The US pork industry, already struggling with weak demand, is facing another blow: high gasoline prices. Pork producer Smithfield Foods Inc. said on Tuesday that fuel costs, which have surged since the start of the war in Iran, weighed on its quarterly pork sales.
"US consumers remain pressured due to persistent inflation and high gas prices," which has impacted consumption levels, Chief Executive Officer Shane Smith said on the company's earnings call. Higher gasoline prices strain overall consumer wallets while also weighing on American driving habits, as hot dogs and bacon breakfasts are linked to US car culture. The US Department of Agriculture said bacon consumption is a "complement to restaurant meals and road trips, which historically slow when inflation and gasoline prices are high."
Wholesale pork values have plummeted to the lowest level in more than five years, according to the USDA. Weak demand has weighed on the values of pork bellies, used for bacon, and hams. The pork industry has not reaped the full benefits of the US protein craze, as shoppers remain less familiar with its protein content and how to cook the meat. Meanwhile, US gasoline demand was lower in June and July compared with the prior year, according to the US Energy Information Administration, a sign that high prices weighed on driving during the peak summer travel season.
Smithfield cut its annual guidance for the second time this year after third-quarter sales dropped 8.3%. Annual adjusted operating profit is now seen at $900 million to $1 billion, down from $1.23 billion to $1.38 billion. Its fresh pork and hog production segments are expected to post losses. Smith said the company is "focused on reducing market risk," including a new long-term supply agreement that will reduce annual internal hog production by 900,000 animals.
The company continues to evaluate acquisition opportunities, following its closing of the Nathan's Famous hot dog brand deal. Smith said Smithfield will accelerate its innovation pipeline, building on launches like its grass-fed beef hot dogs. Smithfield shares were up 2.3% as of 11:35 a.m. in New York.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing