Smithfield Foods Inc. said it completed the sale of an idled hog production complex near Dalhart, Tex., to Cargill Inc. for about $33 million.
As part of a broader herd-reduction effort, Smithfield removed sows from the Dalhart complex in 2009, when the pork industry was mired in a recession-driven slump. In January, Smithfield sold a Texhoma, Okla., hog complex to Prestage Farms, Inc., for an undisclosed amount.
The Dalhart sale is a “further extension of our strategy to reduce exposure to commodity businesses and shed non-core assets," C. Larry Pope, Smithfield’s chief executive officer, said in an April 27 statement. About two years ago, the Smithfield, Va.-based company said it would cut its U.S. sow herd by 13 percent to reduce overall supplies.
While the pork industry has largely recovered from the 2008-09 recession, with hog prices hitting all-time highs earlier this month, producers are being increasingly squeezed by soaring feed costs after corn rallied to record levels.
In the three months ended Jan. 30, Smithfield’s hog production business posted an operating loss of $2.3 million, even as the unit’s revenue rose 8.8 percent, to $649.9 million. During the same period a year earlier, Smithfield’s hog production lost $78.1 million.
The largest U.S. pork producer, Smithfield said previously it expected to raise about 17 million hogs for slaughter in its fiscal 2011, which ends this month.
Cargill said the Dalhart complex, which covers 21,500 acres, will be used to produce pigs that will be transferred to “grow-out” facilities in the Midwest after they are weaned. Fattened pigs will then be sent to Cargill slaughter plants in Beardstown, Ill., and Ottumwa, Ia.
The first group of animals from Dalhart is expected to be processed in 2012, with the number increasing annually for several years, Cargill said. The company plans to make additional investments to improve and expand the complex.
Adding the Dalhart complex “will allow us to have better control over the health and quality of animals raised for our premium pork programs,” Jeff Worstell, vice president of livestock production for Wichita-based Cargill Pork, said in a separate April 27 statement.
The purchase “is strategic to our business… as global demand for pork continues to increase,” Worstell said.
In trading April 27, lean hog futures for June delivery traded at CME Group in Chicago fell 0.4 cent to 96.7 cents a pound.
Hog prices are up 21 percent so far this year and on April 20 touched $1.03425, a record high for a contract closest to expiration. CME hogs reflect carcass values.