Can Smithfield meet Chinese demand without driving up U.S. prices?

September 29, 2013|By Ryan Murphy, It's official: Smithfield Foods now belongs to Chinese pork giant Shuanghui International Holdings. The sale was approved by an overwhelming majority of shareholders on Tuesday, and with it came access to the burgeoning Chinese pork markets that Smithfield executives had been heralding as huge new source of potential profit. That raises two questions: Now that Smithfield has access, does it have the capacity to meet the demand? And will satisfying the Chinese demand increase the price of a ham in an American supermarket? Smithfield Foods chief executive Larry Pope told the Daily Press in June that the merger could temporarily increase the price of pork products in the U.S., but said farmers and processors would ramp up production and prices would settle over time. U.S. farmers would benefit from the increased demand for their products, he said. Smithfield owns 400 hog farms and contracts with 2,000 more. It employs more than 46,000 people internationally, 3,700 in Virginia. In a report to stockholders last year, Smithfield said its hog farms produce 15.8 million hogs annually. The pork segment of the company processed 27.7 million hogs in fiscal year 2012, the report said, and exports made up 18 percent of the company's pork sales for that year. The report said the total capacity of Smithfield's processing plants is about 110,000 hogs per day, or about 40 million each year. It would seem the infrastructure is in place to boost production. According to the U.S. Bureau of Labor and Statistics' Consumer Price Index, pork products in America have held fairly steady over the last year. Pork prices overall increased 1.7 percent between August 2012 and August 2013, led by an 8.2 percent increase in bacon and related

September 29th, 2013|Categories: News|Tags: |

WattAgNet interviews Clayton Bailey regarding new agribusiness regulations

What new GIPSA regulations mean for poultry industry Clayton Bailey discusses the new Grain Inspection, Packers & Stockyards Administration (GIPSA) final rules for 2013; both the feed weighing and scaling provisions and the ruling that pullets and breeders are now out of the scope of GIPSA regulations. Bailey is a partner in the Dallas law firm of Bailey Brauer PLLC. 2013-09-18

September 18th, 2013|Categories: Interview, News|

Bailey Brauer’s Clayton Bailey analyzes recent Fifth Circuit win

Bailey Brauer’s Clayton Bailey analyzes recent Fifth Circuit win for the Agriculture and Food Committee of the American Bar Association Section of Antitrust Law. Fifth Circuit reverses $25 million chicken price fixing lawsuit under PSA § 192(e) On August 27, 2013, the U.S. Fifth Circuit Court of Appeals issued an opinion reversing a judgment in excess of $25 million in favor of more than 90 contract poultry growers who alleged that Pilgrim’s Pride Corporation attempted to manipulate chicken prices in violation of Section 192(e) of the Packers and Stockyards Act, 1921 (“PSA”) by idling certain chicken processing plants and terminating the growers’ poultry grower agreements. The Fifth Circuit’s decision, styled Agerton, et al. v. Pilgrim’s Pride Corporation, No. 12-40085, 2013 WL 4523500 (5th Cir. Aug. 27, 2013), reverses and renders judgment in Pilgrim’s Pride’s favor nearly two years after a magistrate judge issued findings of fact and conclusions of law imposing liability on the company because the plant idlings and concomitant termination of the growers’ contracts presented the likelihood of an anticompetitive effect. The growers’ Section 192(e) claims stem from Pilgrim’s Pride’s restructuring efforts after seeking voluntary bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code in December 2008. According to the Agerton opinion, “[t]he primary reason” for the company’s weak financial condition “appeared to be the company’s over-extension into the commodity chicken market,” of which Pilgrim’s Pride apparently “held an estimated 50% market share.” Id. at *1. Pilgrim’s Pride targeted for idling operations “unnecessarily producing a surplus of commodity chicken at great cost to itself.” Id. As Pilgrim’s Pride idled the facilities, it also terminated the poultry grower agreements of local poultry growers who raised poultry for processing at the plants. Id. Despite

September 3rd, 2013|Categories: Judgment, News|

Smithfield Foods investor to propose rival merger

Starboard Value will oppose sale at Sept. 24 meeting, trying to buy time to firm up rival offer September 03, 2013|By Allison T. Williams, | 757-247-4535 | Daily Press Starboard Value LP, a New York investment company that owns 5.7 percent of Smithfield Foods Inc., says it will vote against a Chinese buyer's proposed takeover of the world's largest pork producer this month. In an open letter to Smithfield stockholders, Starboard said it is working with several third parties to produce an "alternative, all-cash proposal from a single entity" to counter Shuanghui International Holdings Ltd.'s proposed $4.7 billion cash acquisition of Smithfield Foods. The letter was filed Tuesday with the U.S. Securities and Exchange Commission. The vote is expected to occur Sept. 24 during Smithfield-based company's annual shareholders meeting at the Richmond offices of law firm McGuire Woods. Jeffery C. Smith, managing member of Starboard, wrote in the letter that his firm has received nonbinded written indications of interest from companies that collectively could exceed Shuanghui's deal to pay Smithfield stockholders $34 per share. Smith said it is likely that Starboard's proposal would be "superior" for stockholders, but that it needs additional time to produce its rival merger proposal. Under Smithfield and Shuanghui's merger agreement, the deal can be finalized as late as Nov. 29, Smith said. Starboard will vote against the merger on Sept. 24 in an effort to buy time to complete and submit its rival agreement. "Starboard is generally supportive of a sale of Smithfield … but we believe the board failed to run a full and fair process to sell the company … to ensure shareholders realized the highest possible price," Smith said. If unable to come up with a better acquisition

September 3rd, 2013|Categories: News|Tags: |