There’s been a torrent of bad news in the meat sector in the last two months. Tyson Foods reported its first quarterly loss since 2009; HyLife’s processing plant in Windom, Minn., declared bankruptcy; Smithfield Foods is closing 40 sow farms in Missouri; Olymel Foods announced permanent closure of its Vallée-Jonction hog plant in Quebec; and despite rising sales, Maple Leaf Foods reported a loss in the first quarter of 2023.

“Everybody’s feeling the pinch, and these sorts of restructurings are a function of the economic challenges that we have right now,” says Paul Marchand, senior risk management analyst with H@ms Marketing.

WHY IT MATTERS: Uncertainty about input costs, demand and price are making profits more difficult to achieve for many livestock producers.

Marchand singled out HyLife’s Windom plant closure as an example.

“It was purely market conditions that drove that decision,” he says. “It talked about an inflationary environment, a high-cost environment, and just difficult global economic challenges to navigate.

“The plant was losing $6 million a month, according to their bankruptcy filings. This is all a function of the economic conditions that we’re in.”

Marchand says those conditions developed as a result of policy decisions made during the pandemic.

“You can’t disrupt supply chains by asking everybody to restrict their movement. That’s going to create challenges,” he says. “And then you pump a bunch of money into the economy on both sides of the border because you’ve asked people to stay home.”

He doesn’t label that as right or wrong in terms of health policy.

“I’m not going to get into that, but it was economically very disruptive,” he says. “We are feeling the fallout of those decisions that were made in 2020, and we’ll continue to do so until we see a new normal develop.”

Marchand says that new normal won’t be realized until the effects of this inflationary, high interest rate environment are settled, but the timing of that is hard to predict.

“There is a policy lag with any of these decisions so we’re just waiting (for) the impacts of the policy to kind of catch up,” he says. “The good news is, we’ve seen a slowdown in demand and a turnaround in inflation rates. While I don’t think that we see an interest rate rise for the remainder of the year, they almost certainly are not going to cut.”

Current times signal a market correction, he says. The excess money supply caused an inflationary bump and extra dollars in circulation increased demand for higher-cost proteins, which drove up all meat prices.

Then the Bank of Canada and the U.S. Federal Reserve began raising interest rates to bring inflation under control. Companies that were over-leveraged are now feeling the pinch with higher debt-servicing costs. For the same reasons, consumers had to tighten their belts so their taste for high-priced proteins diminished.

“It’s not like you can say, ‘I don’t feel like paying my line of credit today’,” says Marchand. “But I can very easily buy ground pork instead of a loin or ground beef instead of a steak.”

The pork sector is being hit hardest by these market forces. When Maple Leaf reported its first-quarter loss, it blamed “pork market headwinds” in addition to inflationary pressures.

When demand for pork rose in 2021, the industry began producing more pigs. Now that consumers are cutting back, there’s an oversupply.

“As prices go up, sometimes producers start to increase production, perhaps a little too early,” said Stephen Heckbert, executive director of the Canadian Pork Council. “Sometimes we outpace market demand with production. And that’s the cycle we’re in at this moment.”

But Heckbert says the situation is largely self-correcting.

“There’s no perfect world where we can match the market exactly. We’re invariably either too high or too low. When we’re too low, prices go up.”

Heckbert is encouraged by recent developments in overseas markets, where roughly half of Canadian pork goes.

“We’re back in China now. The Philippines is a growing market for us now. As more people enter the middle class, pork consumption is going to grow.”

The price of hogs is determined by the U.S. domestic market, the destination for only 20 per cent of Canadian pork. So, while demand for Canadian pork in overseas markets has a negligible effect on the price producers get for hogs, it does ensure there are markets for Canadian pork when the U.S. market is oversaturated.

The beef sector has been somewhat insulated from economic pressures because producers reduced herd sizes in the face of high feed prices after several years of drought. Demand has never caught up. Now, with consumer spending choked by high interest rates and rising prices, demand will inevitably fall.

“Inflationary pressures have been a challenge for the last couple years from the input side of things in the beef space,” says Manitoba Beef Producers general manager Carson Callum, adding there is still a strong outlook for cattle prices.

“Obviously there are market headwinds that continue to be at play, and producers are monitoring those.”

He recommends that producers take advantage of risk-management programs like livestock price insurance while prices are high and coverage is favourable.

Risk management programs are also an important tool for pork producers, says Manitoba Pork general manager Cam Dahl.

He recommends that producers look into risk management tools where there’s forward contracting or forward pricing, on the feed side as well as the product side.

“That’s not always the perfect solution, but in dealing with that volatility right now, those tools are becoming more and more valuable.”

Dahl says volatility extends to the farm level.

“Whether it’s farrow to finish, if you’re just producing isoweans, or if you’re a nursery or a finisher, everybody’s losing money right now.

“Grain farmers will tell you their prices are falling, but we’re still seeing some of the highest feed prices we’ve seen in history,” says Dahl. “Unfortunately, right now, the price of a hog is falling faster than the price of feed.”

While things remain uncertain, Dahl says he doesn’t expect to see any plant closures in Manitoba.

“I’m confident that there is really a Manitoba advantage to having the processing industry here,” he says. “I don’t see that under threat.”

The post Meat industry hits hard times appeared first on Manitoba Co-operator.

The group, Socially Responsible Agriculture Project (SRAP), reviewed 30 years of Missouri Department of Natural Resources (DNR) records on 21 hog farms now owned by Smithfield, the nation’s top pork company, which bought them in 2006 from Premium Standard Farms (PSF).

Citing the state data, the group found that more than 4.6 million gallons of manure had been released into emergency containment structures or spilled into waterways in the past 15 years — an increase of 70 per cent from the previous 15 years during PSF’s ownership.

State regulators verified SRAP’s data, but said the vast majority of the releases from the Smithfield operations were contained on site and never reached nearby waterways.

The causes of the manure releases include clogged pipes, equipment failure and lack of proper maintenance, according to the records contained in the report, which DNR verified are accurate.

The post Manure releases from Smithfield hog farms raise environmental concerns appeared first on Manitoba Co-operator.

Now, that role no longer exists, the company confirmed.

The plant gradually moved employees who worked as safety monitors to other positions, said BJ Motley, president of the United Food and Commercial Workers (UFCW) union branch that represents Smithfield workers in Sioux Falls, South Dakota.

Smithfield, which is owned by Hong Kong-listed WH Group Ltd., said it shifted the monitors’ duties to other personnel starting in the second quarter of this year because COVID-19 safety protocols became “second nature” and vaccines were available. As for cleaning, the company said facilities are “routinely sanitized for food safety reasons.”

Across the country, U.S. meat and chicken plants that reported some of the country’s largest coronavirus outbreaks last year have eased or adjusted protective measures implemented near the start of the pandemic, according to interviews with 10 plant employees, union officials and advocates for workers.

Safety concerns in slaughterhouses, where employees are often in close quarters, have made it harder for meat processors to hire and retain workers at a time when labour is already scarce and demand is booming.

Meat companies including Smithfield, Tyson Foods Inc. and JBS USA say employee health is a top priority and that they require masks in plants, even though many states have relaxed COVID-19 mask and social distancing rules.

Workers and advocates say the companies could do more as the contagious Omicron variant rages and soaring meat prices boost profits.

“We don’t have anybody monitoring social distancing. We don’t have anybody wiping tables down. It’s really back to normal,” Motley said.

About 59,000 meat-packing workers were infected with COVID-19 through January at U.S. plants run by Smithfield, Tyson, JBS, Cargill Inc. and National Beef Packing Company, a U.S. House of Representatives subcommittee report said in October in the most comprehensive data to date.

Smithfield said it invested more than US$800 million to protect employees from COVID-19 and follows federal health and safety guidelines.

The U.S. Occupational Safety and Health Administration cited Smithfield in 2020 for failing to protect Sioux Falls workers from COVID-19 and said last month the company agreed to assess its operating procedures as part of a settlement. Smithfield said the citation was without merit last year.

Along with masks, Smithfield uses barriers between work stations and social distancing “when feasible” to keep employees safe, spokesman Jim Monroe said.

“We have in no way rolled back COVID-19 safety protocols,” he said. “We are confident that our protective measures are effective in mitigating COVID-19 illness among our employees.”

A Smithfield plant in Vernon, California, operating under the name Farmer John, stopped having employees work as social distance monitors roughly three months ago, said Darryl Blackwell, a UFCW steward who slices fat from pork in the plant. He would like to see them return.

“It’s pretty much do whatever you want as far as the social distancing,” he said. “With this new variant, you just can’t be too cautious.”

Smithfield confirmed it shifted monitors’ duties to other workers. The company did not provide data about vaccination rates. It said Smithfield hosted about 200 on-site vaccine drives that include boosters and that shots are widely available.

“Our vaccination and case rates are excellent,” Monroe said.

Motley estimated the South Dakota plant is about 60 per cent vaccinated, compared with a rate of about 65 per cent nationwide. He and Blackwell said boosters had not been offered at their facilities.

