Smithfield Foods ends contracts with 26 US pig farms, citing oversupply (updated)

WH

06/12/2023 19:39

(Updates Tuesday story to add details on hog farms in
paragraphs 4-5)
    By Tom Polansek
       CHICAGO, Dec 6 (Reuters) - Smithfield Foods said it will
end contracts with 26 hog farms in the U.S. state of Utah, in
the latest contraction by the world's largest pork processor in
the face of an industry oversupply.
    Pork producers have been losing money as pig prices and
consumer demand have struggled at a time of high costs for labor
and other expenses.
    Smithfield, owned by Hong Kong's WH Group  0288.HK , said it
will terminate employees who support its dealings with farms
that raise hogs under production contracts. Layoffs may total
about 70 employees, or up to one third of the 210 workers in
Smithfield's Utah hog production operations. 
    The contracts are with finishing farms that raise hogs to
slaughter weight, Smithfield said in an email to Reuters on
Wednesday, adding that it will continue to operate company-owned
sow farms in Utah. 
        Analysts said pork producers need to cut the number of
sows, or female pigs used to reproduce, to return to
profitability more quickly.
  
        "Our industry and company are experiencing historically
challenging hog production market conditions," Smithfield CEO
Shane Smith said in a Tuesday statement.
    Smithfield in October said it would shut a pork plant in
Charlotte, North Carolina, after previously confirming it would
permanently close 35 Missouri hog farm sites. Last year, the
company said it would close a California plant and reduce its
herd in the Western U.S.
    Smithfield needs such cutbacks to remain competitive, Smith
said. The company cited an "industry oversupply of pork, weaker
consumer demand and high feed prices" as challenges, though
futures prices for corn  Cv1  used for livestock feed last month
fell to their lowest level in nearly three years.
    U.S. meat companies also grappled with excess chicken
supplies this year, and face dwindling cattle inventories and a
law requiring more space for livestock in California.
    Tyson Foods  TSN.N , the biggest U.S. meat company by sales,
has shut chicken plants.

 (Reporting by Tom Polansek; Editing by Leslie Adler)
 ((Thomas.Polansek@thomsonreuters.com))