Dive Brief:

• Smithfield is investing $45 million into its Sioux Falls, South Dakota production facilities and adding 70 jobs to help meet growing U.S. interest in bacon and international demand for ground seasoned pork, according to a release.
• Already, the company has invested $73 million into the facility during the past five years. This latest investment is intended to modernize the facility by incorporating the latest technology for automated packaging, boxing, labeling and stacking, according to the release.
• The renovations in the processing facility are on track to be completed by May 2019. The improved hog barn, which will house up to 8,000 animals, is expected to be done by fall.

Dive Insight:

Smithfield is pursuing these upgrades in response to the increased domestic demand for bacon as well as foreign demand for ground pork. This push for expansion comes at a seemingly ideal time when China, America's largest market for pork products, has just agreed to a truce in the trade war. Simultaneously, Americans have been eating more pork and beef recently.

"Export markets are key for the continued growth of all U.S. hog producers and pork processors," Jason Richter, president of the international group for Smithfield Foods, said in the release. "This new project further positions the company to meet the demands of consumers in these key markets, benefiting our national and local economies."

But with the volatility of the administration in regards to trade, Smithfield shouldn't count on markets reopening to boost the free flow of goods just yet. Only a day after this truce was stuck, President Donald Trump took to Twitter and sowed confusion over his real intentions, tweeting, "I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so."

Still, there is a bright spot with the renegotiation of the United States-Mexico-Canada Agreement (USMCA), previously known as NAFTA. If the agreement is approved and tariffs are lifted from those countries, there is a good chance that two large markets will be grateful for the increased production that Smithfield — the world’s largest pork producer — is able to provide.

But Smithfield isn't the only meat manufacturer expanding its facilities. Last year, Tyson announced that it was opening a 75,000-square foot Incubation Technology Center in Springdale, Arkansas and Foster Farms invested $30 million to expand a poultry processing plant in Louisiana. Additionally, Cargill has invested in Memphis Meats, the startup behind the world's first cell-cultured meatball and chicken strip.

Although the economy is facing a reality that includes tariffs on exports, there is no substitute for food, which as the population grows will become even more of a necessary commodity. According to CB Insights' Feeding the Future report, there won’t be enough food to feed the world’s population by 2050 so the future payoff for production expansion could be fruitful. In addition, growing demand for protein and expanding middle classes around the world create more interest in meat.

For Smithfield, this investment could also be an attempt to correct some of the environmental issues associated with its facilities. Earlier this month, the South Dakota Department of Environment and Natural Resources fined the company more than $53,000 for violating its surface water discharge permit into the Big Sioux River this past August. Modernizing their South Dakota plant could be in response to this mishap.

The company said in the release that the investment includes renovating a high-speed bacon line, a ground seasoned pork operation and the distribution center. In a market where consumers demand sustainability and environmental stewardship, it could be in the best interest of Smithfield to ensure that a portion of the $45 million dollar investment go toward sustainability and fulfilling the promise of its slogan: “Good food. Responsibly.”