Rival meat processor JBS USA, owned by Brazil’s JBS SA, started staggering employees’ break times at slaughterhouses last year as a way to promote physical distancing. In July 2021, the company stopped the practice at a massive beef plant in Greeley, Colorado, the UFCW Local 7 union branch that represents plant workers said.

“Unless they do reconstruction of the plant or they slow down the line speeds, they’re still elbow to elbow in the plant,” said Kim Cordova, president of UFCW Local 7.

Company spokeswoman Nikki Richardson said JBS kept the vast majority of COVID-19 protocols in place and adjusts procedures as it evaluates cases among employees and in the community.

The Greeley plant has reported more than 400 cases of COVID-19 among workers, including 19 since Oct. 25, 2021, state data shows.

JBS said the Greeley plant has an 80 per cent vaccination rate and 35 per cent have received boosters, while 86 per cent of all its workers are vaccinated. New hires must be vaccinated.

The post U.S. meat plants relaxed some COVID-19 safety protocols after outbreaks appeared first on Manitoba Co-operator.

Smithfield’s plant in Tar Heel, North Carolina, is allowed again to export pork to Mexico that was produced on or after Aug. 6, the USDA said in a notice on Aug. 9. Meat produced from June 16 to Aug. 5 cannot be shipped, it said.

Mexico stopped accepting shipments from the plant on June 16 over concerns about the quality of pork skins, in a blow to the U.S. hog sector.

Smithfield, owned by Hong Kong-listed WH Group, has said the issue was not related to Smithfield or its facility, but was due to a third-party company.

Between April and June 16, Mexican inspectors at the U.S.-Mexico border rejected three pork skin cargoes from the Tar Heel facility as well as another shipper, Rava Forwarding, Mexico’s health safety agency told Reuters in June.

Mexico halted shipments from a Rava Forwarding cold storage facility in Laredo, Texas, on June 18. The company is now eligible to ship meat with export certificates issued on or after Aug. 6, according to the USDA.

The post Mexico agrees to resume pork shipments from Smithfield plant in U.S. appeared first on Manitoba Co-operator.

The end of slaughtering in Smithfield, Virginia, is the latest reconfiguration for the company’s namesake plant and follows a months-long internal review of its East Coast operations, Smithfield Foods said in a statement.

The company, owned by Hong Kong-listed WH Group, is shifting slaughtering to some of its 47 other U.S. facilities and spending $5 million to upgrade the Virginia plant to produce more packaged bacon, ham and other pork products, said Keira Lombardo, chief administrative officer.

Smithfield, Virginia, is a tourist destination based on its history as Smithfield Foods’ hometown and boasts a museum featuring the world’s oldest ham.

The company retooled the plant in 2019 to ship hog carcasses to China, the world’s top pork consumer, and again last year to supply more pork to U.S. customers during the COVID-19 pandemic.

U.S. meat companies came under scrutiny during the pandemic as plant workers got sick and died, and slaughterhouse shutdowns highlighted supply chain vulnerabilities.

The post Smithfield Foods stops slaughtering pigs at U.S. hometown plant appeared first on Manitoba Co-operator.

The pandemic has reduced demand for meat at restaurants, cafeterias and other food-service outlets, delivering an economic shock to Smithfield and its rivals. Thousands of meat-packing workers have been infected with the new coronavirus, including at Smithfield plants, and meat companies have faced criticism for not doing more to protect their employees.

Smithfield CEO Dennis Organ, who was previously the company’s chief operating officer, had been scheduled to take the reins in early 2021, but the change was pushed up to late November.

The shakeup announced by the Smithfield, Virginia-based company on January 7, includes the retirements of the chief commodity hedging officer, two executives in the packaged meats division and a senior adviser to the CEO, after decades at the company.

The company, owned by Hong Kong’s WH Group Ltd., said Organ had promoted some executives to new positions, including Russ Dokken to chief sales officer from executive vice-president of U.S. packaged meats.

Scott Saunders becomes chief supply chain officer after working as executive vice-president of the company’s U.S. supply chain and president of fresh pork.

Joe Weber was promoted to chief commodity hedging officer from executive vice-president of growth and emerging business.

“This team will carry our company forward and make Operational Excellence our standard,” Organ said in a statement.

Smithfield announced the retirement of Dhamu Thamodaran, who was chief commodity hedging officer, executive vice-president and chief strategy officer.

Also retiring are John Pauley, chief commercial officer of packaged meats; Bill Michels, senior vice-president of operations for packaged meats; and Michael Cole, senior adviser to the CEO and corporate secretary, according to Smithfield.

The company said in November that Organ, who replaced former CEO Kenneth Sullivan, had “moved swiftly to install a new leadership team.”

