Top Pork Producer Says Loss-Making US Farmers Will Shrink Herds

(Bloomberg) — American pig farmers are losing so much money that some may soon start selling the corn they would normally use to feed animals, according to the world’s largest hog producer.

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It’s a sign that producers will soon take steps to shrink their herds, with growers losing as much as $80 a head, said Shane Smith, chief executive officer of Smithfield Foods. Demand from top buyer China is waning at a time the cost to feed animals is surging.

A drought in the Midwest has deteriorated crops, with corn at its worst conditions for this time of year since 1992. That’s squeezing profits and making it more appealing for growers to sell the grain, which has risen more than 10% in the last four trading days.

“There’s a concentration of people in the industry who grow their own corn, they grow their corn and they feed it to the animal,” he said in an interview on Wednesday at the Wall Street Journal’s Global Food Forum in Chicago. “They’re going to have to make a decision. Do I sell my corn and just forget about the animal?”

American growers usually only start shrinking herds when they face cash flow losses, and that is already happening, Smith said. He declined to comment on whether Smithfield, owned by Hong Kong-listed WH Group, is planning to cut back as well.

The American meat market is facing a glut that may take until the end of next year and into 2025 to normalize, he said. That’s all happening just as only 55% of the US corn crop was rated good to excellent, the lowest for this time of year in more than three decades, according to data from the US Department of Agriculture.

To make matters worse, California, which consumes about 15% of the nation’s pork, installed a law requiring meat sold in the state to come from animals raised in larger spaces, raising costs for producers.

“This industry is in an incredibly difficult cycle,” Smith said.