China-owned Smithfield Foods closing operations in Vernon, Calif.

Smithfield Foods Inc., which is a unit of China’s WH Group Ltd. WHGLY, -3.81% 288, -2.60%, said Friday it will cease all harvest and processing operations in Vernon, Calif., in early 2023. “Smithfield is taking these steps due to the escalating cost of doing business in California,” the company said. The move is part of an overall effort to reduce its sow herd in the Western U.S., including Utah. It’s also “exploring strategic options” to pull out of its farms in Arizona and California. Smithfield will serve the California market with its Farmer John brand and other products from existing facilities in the Midwest. Smithfield said it reached an agreement this week with the United Food and Commercial Workers International Union, the International Brotherhood of Teamsters and the International Union of Operating Engineers as part of its plan to close the Vernon facility. Smithfield chief operating officer Brady Stewart said the company remains “committed to providing financial and other transition assistance to employees impacted by this difficult decision.” Smithfield said it currently employs 40,000 people at 46 facilities and nearly 500 company-owned farms. U.S.-listed shares of WH Group Ltd. are up 16% so far in 2022, compared to a drop of 15.7% by the S&P 500 SPX, -2.91%.