July 1, 2016
Planning to open a new pork processing plant in the United States has not been all roses for the Prestage family, however Ron Prestage, DVM and president of Prestage Farms, firmly believes it is the right decision for the industry. Speaking at the Iowa Swine Day on June 30, he says, “It has been a painful decision but we had the right motivation and we made the right decision.”
The family’s decision to embark on opening a processing plant was based on the narrowing producers’ profit margins. Something the family is well familiar with during its 48 years of production. Looking at the combined producer and packer margin 25 years ago, the producer would receive approximately two-thirds to three-fourths of the profit. As Prestage points out, the producers’ investment in infrastructure is 80% now and back then. Today, the share of that profit margin has slimmed to a five-year average of the producer fighting for 25%.
Through the years, packer consolidation has happened, including foreign ownership of those processing plants. He says, “I do not want to discourage any of the packers today but in reality the consolidation is what has caused that flip.”
U.S. hog producers have fewer avenues to sell their hogs today than 25 years ago. For that reason, three years ago the Prestage family started researching building a new processing plant. Prestage says another reason for pursuing a new processing plant is that three others are currently being built in the United States.
From the beginning, the Prestage family felt Iowa is the right location for a new processing plant. For 12 years, the family has finished pigs in Iowa. The first location site selected was Mason City, Iowa. After a lengthy process and an emotionally draining hearing, the city council did not approve the Prestage’s proposal to build a $240 million pork processing plant in Mason City.
Reflecting on the experience, Prestage says the size of the city matters. Originally, the family thought a medium-sized city would be ideal. The presence of the processing plant would not leave too much of a footprint but would add value to the town.
He further explains the hearing system was designed so no effective dialogue can occur between objectors and the company. In the first hearing, Prestage — an outspoken person and past president of the National Pork Producers Council — had to silently listen for seven hours how his family was going to destroy citizens’ hair, damage the water system, lower property values, hurt the school system and the family was the sole cause of antibiotic resistance.
Today, Prestage chalks it up to lessons learned but the process is not discouraging the family from moving forward with their plans. He says his family has learned a lot from the experience and he hopes the pork industry has, too.
Next time around, the family will be ready for the opposition. They will work diligently to explain the positives of a pork processing plant to the citizens of Iowa. In addition, he says “we will not let the Iowa Citizens for Community Improvement highjack the conversation and let everything to appear about our industry to be negative.”
Still, Prestage says, “We thought Iowa was the right place to go and nothing has changed my opinion of that at all.”
The Prestage family is expected to make a big announcement very soon on the new site location after all the documents are signed.
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