Smithfield Foods Inc. (SFD), the world’s biggest hog and pork producer, said major customers don’t want it to let go of its farms so the company can control supply and animal care.
U.S. customers want pregnant sows to live in group housing rather than small gestation crates, a shift Smithfield started in 2007, and export clients want pork free of the feed additive ractopamine, the Smithfield, Virginia-based company said in a slide presentation in a filing today. The company didn’t specify which customers suggested keeping the farms.
Kroger Co. (KR) and McDonald’s Corp., both Smithfield customers, have in the last year asked suppliers to move to group housing for sows.
A decision several years ago by Smithfield to move toward group housing “is becoming very important to our customers and is an important factor in the recent growth in our food-service business,” Chief Executive Officer C. Larry Pope said on a Dec. 6 conference call.
Continental Grain Co., which holds a 5.8 percent stake in Smithfield, said in a letter last month that the company should consider splitting into three businesses -- one selling pork and packaged meats, another that runs hog farms, and a third based outside the U.S. -- because the unprofitable hog-raising unit hurts returns. Pope said last month that selling the farms would be a mistake.
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