Oh, how I long for the days of the Atkins diet, when folks were eating meat by the handful. I'll bet Premium Standard (NASDAQ:PORK) is longing for those days, too, now that an overall glut of protein has made profitability tougher for this prime processor of porkers.

The best thing to say of this fourth quarter is that nobody expected it to be very good. A 13% sales decline was not too surprising, nor was a 66% drop in operating income and a sizable drop in net income. After all, consider that prices for live hogs have dropped more than 17% from last year, and that pork prices have fallen 11%, and you see the challenge.

That's not to say that there weren't still some surprises. Revenue in the pork-processing operations (turning pigs into pork chops) dropped 14% on lower volume; that, in turn, played a role in lower margins -- at least lower than I was expecting. On the hog production side, revenue dropped a bit more sharply, but the operating income held up somewhat better.

So yes, it's bad right now for Premium Standard, Smithfield (NYSE:SFD), Tyson (NYSE:TSN), and the poultry operators like Pilgrim's Pride (NYSE:PPC) and Sanderson Farms (NASDAQ:SAFM). What's next?

In the short run, probably not a whole lot. Unless people absolutely freak out over bird flu, I don't think you're going to see any sudden surge in the demand for pork. Over the long run, though, I think Premium's vertical integration and strong export markets will help separate them from the pack. What's more, comments from members of management suggest that they're looking for opportunities to add more processing operations, and a tough market like this could turn up some decent deals.

When it comes to the stock, I'm not fired up one way or another. I bought the stock on what I thought was an overreaction, and I have a decent little gain to show for it. And though I think the company has a good future ahead of it, the untapped valuation potential here doesn't exactly put PORK at the top of my list. Still, it's a good company with good prospects (albeit in a very difficult market) trading at what I think is a reasonable valuation. And that's good for enough for me for now.

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Fool contributor Stephen Simpson owns shares of Premium Standard, but he has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares). The Motley Fool has a disclosure policy.