Wall Street Journal  Sep 28  Comment 
Smithfield CEO Ken Sullivan said a resolution to the standoffs that have resulted in retaliatory tariffs from China and Mexico isn’t occurring quickly enough.
Insurance Journal  Aug 6  Comment 
A federal jury decided Friday that the world’s largest pork producer should pay $473.5 million to neighbors of three North Carolina industrial-scale hog farms for unreasonable nuisances they suffered from odors, flies and rumbling trucks. The...
Wall Street Journal  Aug 4  Comment 
A federal jury awarded more than $470 million to six neighbors who live near a hog farm run by a contractor for pork giant Smithfield Foods, the third lawsuit in a row the company has lost for odor and noise created by hog farming.
Insurance Journal  Jul 5  Comment 
A federal jury in North Carolina has punished the world’s largest pork producer, deciding Smithfield Foods should pay two neighbors more than $25 million for unreasonable nuisances they suffered from odors, flies and rumbling trucks after an...
Wall Street Journal  Jun 30  Comment 
Chinese-owned pork giant Smithfield Foods lost a pivotal legal battle on Friday, as a federal jury awarded $25 million to a rural couple for the nuisance caused by living near a Smithfield contractor’s hog farm.
Wall Street Journal  Apr 11  Comment 
The company that makes Smithfield bacon and Nathan’s Famous hot dogs has fallen on the wrong side of China’s new tariffs—despite being Chinese-owned.
Biomass Magazine  Apr 10  Comment 
Smithfield Foods Inc. and Anuvia Plant Nutrients are pleased to announce a new partnership to create sustainable fertilizer from renewable biological materials collected from manure treatment systems at Smithfield's hog farms.
Forbes  Nov 29  Comment 
This past year was likely the busiest ever for Stewart and his team at Smithfield, after they made an industry-leading commitment on reducing greenhouse gas emissions.
TechCrunch  Nov 11  Comment 
 I’ve tried both Blue Apron and HelloFresh before, but I don’t like being locked into some subscription, so I decided to go with Chef’d this time around. Chef’d, which raised $35.2 million in August from strategic investors like pork...
Reuters  Oct 25  Comment 
The world's largest pork company WH Group Ltd said on Tuesday its U.S. subsidiary, Smithfield Foods [SFII.UL], will for the first time sell its U.S.-produced pork online in China, via online retailer JD.com Inc.


Smithfield Foods (NYSE:SFD) is the world's largest hog producer and slaughterhouse, also known as a pork processor. Approximately half of Smithfield's profits come from processed meats sold under one of Smithfield Foods' private brand names, a percentage that the firm hopes to increase in the future. These products are sold at higher margins, even in times of rising commodity prices - whereas fresh meat is sold to butchers, who then mark up the product to earn a profit. Processing the meat itself allows the company to earn maximum profit from each sale and to pass a higher percentage of input costs onto consumers. The company earned $11.2 billion in revenue but incurred a net loss of $101 million in 2010.[1]

By vertically integrating its hog production and processed pork segments, Smithfield is insulated from the hog commodity market. It is not, however, insulated from feedstuff commodity prices, like grain, since 60-65% of the cost of raising hogs is feedstock prices. Corn makes up 85% of a pig's diet, and demand for corn, spurred by ethanol production as well as an expanding global population, has led corn prices to rise nearly 60% since 2007. Increased commodities prices depress margins as Smithfield Foods is unable to completely pass on feed prices to consumers.

Company Overview

Smithfield Foods operates in four segments: pork (its largest segment), international, hog production, and other (turkey production):[2]


The pork segment consists of fresh pork and packaged meat. Smithfield is shifting strategy towards its packaged meat business, due to the higher margins of private labels. Meat is sold under Smithfield, Farmland, John Morrell, Gwaltney, Great, Cumberland Gap, Armour, Eckrich, Margherita, LunchMakers, and Dinner Bell, among others. The pork segment procures about 52% of hogs from the hog production segment and the rest from the hog spot market.

Hog Production

The hog production segment consists of raising and selling hogs. It has approximately 900,000 sows producing 14 million market hogs annually, making it the largest producer of hogs in the world. By integrating this segment with the processed pork segment, Smithfield Foods hopes to use economies of scale to decrease the hog cost for each.


The international segment consists of several international meat processing operations. Smithfield has controlling interests in processing plants in Poland, Romania, and the United Kingdom, and smaller interests in plants in Western Europe, Mexico, and China.


The other segment consists of turkey production relating to the 49% stake that Smithfield Foods owns in the Butterball company.

Business Growth

FY 2010 (ended May 2, 2010)[1]

  • Net sales fell 10% to $11.2 billion. The company attributes the decline to lower sales volume created by the sluggish economy.
  • The company incurred a net loss of $101 million, an improvement over the net loss of $198 million in the previous year.

Trends and Forces

  • Rising Feedstuff Prices Cut Smithfield Foods' Margins as Corn Is 85% of a Pig's Diet: Smithfield Foods is heavily dependent on favorable pricing of feedstuff, such as corn prices and soybeans, as well as hog and cattle prices. Corn prices have risen sharply since the beginning of 2007, as ethanol producers have increased their demand for the commodity (rising oil prices, in turn, have increased demand for ethanol). Smithfield Foods engages in various hedging activities to "lock in" to current prices and protect itself from price increases. It does this by buying forward grain contracts at current prices. This means the company is protected in the case of raising prices, but is also liable in the case of falling prices because it will continue to pay the contracted rate. Any long-term, significant increase in feedstuff prices has the potential to seriously depress margins and reduce profitability. Though hog prices have steadily declined, Smithfield Foods is insulated from price increases by supplying its processed pork segment with lower priced hogs from its hog production segment.
  • Smithfield Foods Has Significant Exposure to Several Customers: Smithfield's top ten customers, including McDonald's (MCD) , Subway, and Wal-Mart Stores (WMT), represented 26% of net sales. However, Smithfield does not have long-term sales agreements with any customers and does not, therefore, have a guaranteed source of revenue. The loss of one of these top customers would have a significant impact on Smithfield's balance sheet.
  • Smithfield's Transition towards Value-Added Meats Will Increase Margins: Smithfield Foods is looking to increase revenue from processed meats (currently just over half of revenues). These products carry a higher margin than fresh pork, because they are sold one step closer to the consumer on the supply chain - to stores, rather than to butchers who then mark up the meat once again before selling to stores. Rising commodity prices factor into the price that consumers must pay for their pork, but these input costs cannot be passed on in their entirety. By eliminating an extra step in the sales process, Smithfield can pass a higher percentage of production costs onto the consumer as well.


Smithfield Foods is currently the world leader in hog production and has 25% of the market share in United States pork.


  1. 1.0 1.1 SFD 2010 10-K "Selected Financial Data" pg. 28
  2. SFD 2010 10K "Description of Segments" pg. 5-8
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki