When it comes to work, Murphy-Brown goes 'whole hog.' The livestock production subsidiary of pork-processing giant Smithfield Foods is the world's largest hog producer. Murphy-Brown maintains some 827,000 breeding sows (more than 90% of which are genetic lines that produce the leanest hogs possible) and brings to market more than 16 million hogs annually. It operates about 450 company-owned farms in a dozen states. The company extends its hog production through partnerships with more than 1,500 independent farmers and contract growers in the US. More than 75% of Murphy-Brown's revenues are attributable to hogs sold to Smithfield Foods' fresh pork and packaged meats subsidiaries, including John Morrell.
Murphy-Brown's profit or loss has traditionally been tied to the market price for live hogs and the cost of animal feed. (The higher the price and lower the cost, the better its results.) Ownership of its hog supply is intended to help Smithfield Foods reduce its exposure to the swings in price and cost, usually passed onto pork processors through higher prices. Nonetheless, following a consecutive three-year operating loss in hog production, which put a dent in Smithfield Foods' results, the parent announced plans to place Murphy-Brown on a cost savings initiative.
In fiscal 2011 hog production managed to regain profitability, in part due to the parent's sale of its interest in a Butterball joint venture, formerly accounted for under hog production. Hog production farms in Oklahoma, Iowa, and Texas, which did not supply Smithfield Food pork processing plants, were also sold.
Among other areas addressed in the cost savings initiative, Smithfield intends on reconfiguring and converting farms, axing high-cost, third-party hog-grower contracts and breeding stock sourcing contracts. In 2011 about 65% of its market hogs were bred on contract farms.
Murphy-Brown's future looks to further brighten due to a biogas joint venture formed between Smithfield Foods and Asian egg producer, DQY Agriculture Technology in early 2012. The US-based venture, operated by their subsidiaries Beijing Helee Bio-Energy Technology and Murphy-Brown, will use waste from a Murphy-Brown hog farm to produce methane and generate power. The project is projected to produce seven million kilowatt hours of electricity and reduce carbon dioxide emission by 42,000 tons a year. Eventually waste from all Murphy-Brown hog farms will be used in the venture, resulting in considerably lower emissions, higher available electricity, and a new revenue stream for the hog producer.
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