Smithfield Foods ends contracts with 26 US pig farms, citing oversupply

By Tom Polansek and Pushparaj 1

CHICAGO (Reuters) - Smithfield Foods said on Tuesday it will end contracts with 26 hog farms in the U.S. state of Utah, in the latest contraction by the world's largest pork processor in the face of an industry oversupply.

Pork producers have been losing money as pig prices and consumer demand for pork have struggled at a time of high costs for labor and other expenses.

Smithfield, owned by Hong Kong's WH Group, said it will terminate employees who support its dealings with farms that raise hogs under production contracts. Layoffs may total about 70 employees, or up to one third of the 210 workers in Smithfield's Utah hog production operations.

"Our industry and company are experiencing historically challenging hog production market conditions," CEO Shane Smith said.

Smithfield in October said it would close a pork processing plant in Charlotte, North Carolina. The company previously said it was permanently closing 35 hog farm sites in Missouri and laying off employees.

Smithfield needs such cutbacks to remain competitive, Smith said. A company statement cited an "industry oversupply of pork, weaker consumer demand and high feed prices" as challenges, though futures prices for corn used for livestock feed last month fell to their lowest level in nearly three years.

U.S. meat companies also grappled with an excess of chicken this year and tightening supplies of cattle due to drought.

Tyson Foods, the biggest U.S. meat company by sales, shut U.S. chicken plants that employed thousands of workers. Last month, Tyson said it would also close two plants where hundreds of workers cut and package meat.

(Reporting by Tom Polansek; Editing by Leslie Adler)