3 themes frame 2019 pork packing report

ANALYSIS: Filling single shift and adding second shifts are on horizon for the industry.

Steve Meyer

September 25, 2019

6 Min Read
3 themes frame 2019 pork packing report

The themes for this 2019 survey of U.S. pork packing capacity are: one last big addition, steady but fitful ramping up of the additions of the past two years, and a few tweaks in smaller plants.

All of those add up to nearly 12,000 head per day more total capacity this fall versus one year ago. Of that increase, 250 head per day is in sow plants.

The biggest development, of course, has been the opening of the Prestage Foods plant in Wright County, Iowa. After being delayed from fall 2018, the plant opened in April and has steadily increased its daily throughput to roughly 6,000 head per day. Company officials believe the first shift will be operating a full single shift (10,000 head per day) by December.

The potential challenge of this plant has always been labor. That did not prove to be much of a problem for the startup. The plant’s owners have been pleased with the quantity and quality of the labor force.

Recently, turnover has begun in that labor force, bringing labor back to the forefront as a potential ramp-up limitation. The company has made no statements about the timing of a second shift.

Only constant is change
The other big change among large plants was the completion of the sale of Hormel’s Fremont, Neb., plant to producer-owned Wholestone Foods. That deal was made in August 2018, and ownership was actually transferred on Dec. 3, 2018.

By all accounts, the transition was smooth and relatively painless for all affected parties. Wholestone plans to eventually double-shift the plant, but that is not likely to happen until 2021 at the earliest.

Hormel is removing some significant value-added operations from the plant, and that space plus an expanded footprint will be needed for the double shift. Wholestone has said it will spend $150 million to update and expand the plant.

A smaller change in the daily slaughter capacity is actually a replacement. Yosemite Meats will move out of its long-term home in Modesto, Calif., to a new facility in Stockton, Calif., as early as September. The move will increase the company’s capacity from 1,850 head per day to 3,200 head, according to CEO John Lau. (The Estimated Daily Slaughter Capacity table can be downloaded by clicking the “DOWNLOAD” button at the bottom of this article.)

The 2017 additions to the U.S. pork packing sector, Triumph-Seaboard Food’s plant at Sioux City, Iowa, and Clemens Food Group’s plant at Coldwater, Mich., continue to increase throughput rates.

There is one pending expansion to U.S. pork packing capacity. Premium Iowa Pork plans to remodel a former beef plant in Luverne, Minn., and open in April 2020. It will open with a capacity of 2,250 head per day, with the ability to go to 4,500 per day by adding a second shift. There is no time frame for the expansion.

The TSF plant is nearing its full two-shift capacity, and Coldwater is nearing its single-shift capacity, but there are reports that labor availability is definitely a limiting factor.

Clemens has long-term plans to add a second shift but has not revealed the timing of that increase. Clemens’ recently announced purchase of Maxwell Farms of Indiana’s feeding operations and supporting sow farms appears to be the first move at building a production base for Coldwater’s “B” shift — someday.

Estimated daily slaughter capacity, sow plants

Labor issues
We asked all respondents how serious the labor situation is for their operations. As was the case last year, the smaller operations reported far more labor difficulties than did their larger brethren.

Every company — from 4,000 to 5,000 head per day and down — reported labor challenges, with some of those being severe. This is understandable since missing, say, five workers would be much more problematic to a workforce of 100 than it would to a workforce of 1,000.

As was also the case last year, operators reported that even where labor was sufficient to get optimal throughput, there may not be enough workers to extract full value from each pig. The most logical — and frequent — reduction in value realization is in offal and byproducts.

We also asked about each plant’s ractopamine requirements. The largest three companies declined to respond to our question, but others did so quite freely.

Using other industry sources to estimate capacity at Smithfield, JBS and Tyson that is either totally or partially ractopamine-free allowed us to estimate that about 223,000 head per day is always ractopamine-free. Some flexible shifts at other packers add to that capacity.

Our base numbers  make up 44% of total U.S. capacity and would provide ample tonnage to serve ractopamine-free export markets, such as China.

U.S. pork packers can, we believe, comfortably handle daily harvest runs of 500,000 head — and slightly more. That would put weekly capacity at 2.754 million head, assuming 5.4 workdays per week.

That work week is somewhat arbitrary, but it was based on the observed level of throughput that — at least in the late 1990s — did not impact hog prices significantly. I use it now to maintain the base for comparisons over time.

Packing plants closed, 1993-2016

Lessons from beef
Finally, pork producers should be reminded once again about the critical nature of packing capacity by observing developments in the beef sector, following the Aug. 9 fire which has temporarily closed Tyson’s Finney County, Kan., facility.

The beef sector has been pushing its capacity hard for over two years, as larger cattle numbers come to a slaughter sector that rationalized significantly after the drought-shortened cattle supplies of 2012-15. The Finney County plant represented about 4.7% of total fed cattle slaughter capacity.

Fed cattle prices fell by 5% the week following the fire. They rebounded by 2% in the following week amid significant allegations that packers were “taking advantage” of the situation.

Producers sell pigs, but consumers don’t buy them. Consumers buy pork, and pigs are the equivalent of “pork ore.” As with iron and copper, there isn’t much of a consumer-level market for ore. Someone has to extract the valuable parts and put them in forms that can be easily used.

Packers perform the first step — and in many cases more steps — of that process. While the relationship between producers and packers will always be somewhat adversarial, they are all in it together.

Source: Steve Meyer of Kerns and Associates, who is solely responsible for the information provided, and wholly owns the information. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.

About the Author(s)

Steve Meyer

Ever.ag Livestock Division

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