Chinese meat processor WH Group acknowledged a $409 million loss in its pork operations in the first six months of this year, with all of that (and more) coming from its U.S.-based Smithfield Foods.
While sales in China and Europe eked out $42- and $44-million operating profits, the U.S. and Mexican operations posted a $495 million operating loss. U.S. and Mexico account for 53% of the company’s sales. Smithfield administers both of those geographies.
Sales in Europe and China recorded small increases, but sales dropped 5% in U.S. and Mexico to just over $3 billion for the period.
High feed costs and low pork values have been hurting U.S. hog producers and processors, and while the cost to retailers has softened, those retailers have kept prices high, weakening demand.
It’s been a difficult start to 2023 for many processors of animal proteins. Tyson has been dealing with unexpected losses in all three meat categories – beef, pork and poultry – for many of the same reasons.
“Amid abundant supplies and soft demand, the average pork cut-out value as reported by USDA was $1.83 per kg in the review period, representing a decrease of 19.7% over the comparable period,” WH wrote in its mid-year financial report. “The average hog price, as published by Chicago Mercantile Exchange, also decreased by 20.4% to $1.29 per kg in the review period.
“As hog prices decreased while raising costs remained at historical highs, hog producers were making sizable losses. On a positive note, export demand picked up as price competitiveness of U.S. products improved with lower hog and pork prices.”
Murphy-Brown LLC, the livestock production division of Smithfield Foods, will close 35 hog farm facilities in northern Missouri in October, according to news reports.
WH Group expects adverse market conditions to continue through the end of this year. WH is the world’s largest pork processor. It bought Smithfield Group in 2013.