Smithfield last year said it was headed for record profits before the pandemic hit and spent more than $600 million on employee health and safety measures.

The post Smithfield Foods plots new course appeared first on Manitoba Co-operator.

Meat packers are under mounting pressure to protect workers after more than 16,000 employees across 23 U.S. states were infected with COVID-19 and 86 workers died in circumstances related to the respiratory disease, according to Centers for Disease Control and Prevention data.

Democratic senators Elizabeth Warren and Cory Booker last month said Smithfield, Tyson Foods Inc., JBS USA and Cargill Inc. had put workers in harm’s way to maintain production. The senators asked the companies how much meat they shipped to China while warning of domestic shortages due to slaughterhouse outbreaks.

Smithfield, in a June 30 response recently made public, said it erected physical barriers and took other steps to protect workers in areas where social distancing is impossible.

The company, owned by China’s WH Group Ltd., balked at slowing processing line speeds to increase space between employees. It said slowdowns would back up hogs on farms, leading to animal euthanizations and higher food prices.

“For better or worse, our plants are what they are,” Smithfield chief executive officer Kenneth Sullivan said. “Four walls, engineered design, efficient use of space, etc. Spread out? OK. Where?”

Tyson told the senators it decreased the number of employees on production lines and created barriers or required face shields in areas where employees cannot be distanced.

“These companies clearly cannot be trusted to do what is right,” Booker said. He and Warren called for new legislation to protect workers.

The post ‘Spread out? Where?’ Smithfield says not all plant workers can be socially distanced appeared first on Manitoba Co-operator.

Results posted on the North Dakota state government website put the unofficial final vote count from the ballot measure at 98,677 votes for “No” and 31,679 votes for “Yes.”

“We always believed that the people of North Dakota would agree that the family farm structure is best for our state’s economy and our communities,” Mark Watne, president of the North Dakota Farmers Union, said in release June 14.

“The results tonight are a strong message that the people don’t want corporate farming in North Dakota.”

The NDFU and other groups that collected signatures to put the referendum on the ballot have said family farmers cannot compete with large agricultural firms with no ties to the communities where they operate.

Corporate and foreign control of U.S. farmland has been a hot-button issue in several major agricultural states in recent years as a multi-year commodities boom that began in 2007 has attracted non-farm investors.

State laws prohibiting corporations and foreign entities from owning U.S. farmland complicated a $4.7-billion acquisition in 2013 of U.S. pork producer Smithfield Foods by China’s Shuanghui International (all figures US$). The deal ultimately closed.

This February, a U.S. district judge issued an injunction barring Nebraska officials from enforcing the state’s ban on farmland ownership by corporations.

The North Dakota groups campaigned for a “No” vote on the referendum, rejecting Senate Bill 2351, which was signed into law in March 2015 by Republican Governor Jack Dalrymple.

Supporters of the bill, wanting a “Yes” vote, argued dairy and pork operations are on the decline in the state and cannot survive without corporations that can finance expensive equipment and compete regionally, according to the Yes for Dairies + Pork Producers website.

It is one of nine states that have laws limiting corporate farming, according to the National Agricultural Law Center. The North Dakota law, which dates to the Great Depression, says farming or ranching companies must have no more than 15 shareholders or members who must belong to the same family, to a distance of first cousins.

Senate Bill 2351, supported by Governor Dalrymple, was to exempt dairy and swine production from the corporate farming prohibition.

The post North Dakotans put ‘corporate’ farming to vote appeared first on Manitoba Co-operator.

The value of the transaction is estimated by Smithfield to be US$7.1 billion.

A number of questions began to run through our heads.

Good deal

At first glance, it appears to be a good deal for the stockholders of Smithfield. They will receive a bonus of approximately $8 per share if the deal goes through.

Smithfield asserted that the sale would be good for U.S. producers because it would increase the export market for U.S. pork. It could be expected that increased exports would increase the income of U.S. pork producers and guarantee them a stable market. On the other hand, the new owner could increase Smithfield’s internal pork production, thus reducing slaughter capacity for producers without a contract. That could put negative price pressure on independent pork producers with no place to slaughter their pigs.

Like with pork producers, the impact of the sale on U.S. consumers could be positive or negative. If pork exports to China increase faster than production, U.S. consumers could see a shortage of pork and an increase in the price. But if the goal of Shuanghui is to access cheap exports for Chinese consumers, U.S. consumers could benefit as well.

