World’s Largest Pork Producer Plans Billion-Dollar South Dakota Revamp

With US markets off for Presidents’ Day, a quiet news cycle let the world’s largest pork producer hog some attention.

Virginia-based, Hong Kong-owned Smithfield Foods announced plans to build a $1.3 billion “state-of-the-art” processing facility in Sioux Falls, South Dakota. Local officials billed it as a “once-in-a-generation opportunity,” though they have plenty of reasons to ham things up.

Bringing Home the Bacon

Founded in 1936 and named for its “Ham Capital of the World” Virginia hometown, Smithfield was a central player in the US pork industry’s global ascendance through aggressive expansion. It acquired more than three dozen companies from the 1980s to the 2000s and is responsible for roughly a quarter of US pig production. But Smithfield’s multinational operations and massive market share couldn’t insulate it from years of rising commodity prices, particularly for grain, and it was sold for $4.7 billion to China’s WH Group in 2013 as pressure from investors over tighter margins intensified.

Since taking over in 2021, CEO Shane Smith (who, while also bearded, is not to be confused with the Vice cofounder) has focused aggressively on resizing the business and reducing its exposure to commodity swings by trimming the number of hogs it owns (to 11.5 million last year, from 17.6 million in 2019). The company has also focused on packaged meats like bacon and sausage, which make up 59% of sales and yield stronger margins than pork cuts. Last year, not long after spinning off its European business, Smithfield listed on the Nasdaq, and sales and profits have since jumped, with its latest quarterly operating profit of $310 million up 9% year-over-year. The big new Sioux Falls plant aims to add to the efficiencies, which have been a boon for investors:

• Subject to regulatory approvals, Smithfield said the new facility, which will employ 3,200 people, could be up and running by the end of 2028. At an announcement with local officials, South Dakota Gov. Larry Rhoden said the new, more advanced location will allow the company to increase its processing capacity beyond the current 20,000 hogs per day.
• Smithfield’s focus on curbing its commodity price exposure and streamlining its business has coincided with a boom in its shares, which have climbed 19% in the past 12 months and more than 12% so far this year. While US pork consumption has been mostly flat since the 1960s, coming in around 50 pounds per year, according to USDA data, Smithfield recently launched a campaign to emphasize pork’s versatility to young consumers who are more exposed to “international, bolder flavors.”

Something to Chew On: Because China’s WH Group maintains majority control of Smithfield, its plans may face heightened scrutiny. Some GOP legislators have argued that US food and agriculture ownership is a national security issue. For example, after Smithfield agreed to buy Nathan’s Famous Hot Dogs for $450 million last month, House Rep. Elise Stefanik (R-NY) tweeted that a “proud American company” had “fallen to China.”