Smithfield Foods, the largest pork packer in the United States, is leaving California due to high operational costs and red tape.
California’s unfriendliness toward companies is biting the hands of businesses that help feed millions in this country.
Smithfield is providing transition assistance to all impacted employees, including relocation options to other company facilities and farms as well as retention incentives to ensure business continuity until early next year.
The company reached an agreement this week with the United Food and Commercial Workers International Union, the International Brotherhood of Teamsters, and the International Union of Operating Engineers as part of its plan to close the Vernon facility.
Here’s what the company said in a Friday news release via Wall Street Journal:
Smithfield “will cease all harvest and processing operations in Vernon, California in early 2023 and, at the same time, align its hog production system by reducing its sow herd in its Western region.”
“Smithfield is taking these steps due to the escalating cost of doing business in California.”
“It’s increasingly challenging to operate efficiently there,” Smithfield Foods spokesperson Jim Monroe told the Wall Street Journal. “We’re striving to keep costs down and keep food affordable.”
The closure, which the company attributed in a statement to “the escalating cost of doing business in California,” comes as the state rolls out a new law requiring livestock to be given more spacious confinements.
Smithfield Chief Operating Officer Brady Stewart said:
“We are grateful to our team members in the Western region for their dedication and invaluable contributions to our mission. We are committed to providing financial and other transition assistance to employees impacted by this difficult decision.”
Smithfield, owned by Hong Kong-listed WH Group Ltd, did not immediately respond to the outlets’ inquiry about whether the law, known as Proposition 12, contributed to the decision to close the plant.
More details of this report from the Wall Street Journal:
Like other food businesses nationwide, the company was hit by a combination of supply chain and labor shortages, the ongoing record-high inflation, and the war in Ukraine — a major producer of wheat—which sent grain prices soaring worldwide.
Because grain is a crucial ingredient in livestock feed, the impending grain shortage also spiked livestock feed prices, raising the California plant’s production costs.
Adding salt to economic injury were utility costs in California, which, according to the company’s spokesman, were 3.5 times higher per head than those in the 45 other plants in the country run by Smithfield.
Furthermore, according to Monroe, California’s regulatory environment has made it difficult for the pork processor to do business there.
The spokesman pointed to Proposition 12, a 2018 voter-approved rule, which mandated that food processing companies confining pigs and sows must have adequate spaces for the animals to lie down and move around.
The regulation effectively rendered confining such animals in smaller stalls unlawful, to the dismay of food producers, who pointed out that the regulation would raise food costs and push up production costs.
In addition to closing down the Vernon plant, the company said in the Friday news release that it would look at “strategic options to exit its farms in Arizona and California” in addition to scaling back its sow herd in Utah.
“Smithfield is providing transition assistance to all impacted employees, including relocation options to other company facilities and farms as well as retention incentives to ensure business continuity until early next year,” the company said.
Smithfield provides more than 40,000 American jobs at 46 facilities and nearly 500 company-owned farms.