodservice, with both up double-digits again in terms of their dollar sales. So now we are not seeing that, but it certainly could be that we are bringing items to the marketplace that have better relevance to the operators than others who are bringing in and then we could be taking at other shares of the folks but it's very hard for us to determine that.

Okay. Thank you.

Thank you. Our next question comes from the line of Pablo Zuanic with J. P. Morgan. Please go ahead.

Good morning everyone.

Good morning Pablo.

Good morning.

Actually two questions and the first one a follow-up to his last question. Just trying to understand under more normalized circumstances, where is it easier to pass on higher pork prices, in Refrigerated Foods or in Grocery Products? I mean I would have expected more in Grocery but can you expand on that?

Well, in general the answer would be, it's in Refrigerated Foods and even within Refrigerated, you kind a have to look at the franchise in the couple of parts. There are items, big volume items in both frankly, in both retail and foodservice within refrigerated that have always moved with market, ham, bacon some of those key big categories. And so in those cases, pricing does move fairly fluidly with what's going on the cost side of the business. Now meat products within Refrigerated does have franchises that behave more like Grocery Products; pepperoni or refrigerated entrees or some of the party tray or those types of items. And so in those cases it's a little slower, that's a little more difficult to just move pricing based on what's going on in the market. On the Grocery side, really all the item that would pull pork raw materials are in that mode of where it's a slow process to work with the retailer on our price change. And they are looking these days to actually justify the reasoning for those changes and so that's the area where we would feel the greater impact, if we went up, it will be difficult to quickly.

Thank you. It's very useful. And just on the Refrigerated Foods, do you have any fresh pork business, any cattle business or it's all being used in value-added products? I mean if there is any in terms of fresh cut out just tell us little bit what's going on in that business?

No,we definitely have fresh pork business. It has different levels of value adding from our perspective where we came up with our patented process to create always tender pork about ten years ago and so a lot of our fresh pork sales go out under that area. That's our higher margin sales than just typical primal sales but it's not at the level of a further value added like our refrigerated entrees. Our trends are very solid in that area. It's really a more of a customer-by-customer relationship. You tend to have a pork program with somebody as opposed to one-of a two up items. And we have very good relationships with the customers who have been kind of long-term using our branded products as the key element of their grocery offering.

But are you sure the cut out I mean just working and looking at cut out business, that's so very negligible then. I mean that the most commodity type part of to a business.

Yes, I mean if you are talking to just sort of--

Okay.Yes we process hogs and therefore have primal available. That's a very insignificant part of our business.

Okay. That's good. Thank you.

Thank you. Mr. Ettinger, there are no further questions at this time. Please continue.

Yes, I just want to thank everybody for joining us today and just would want to remind you that we are planning an investor day, here in Austin, Minnesota on October 9th. And if you haven't received the invitation or responded to an invitation, please call Fred Halvin at 507-437-5007. Thanks everyone for participating today.

Ladies and gentleman, this does conclude the Hormel Foods third quarter earnings conference call. We thank you for your participation. You may now disconnect.