Livestock slaughtered by the Company is purchased by Company buyers and commission dealers at sale barns and terminal markets or under long-term
supply contracts at locations principally in Minnesota, Illinois, Iowa, Nebraska, Colorado and South Dakota. The cost of livestock and the utilization of the
Company's facilities are affected by both the level and the methods of pork production in the United States. The hog production industry has been rapidly
moving to very large, vertically integrated, year-round confinement operations operating under long-term supply agreements. This has resulted in fewer
hogs being available on the spot cash market, which decreases the supply of hogs on the open market and can severely diminish the utilization of
slaughter facilities and increase the cost of the raw materials they produce. The Company, along with others in the industry, uses long-term supply
contracts to manage the effects of this trend and to assure a stable supply of raw materials while minimizing extreme fluctuations in costs over the long-
term. This may result in costs for live hogs that are either higher or lower than the spot cash market depending on the relationship of the cash spot
market to contract prices. Contract costs are fully reflected in the Company's reported financial results. In fiscal 2003, the Company purchased 79 percent
of its hogs under long-term supply contracts.
In fiscal 2003, JOTS raised approximately 57 percent of the turkeys needed to meet its raw material requirements for whole bird and processed turkey
products. Turkeys not sourced within the Company are contracted with independent turkey growers. JOTS' turkey-raising farms are located throughout
Minnesota and Wisconsin. Production costs in raising turkeys are primarily subject to fluctuations in feed grain prices and to a lesser extent fuel costs.
Manufacturing
The Company has plants in Austin, Minnesota; Fremont, Nebraska; and Beijing, China that slaughter livestock for processing. Quality Pork Processors of
Dallas, Texas, operates the slaughter facility at Austin under a custom slaughter arrangement.
Facilities that produce manufactured items are located in Algona, Iowa; Aurora, Illinois; Austin, Minnesota; Beloit, Wisconsin; Bondurant, Iowa; Ft. Dodge,
Iowa; Fremont, Nebraska; Houston, Texas; Knoxville, Iowa; Mitchellville, Iowa; Osceola, Iowa; Perrysburg, Ohio; Quakertown, Pennsylvania; Rochelle,
Illinois; Savannah, Georgia; Sparta, Wisconsin; Stockton, California; Tucker, Georgia; Visalia, California; Wichita, Kansas; Beijing, China; and Shanghai,
China. Company products are also custom manufactured by several other companies. The following are the Company's larger custom manufacturers:
Lakeside Packing Company, Manitowoc, Wisconsin; Schroeder Milk, Maplewood, Minnesota; Steuben Foods, Jamaica, New York; Power Packaging, St.
Charles, Illinois; Criders, Stilmore, Georgia; Tony Downs, St. James, Minnesota; and Concept Foods, Alma, Kansas. Power
 
 
Logistics, Inc., based in St. Charles, Illinois, operates distribution centers for the Company in Dayton, Ohio, and Osceola, Iowa.
The Company's turkey slaughter and processing operations are located in Barron, Wisconsin; Faribault, Minnesota; Melrose, Minnesota; Montevideo,
Minnesota; Pelican Rapids, Minnesota; and Willmar, Minnesota.
Patents and Trademarks
There are numerous patents and trademarks that are important to the Company's business. The Company holds seven foreign and 47 U.S. issued
patents. Some of the trademarks are registered and some are not. In recognition of the importance of these assets, the Company created a subsidiary,
Hormel Foods, LLC, in 1998 to create, own, maintain and protect most of the Company's trademarks and patents. Some of the more significant owned or
licensed trademarks used in the Company's segments are:
HORMEL, ALWAYS TENDER, AMERICAN CLASSICS, AUSTIN BLUES, BLACK LABEL, CARAPELLI, CHI-CHI'S, CURE 81, CUREMASTER, DAN'S