Focus: At Smithfield Foods' slaughterhouse, China brings home U.S. bacon

Seaboard

05/11/2019 08:00

By Tom Polansek
    SMITHFIELD, Virginia, Nov 5 (Reuters) - Smithfield Foods'
slaughterhouse in Virginia used to carve up pork for American
sandwiches and holiday dinners. But workers now box up pig
carcasses to ship to China, according to employees, local
officials and industry sources. 
    The transformation at the Smithfield, Virginia, plant shows
how the global meat industry is adapting to profit from African
swine fever, a fatal pig disease that has killed millions of
hogs in China and turned the world's top pork consumer into a
major meat importer.  urn:newsml:reuters.com:*:nL8N24A4RS
    Bought by China's WH Group Ltd  0288.HK  six years ago for
$4.7 billion, Smithfield Foods has retooled U.S. processing
operations to direct meat to China, which produced half the
world's pork before swine fever decimated the industry.
    The world's biggest pork processor operates a white,
box-shaped meat plant in Smithfield, Virginia, home to 8,000 as
well as the company's headquarters and a wider tourist economy
built on its famous hams, bacon and sausages.
    Since late spring, pigs trucked to the plant have been
slaughtered and sliced into thirds for shipment to China, where
Chinese workers process the carcasses further, company employees
and industry sources told Reuters.         
    "They got an order to fill: China," said one plant worker,
who asked to remain anonymous.
    Smithfield Foods declined to comment on the change or allow
a reporter to visit the Virginia plant, which slaughters about
10,000 pigs a day. 
    The company previously said it was upgrading the facility,
without giving details, and that U.S. business was a priority.
Other Smithfield Foods plants in the United States have
continued to slaughter pigs for the home market, industry
sources said.
    WH Group, known as Shuanghui International Holdings when it
bought Smithfield Foods, did not respond to a request for
comment.
    However, Arnold Silver, Smithfield's director of raw
materials procurement, said at a recent industry conference that
sales to China could eventually create bacon and ham shortages
for American consumers. 
    The outbreak of African swine fever has killed up to half of
China's hog herd since August 2018 and pushed prices so high
that Chinese importers are willing to pay hefty tariffs that
Beijing imposed on U.S. pork as part of the countries' bruising
trade war.  urn:newsml:reuters.com:*:nL2N26N1P7
    U.S. pork producers say China's losses from the disease have
created a once-in-a-lifetime opportunity for sales.  urn:newsml:reuters.com:*:nL4N2361RT
    After shifting operations, Smithfield Foods can process pigs
more quickly in Virginia because employees are doing less work
on each carcass, according to the plant worker. The job is still
difficult, though.
    "They freeze it up. It's heavy," said the employee, who was
wearing a brace to support his back and a sweatshirt to keep
warm. 
    
    PIGS WILL FLY
    The United States exported 294.5 million kilograms of pork
to China between January and August, according to U.S. Census
Bureau data, more than in the whole of 2018.
    Frozen carcasses accounted for about 20% of exports by
weight from January to August, up from 0.3% during the same
period in 2017, the data show.
    Smithfield Foods was the top shipper this summer, sending at
least 17.6 million kilograms of pork to China between June and
September, according to Panjiva, a division of S&P Global Market
Intelligence. Kansas-based Seaboard Corp  SEB.A  sold at least
5.3 million, Panjiva said. The firm noted its data does not
capture all shipments.
    Seaboard did not respond to a request for comment.
    "Down the road, if this continues and we ship a lot of
product to China, certainly I think we could see shortages,
particularly on hams and bellies," Smithfield's Silver told the
conference.
    Smithfield Foods renovated its Virginia plant to supply
carcasses to China, according to a person with direct knowledge
of operations who asked not to speak publicly about the changes.
     "There were departments that were completely eliminated or
erased or remodeled," the person said.
    Tyson Foods Inc  TSN.N  and JBS USA  JBS.UL  are also
maneuvering to increase sales by stopping the use of the growth
drug ractopamine, which is banned by China.  urn:newsml:reuters.com:*:nL2N2720R0 
    
    THE WHOLE HOG
    China is importing U.S. hog carcasses because it needs the
entire animal, rather than specific parts, market analysts said.
China has excess capacity in its processing industry due to the
disease outbreak and can cut up U.S. carcasses to meet domestic
tastes more cheaply than buying already-butchered pork, they
said.
    China's tariffs on frozen carcasses are also 62%, compared
with 72% for muscle cuts, said Erin Borror, economist for the
U.S. Meat Export Federation, an industry group.
    "They need to be able to run their plants and keep workers
employed to the extent possible," she said. 
    Smithfield Foods said it is subject to the same Chinese
trade tariffs as other U.S. pork producers, despite being owned
by a China-based company.
    The United States did not export any hog carcasses to China
between January and May of this year but shipped 6 million
kilograms in June, 28 million kilograms in July and 26 million
kilograms in August, U.S. Census Bureau data show. 
    The start of shipments coincides with the conversion of
Smithfield Foods' Virginia operations, traders said.
    Increased exports of hog carcasses are so new that the U.S.
Department of Agriculture said it plans to clarify its reporting
requirements for shippers to make sure sales are being counted
accurately. Some meat traders said weekly recorded sales have
looked low.  urn:newsml:reuters.com:*:nL3N270212
    Bob Brown, a longtime U.S. livestock market analyst, said
tracking carcass sales to China should not be difficult because
most are being done by Smithfield Foods from its Virginia
facility.
    "This is one plant, one company, one place," Brown said.
    
    NERVOUS WORKERS
    Smithfield Foods' latest turn toward China is an unusual
shift for America's so-called ham capital, which boasts a museum
featuring the world's oldest ham and streets dotted with
brightly colored pig sculptures.    
    Mayor T. Carter Williams said he heard from company workers
that the plant is shipping more pork to China.
    "It doesn't bother us at all," Williams said. "The meat's in
the store. All the local supply is still here."
    Smithfield Foods workers are worried, though. Many were
shuffled to different jobs in the slaughterhouse due to the
overhaul, according to employees.
    "They say they're doing everything short now and cutting out
a lot of jobs," said James Moton, who cuts hair at Hamtown
Barber & Styling in downtown Smithfield.
    A former sanitation worker at the slaughterhouse, Moton
learned of the operations changes from customers who still work
at the facility. "They're hoping they still have a job."

 (Reporting by Tom Polansek. Editing by Caroline Stauffer and
Louise Heavens)
 ((Thomas.Polansek@thomsonreuters.com; +1-312-408-8556; Twitter:
@tpolansek; Reuters Messaging:
thomas.polansek.thomsonreuters.com@reuters.net))