Smithfield Foods Inc., SFD 0.00% the world's largest pork producer, said Tuesday it will import corn from Brazil, a move that reflects how surging costs for U.S. feed grains are rippling through the livestock and meat industry.
The worst drought in decades has battered the U.S. Corn Belt, leading to tight supplies and sharply higher prices.
Analysts say it is unusual for a U.S. livestock producer to import supplies from South America, though it could be cheaper to buy and ship corn from there to the eastern U.S. than to get it by rail from the Midwest, in light of the high domestic corn prices. The U.S. is by far the world's biggest producer and exporter of corn.
A Smithfield spokeswoman confirmed the company's decision to use Brazilian corn in its hog-raising operations, after the Financial Times reported earlier this week that meat companies including Smithfield had arranged to ship Brazilian corn to the East Coast.
She declined to say how much of the feed the Smithfield, Va., company has purchased, or when the first shipments will arrive. Smithfield has hog-production operations on the U.S. East Coast and elsewhere.
The cost of animal feed is a critical factor for big livestock producers, such as Smithfield, which buy millions of bushels of feed each year as they stock the meat supply chain with new pens of animals ready for slaughter.
Tyson Foods Inc., TSN -0.97% the world's largest chicken producer, declined to comment on whether it has purchased Brazilian corn, citing a quiet period ahead of an August earnings report.
Spot-market prices for physical corn in the U.S. surged early this year as supplies ran low, and farmers demanded a higher payoff for their corn that was still in storage from last year's harvest.
Paulo Molinari, a consultant at Brazil's Safras & Mercado, said corn at Brazilian ports is currently going for around $290 per metric ton, compared with $345 in the U.S. Gulf of Mexico. Shipping corn to the U.S. from Brazil adds anywhere from $30 to $40 per ton to that cost.
"There's never been this big of a difference in price," Mr. Molinari said. "Brazilian corn is almost always at the same level as in the Gulf of Mexico, if not higher."
Source: Argentine Beef Packers S.A.
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