Smithfield Foods terminates pig farm contracts, as US pig sector feels the pressure

Smithfield Foods, one of the US’s biggest pork processors, has announced it is to terminate contracts with 26 pig farms in Utah in response to an industry-wide oversupply of pork, weaker consumer demand and high feed prices.

Smithfield, which is owned by Chinese pork giant, WH Group, said it wanted ‘optimise its supply chain for more efficient operations’ and the contract terminations will ‘result in the elimination of Smithfield positions that support contract farm relationships’.

The contracts are with finishing farms that raise hogs to slaughter weight, Reuters reported on Wednesday. The move could result in the loss of around 70 jobs out of the 210 people currently employed in its Utah hog production operations. The company will offer relocation opportunities for affected employees and provide transition assistance. 

Smithfield will continue to operate company-owned sow farms in the state.

“Our industry and company are experiencing historically challenging hog production market conditions,” said Shane Smith, president and CEO, Smithfield Foods.

In October, Smithfield announced the closure of 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 west of the US, Reuters reported.

“Smithfield continues to take steps to improve operational efficiency and optimise our hog supply chain. These actions have included rebalancing production with East Coast harvest capacity, reducing our sow herd in Missouri and closing finishing operations in Utah,” Mr Smith added.

“These are difficult decisions, but they are necessary to help our company remain competitive in this operating environment.”

Headquartered in Smithfield, Virginia, Smithfield Foods employs nearly 60,000 people in seven countries and partners with thousands of American farmers.

The US pork industry has been under pressure from falling prices this year, on the back of an over-supply, which, alongside continuing high feed prices, have hit margins.

Rabobank is forecasting that North American pig breeding herds are expected to see further ‘modest contraction’ next year, as pig prices continue to lag behind rising costs. It is forecasting a 0.6% decline in North American pork production, with larger falls in the US and Canada and a 1.6% increase in Mexico.