By Tyler Durden
California looks like it is reaching its long-term objective: make it impossible to do business within the state.
Meat-packing giant Smithfield Foods announced a 1,800-person pork processing plant in California would shutter operations next year, citing the rising cost of doing business in the liberal-run state.
Smithfield, owned by Hong Kong-based pork conglomerate WH Group Ltd., “will cease all harvest and processing operations in Vernon, California in early 2023,” the company said in a Friday press release.
“Smithfield is taking these steps due to the escalating cost of doing business in California,” the company continued.
WSJ explains the company’s reasoning behind winding down operations at the Vernon plant is due to a multitude of factors, including the cost of energy to power plants is 3.5x higher per head to produce pork than any of its 45 other US plants.
“It’s increasingly challenging to operate efficiently there,” company spokesman Jim Monroe told WSJ. “We’re striving to keep costs down and keep food affordable.”
Monroe also made clear the regulator environment in the state wasn’t favorable for meat processing plants.
Smithfield also said part of the reason it closed the facility was the regulatory environment in the state. Specifically, a state law passed by voters in 2018 and backed by the Humane Society, called Proposition 12. It requires breeding pigs, or sows, to be able to lie down and turn around in spaces in which they are housed, essentially outlawing pork produced using small gestation stalls in most circumstances. -WSJ
Smithfield will also “decrease its sow herd in Utah and is exploring strategic options to exit its farms in Arizona.” The planned shutdown isn’t expected to reduce the supply or increase the costs of pork products at the supermarket.
The announcement’s timing comes as a string of fires and explosions damage major food processing plants across the country. The latest fire hit a huge poultry farm in Minnesota that supplies eggs to top supermarkets.
What’s also concerning is the US hog herd isn’t expected to increase anytime soon as soaring input costs, such as higher feed, diesel, labor, and material costs, have financially strained farmers.