Though the stated purpose of the purchase is so that Shuanghui can supply the Chinese market with safe, high-quality pork, one wonders if there is more to it than that. Once Shuanghui gets their production in China up to U.S. standards, will it want to turn the pipeline around and ship pork the other way? A June 3, 2013 article in the New York Times reported that prior to the deal, Shuanghui’s chairman, Wan Long, had said: “Our goal is to be the biggest in China, and the leading meat supplier in the world.”

Many of China’s purchases are for raw materials like ore, scrap metal, and soybeans that can be further processed in China, providing employment for their population and products to export, creating a positive balance of trade for China. In this case they are talking about allowing the further processing to remain in the U.S. Are we missing something?

Given the difference between the wages and costs in the U.S. and Brazil and Brazil’s potential for expansion, why didn’t they purchase a Brazilian firm?

In addition to securing food for the future, is the potential Smithfield deal also part of a general Chinese policy of making strategic worldwide investments as a means of benefiting from the economies and strengthening political allegiances with the U.S. and other countries?

As we know in the case of the U.S., China has quite a stash of accumulated dollars from years of a negative balance of trade on the part of the U.S. to purchase productive assets. With the Smithfield investment as an example, they get the profits that used to go to domestic investors and pork to boot.

The post Analyzing the Smithfield deal appeared first on Manitoba Co-operator.

The need to feed the world’s most populous nation has seen Chinese firms gobble up foreign dairy, sugar and cereal producers, and Shuanghui International’s $4.7-billion bid for top U.S. pork producer Smithfield Foods is just the country’s latest food ‘land grab.’

Beef could be next on the menu as Chinese opt for the protein-rich meat, which is seen as a higher-quality product than pork, the nation’s staple. While pork and poultry remain China’s meats of choice, beef consumption is growing rapidly as hot-pot restaurants, Korean barbecue joints and burger bars set up across the country.

Chinese consumers are also more wary about cheaper local meat products after a series of recent food safety scandals — from bird flu to rotting pig carcasses in Chinese rivers.

All of which is making imports more affordable — good news for major beef producers such as Australia and New Zealand — and encouraging Chinese firms to look overseas to secure future supplies.

“There are many companies closely following this market and looking for the right time to come in. One of the major reasons is food safety,” said a consultant who advises Chinese agribusinesses.

One state-owned agribusiness firm is in talks with a foreign beef supplier and eyeing future overseas production, he said, asking not to be named because the information is commercially sensitive.

Chongqing Grain Group, a state-owned business that has expanded aggressively overseas in recent years, plans to invest in breeding beef cattle in Australia, its president Hu Junlie said, without giving further details. Tianjin Dawnrun Beef, too, has been buying up rivals to expand its business and is looking to breed cattle in Australia, said a company official.

A struggling industry

China’s beef imports soared in January-April to more than 75,000 tonnes, more than 10 times those in the same year-earlier period, and look set to far outpace initial forecasts. That’s still just a fraction of China’s total consumption of around 5.6 million tonnes a year, but the proportion is set to swell.

“Domestic beef prices are going up faster than the import price,” said Joy Tang, China manager at Meat and Livestock Australia. “The gap is closing.”

Traditionally the domain of China’s Muslim minorities, raising cattle for meat only began to expand in the 1980s, but remains small scale and fragmented.

One of China’s earliest beef processors, Fuhua slaughters 30,000 head of cattle a year, with about a quarter of those raised on its own farm. Its Chinese Yellow-Swiss Simmental crossbred bullocks are reared in stalls on farmland that once supplied Chinese emperors, but is now overlooked by high-rise apartments — a sign of the capital’s spreading urban sprawl that is rapidly swallowing up agricultural land and pushing up farmers’ costs.

“Farmers aren’t breeding anymore. It gives poor returns and they prefer to move to cities to work where they can earn 100 yuan ($16.30) a day, while a cow only earns them 3,000 yuan a year,” said Fuhua sales manager Liu Chunsheng.

“The beef market is very scattered. There’s not a single big company,” Liu added. “It’s to do with capital. This year everyone’s losing money. Live cattle are expensive and imports are cheap. It’s quite simple.”

China currently only allows beef imports from Australia, New Zealand, Argentina, Uruguay and Costa Rica, but recently added four Canadian firms to its list of approved exporters. It has also signed a framework deal with India to import buffalo meat.

For now, the Chinese eat just four to five kg of beef per head each year, around a fifth of the global average.

“Chinese knowledge about beef is still very low. We’re teaching butchers how to cut the meat and consumers how to appreciate a good steak,” said Tang at Meat and Livestock Australia.

The post With big U.S. pork buy and diet shift, China now asks: ‘Where’s the Beef?’ appeared first on Manitoba Co-operator.