October 26, 2018 / 3:07 PM / 25 days ago

Smithfield Foods warns hog disease could roil global pork market

CHICAGO (Reuters) - Outbreaks of a highly contagious swine disease could roil pork shipments worldwide next year, Smithfield Foods Inc’s [SFII.UL] chief executive officer said on Friday, further reordering the global flow of farm goods after the trade war between Washington and Beijing has crippled U.S. pork and soy exports to China.

Smithfield products are seen at a supermarket in Shanghai, China July 26, 2017. Picture taken July 26, 2017. REUTERS/Aly Song

African swine fever has spread rapidly in eastern Europe and China, the world’s largest pork producer, where the disease is traveling vast distances.

China has culled 200,000 pigs due to outbreaks and warned of higher pork prices, while France has built a fence after the disease was found in wild boars in neighboring Belgium.

The measures reflect urgent efforts to protect herds, which can be infected through direct contact with other animals, contaminated food and from people who have visited countries where the virus is present.

“African swine fever certainly has the potential to roil and disrupt the worldwide markets,” Smithfield CEO Ken Sullivan told Reuters as the company announced an unrelated plan to cover pits that hold U.S. hog manure as part of an environmental effort.

Smithfield Foods, a division of China’s WH Group (0288.HK), is the world’s biggest pork producer.

The United States could benefit from the global outbreaks if it remains free of African swine fever, according to analysts. They say U.S. farmers could gain a chance to supply markets that normally would have been served by nations grappling with the disease.

That would be good news for the sector, which is selling less pork to China because of the trade row.

In April, China slapped a 25 percent import duty on most U.S. pork items, retaliating against U.S. tariffs on Chinese steel and aluminum products. U.S. pork and soybeans also were included in a second round of tariffs Beijing introduced in July.

“There’s not that many countries China could buy from - basically the EU, Canada, Brazil and the U.S.,” Kerns and Associates economist Steve Meyer said of pork. “It could create some opportunities for us even if we do have the tariffs.”

Sullivan said China may be underreporting the number of its cases, echoing the sentiments of U.S. government officials.

“I know what people tend to believe: that the information coming out of China isn’t reliable,” Sullivan said. “I don’t take issue with that. I think that may be a fair statement.”

Smithfield has increased safety procedures at U.S. farms to keep out African swine fever, which kills hogs in as little as two days. The company has operations in Poland and Romania, where cases have been detected. Though not harmful to humans, there is no vaccine for the disease.

COVERING MANURE LAGOONS

Separately, Smithfield during the next decade plans to work with U.S. farmers to install covers on manure pits, known as lagoons, at 90 percent of its hog operations in North Carolina, Missouri and Utah.

Capturing methane from manure from the lagoons and converting it to natural gas will help meet the company’s goal of cutting greenhouse gas emissions by 25 percent by 2025. Smithfield already has covers at some of its hog farms, primarily in Missouri.

“It’s a very substantial investment; it’s not a couple of million dollars,” Sullivan said.

Smithfield faces lawsuits from North Carolina residents who live near its hog farms and say they have suffered because of the smell of the manure.

Sullivan said the goal of covering the lagoons was not to reduce odors, though.

“When you think about the carbon footprint we have, animal waste is at the top,” he said.

Covering lagoons also minimizes the risk that lagoons could overflow. More than 5,000 hogs were killed and a dozen manure pits overflowed last month in North Carolina due to Hurricane Florence, stoking worries about water contamination.

Reporting by Michael Hirtzer and Tom Polansek in Chicago; editing by Chizu Nomiyama, Matthew Lewis and Diane Craft

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