After withstanding a decline in hog prices which led to loss of revenue for parent company WH Group, Virginia based Smithfield has significantly reduced its hand in the “hog farming” category to focus on packaged meat. Last year it had plans to terminate contracts with farm operations in Missouri, Utah, Arizona, California and the East Coast, including one North Carolina plant and European operations. The pork titan is offloading 150,000 hogs to Wallace, N.C. based Murphy Family Ventures in an agreement that will reestablish the company’s independence as a producer.
Smithfield acquired Murphy Family Farms in 2000 and merged it with Brown’s of Carolina Inc. as it worked to create a colossal livestock production business. “The agreement will re-establish the Murphy family farming business as one of the largest independent pork producers in the United States,” said Ray Atkins, senior director external communications at Smithfield. Murphy will have the capacity for 3.2 million hogs annually for Smithfield, which will provide feed and transportation services. “It allows Smithfield to focus on our growth strategy, which is fueled by packaged meats, while ensuring a consistent supply of hogs,” he said.
Given the volatility of production, WH Group trying to spin off Smithfield and list it publicly as its own company on the stock market. “In its letter to shareholders, WH Group stated that the proposed spin-off would give investors more visibility into Smithfield’s fair market value, enable Smithfield to independently access equity capital markets and provide the company with more flexibility in future merger and acquisition transactions,” Atkins said.
WH Group, a publicly traded company based in Hong Kong acquired Smithfield in 2013 for $4.7 billion in a deal that was known as the “largest Chinese takeover of a U.S. company,” which drew widespread criticism from lawmakers on Chinese ownership of U.S. agricultural production. “There are important issues to be addressed between the U.S. and China,” Atkins said. “Ownership of U.S. agricultural land is not one of them.” Since the WH Group acquisition, “Smithfield’s economic and other contributions to the U.S. and the communities where our employees live, and work have increased substantially.”
Smithfield Foods was founded in Smithfield, Virginia, in 1936, and employs approximately 35,000 people in the U.S. and contracts with more than 1,900 American farmers. “Smithfield will remain in the hog farming business. “While this agreement reduces the volume of Smithfield hog production, we will still be the largest hog production company in the U.S,” Atkins said.
