Smithfield Foods Lands Pork Deal in China

Friday, 24 Aug 2007 | 12:21 PM ET

U.S. meat producer Smithfield Foods said on Friday that it had reached a deal to sell 60 million pounds of Paylean-free pork to a Chinese trading company for delivery by the end of December.

Smithfield, the largest U.S. hog producer and pork processor, said there could be additional sales.

Shares of Smithfield were up almost 4 percent on the news.

News of the deal sent hog futures higher at the Chicago Mercantile Exchange early on Friday, traders said.

"Although our agreement today is modest, we believe there could be additional purchases, and we are hopeful that this is the beginning of a longer-term and growing association," Smithfield Chief Executive Larry Pope said in a statement.

Paylean, commonly used by U.S. hog producers as a growth promoter for swine, is illegal in China. That country has banned pork from some U.S. plants because it was produced with Paylean.

There has been considerable speculation in U.S. livestock and meat markets that China will need to import a significant amount of pork, including from the United States, to make up for disease losses in its own hog herds.

The buyer of the 60 million pounds was not identified and preferred to remain anonymous, Smithfield said.

On Thursday, Pope said in a conference call that the company was in talks to sell pork to Cofco, China's largest oils and food importer and exporter and a leading food manufacturer.

Smithfield can produce about 13 million hogs a year.

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