Significant Changes Underway in the Pork Industry

Date posted : August 17, 2017

20130919_stevens_003By: Brian Stevens, President of Big Stone Marketing

Here it is the middle of August and we have some pretty significant changes underway in the Pork Industry and I thought I should talk about it in this month’s newsletter.  The topic is the additional packing capacity our industry is adding.  We have two remodeled pork harvest plants already underway in Pleasant Hope, MO, and Windom, MN with the two new larger harvest plants ready to begin operations next month.  Both Clemens Food Group (Hatfield) in Coldwater, MI and Seaboard Triumph Foods (STF) in Sioux City, IA are both saying they will harvest their first hogs on September 5th so just in time for our big fall run.  Capacity should not be an issue at all this fall and that is a very good thing.  Now it will take some time for these plants to get up to their full first shift numbers depending on how the start-up and the hiring of employees goes.  Coldwater has said they hope to be up to their 10,000 head per day by February and I expect Sioux City to be at a first full shift by the end of the year.  There is another new plant under construction in Eagle Grove, IA owned by the Prestage Family and they are expecting to start-up in the spring of 2019.

Down below I’ve included a chart with the expected capacities and estimated timelines of each of these plants.  I also compared these additional annual hog harvest numbers to what we actually harvested last year in 2016 (which was just under 117 million head) so you can see the estimated percentage increases in capacity that we are looking at moving forward.  You’ll see we are looking at a just under 6% increase in capacity yet this fall and 6.65% next spring.  Then the estimates are that STF in Sioux City wants to double shift as soon as possible so I’ve put those in for the fall of 2018 which increases our harvest capacity to over 8%.

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This is significant and in my career, I’ve never seen this much capacity added in such a short amount of time.  So in my opinion, adding these new modern plants, equipment and technology is a good thing and will help our industry stay competitive.  This additional capacity should also create a little more competition among the packers which I know producers will agree is a good thing.  But the question is how long will it take for us to produce more hogs and fill this capacity?  We already know we are looking at an increase this year of 3.5-4% depending on how many come to market this fall and the June 29th Hog & Pig report is indicating another 3% increase for next year for a 2017-2018 total of 6.5-7% more hogs versus the 8.39% expected additional harvest capacity I mentioned.  Then if all goes as planned Prestage will begin harvesting in Eagle Grove in the spring / summer 2019 and under my column labeled “Future” you’ll see I’ve added in a double shift for Coldwater which I’ll admit is a total guess on my part, but the economics will drive them to increase as soon as they have the hogs and the people and of course the markets and margins have to cooperate as well.  So by mid-2019 we should have added 10.5% more packing capacity and maybe up to 12.75% not long after.  You can see that is the equivalent to adding almost 15 M additional head harvested each year!

We basically have half of those hog numbers in the works already so it will be interesting to see where we go from here from a production standpoint.  That is a lot of additional pork that our industry is going to have to find a home for! So will we raise more hogs or close some older plants or will we be able to sell all of this pork at a profitable level?  What will exports have to be?

Predicting the future is difficult, but it feels to me our industry is on the cusp of some really big changes!  The change that is happening is significant in several different ways.  Four out of the five new plants were driven by producer initiatives and you can argue that STF is a producer’s initiative as well so then 5/5.  Coldwater is only sourcing hogs from loose sow housed systems, Sioux City requires Ractopamine free and Windom wants certain genetics.

I have presented you with many questions in this article. I don’t know the answer to these questions and only time will tell, but I can tell you to buckle up your seatbelts as this industry has never been for the faint of heart and I don’t think the next 5 years will be any different!

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