Smithfield sells off pigs as attention turns toward lunch meats

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Dive Brief:

• Smithfield Foods is rapidly selling off pigs as the U.S' largest pork producer looks to recover losses in hog production and build its presence in packaged meats.
• The company is expected to produce an estimated 11.5 million hogs in 2025, down nearly 35% from its high of 17.6 million in 2019, executives said on an earnings call.
• Smithfield in 2023 ended contracts with pig farmers in Utah and other western states where raising livestock is more expensive. The pork giant also has recently converted some of its contract growers into independent suppliers for the company.

Dive Insight:

Smithfield is reducing its exposure to agricultural markets as it expands its presence in the more lucrative packaged meats segment, which has driven more than $1 billion in profits for three consecutive years.

The hog industry, while expected to turn a profit this year, has overcome serious headwinds that have reduced earnings across the sector. An oversupply of pigs, lower demand and higher costs of raising pigs created “the perfect storm” in 2023, said Mark Hall, Smithfield’s chief financial officer.

The company's hog production division posted a $756 million loss in 2023 and a $152 million loss last year. Hog production pressured Smithfield's overall sales last year, which were down 3% compared to 2023.

In the medium term, the company wants to own 10 million hogs, or around 30% of the needs of Smithfield's fresh pork segment.

“Smithfield [is] going from a commodity company to more value-added premium products,” Steve France, president of packaged meats, said in the firm's earnings call, its first since becoming a publicly traded company.

The packaged meats giant is also reducing its presence in holiday hams and other lower-margin seasonal items. Instead of targeting consumers who may buy a large ham a couple of times a year, Smithfield wants to reach shoppers who purchase deli meats more often.

“That same consumer or multiple consumers are now buying our product, and now we're moving anywhere from 10 to 15 different units instead of two to three units to that consumer,” said France.

Lunch meats have provided a prime opportunity for Smithfield, both through its own Smithfield Fresh brand and as a supplier for private labels. As inflation pushes more consumers to trade down to private label, Smithfield can command a profit by maintaining a presence in that space while also selling its own premium product.

Smithfield's packaged meats unit posted record profits in 2024, rising 6% from the previous year, to $1.1 billion.