Despite the devastation, orders for pork imports were not cut. “Immediately upon the incident, we saw no backup in terms of their orders,” Manly said. “There was no request to hold up shipments or slow down orders. That first week [after the earthquake and tsunami], we actually had a bump in terms of our orders.”
Smithfield continues to see strong demand in Japan, about level with where it was one year ago, but it is seeing a change in mix, Manly said. “We have seen a higher proportion of chilled pork, which goes to the retail segment, and a lower percentage of frozen pork, which goes into their manufacturing segment. What that's telling me is we are finding empty shelves in the retail markets [in parts of Japan] and they are desperately trying to refill those.”
This represents a slowdown in terms of Japan’s manufacturing side, which uses the frozen pork Smithfield ships [that’s used] in the ham and sausage complex. “[This] probably is reflective of the slowdown in their whole industrial sector because of a lack of electricity to even operate some of their plants,” he added. “So, we are benefiting because we typically have higher margins on the fresh pork than we do the frozen pork. We see a benefit in terms of the profitability of that segment, a very large segment of our total dollars in total export sales.
“We are very disappointed to have any issues like this facing one of our very good trading partners, but in the long run I think it is probably good for US pork exports,” Manly said. “Japan imports about 55% of all of its pork needs, but the opportunities for us continue to exist as they try to get back on their feet. I can't believe this will reverse the trend in terms of a shrinking pork reduction segment within Japan, which feeds to some of our strengths in terms of exporting. This is an area that we look to continue to be very strong for Smithfield moving forward.”