According to a Reuters report, Smithfield Foods is now buying 65 percent of its animal feed directly from farmers, up from the 10 percent it bought in 2010. The company’s acquisitions of grain elevators has allowed it to cancel several contracts with grain handlers — an industry that Reuters states is “already reeling from multiyear lows in corn and soybean prices.”
Smithfield purchased two grain elevators in Ohio in September, which allows the company to ship grain directly from Ohio to its facility in Tar Heel, N.C. The company’s hog processing plant, the largest in the world, processes about 32,000 hogs daily.
In 2014, Smithfield canceled a grain handling contract with CHS Inc, the largest U.S. farmer-owned cooperative, which had previously supplied a Smithfield feed mill in Yuma, Colorado. Smithfield has canceled contracts with other smaller grain handlers since 2010.
"They take the Walmart approach and go right to the source," said a CHS Inc employee who declined to be identified because he was not authorized to speak publicly.
A CHS spokeswoman declined to comment.
Smithfield, purchased by China's WH Group in 2013 for $4.9 billion, plans to continue reducing reliance on grain handlers, said Robbie Montgomery, Smithfield's grain origination manager.
"That's key to our strategy, our farmer relationships. It's not us buying from a dealer; it's us buying from a farmer," Montgomery said.