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USDA finally working on line speed situation

marina_karkalicheva/iStock/Thinkstock Pork carcasses hanging in cooler
Avoidable situation costing producers millions of dollars.

Secretary of Agriculture Tom Vilsack was called to task last week by Congress about the reductions in chain speeds at pork packing plants. His answer was that the department is working on possible waivers for the five plants that had to slow their operations when a Minnesota judge threw out the chain speed portion of the final rules for the New Swine Inspection System. My thought was, “Well it’s about time!”  This situation has become critical for pork producers, and Mr. Vilsack and company, from what I can tell, have dawdled at doing nothing until now. They should have been acting long ago.

First, I’ll defend the secretary on two points. His USDA did not screw this up. That was the doing of the USDA under the Trump Administration when they did not follow the proper procedures in finalizing the rules to make a successful 20-year HAACP Inspection Models Project (HIMP) operational. The federal government has rules for how its agencies go about making rules. Those “rules for rules” are called the Administrative Procedures Act and all agencies are supposed to follow them to make the process open and transparent and allow all parties to be heard in the process. USDA didn’t do that, and the judge in Minnesota called foul on them and imposed the penalty that the plants can’t run at the enhanced speeds they have proven are possible and beneficial. They have to slow down to 1,106 head per hour.  USDA committed the foul, and packers and producers got the penalty. Hardly sounds fair, does it?  But again, that was not the fault of Mr. Vilsack’s agency.

Second, Mr. Vilsack found himself in the same shoes as your favorite football coach who watches the replay and sees that the referee got the call against his team correct. Not much reason to throw the red flag and just cost your team more in that circumstance, is there? From what I know, the Minnesota judge got it correct: USDA did violate the APA. So, an appeal by USDA was most likely a useless waste of time and resources. Remember, this court decision is not about worker health and safety. It is about whether USDA followed the proper procedures.

Which brings us to now, which should have been a few months ago. The only solutions that I think are available for this situation are 1) re-promulgate the rules regarding chain speeds and correctly address all comments about worker health and safety and 2) find a “work-around” with waivers or some reversion to the HIMP pilot project allowances for the higher line speeds. 

Option 1 involves writing rules that the United Food and Commercial Workers (UFCW) labor union – which was the party that filed the Minnesota lawsuit – found objectionable from the start. That would not have been much of a surprise from Trump’s USDA, but it is probably more than we in the pork industry can hope for from Biden’s USDA. Given this administration’s clear disdain for large companies, large farms, and modern agriculture, I think it’s safe to say it is not going to potentially run afoul of a labor union to help those groups out.

Option 2 is apparently where we are now. That’s good. I don’t see any reason we could not have been here several months ago and perhaps be at a point to actually speed the lines up now when we need them. I fear that this effort will get something done in, say, January, when the most acute need for more capacity is past. Government moves slow even in an emergency, and, unfortunately, I’m not even sure they see this as an emergency given that it is hurting large companies, large farmers, and modern agriculture. Of course, it is hurting a lot more than those three “undeserving” groups.

The U.S. pork packing sector currently has a capacity of roughly 490,000 head per day. That is physical, maximum throughput with a full labor complement. Practically no company, of course, has a full labor complement, and the largest single daily harvest that we have seen is 481,040 head back on September 9. USDA has estimated daily slaughter at 481,000 only once since then, on September 14 when the actual was 480,601. It hasn’t estimated a single day at over 478,000 since that date. Capacity operations of 490,000 per day are a pipe dream.

And even the 481,000 max is a pipe dream on Fridays and Mondays as workers call in or just don’t show up to make extended weekends knowing full well that employers will probably not fire them. 

Last week’s total harvest of 2.597 million is the closest we have gotten to 2.6 million so far. The Saturday run was 224,000, an amount actually higher than I think the industry can do week-in, week-out.  Producers with “spot” hogs that aren’t covered by a marketing contract are having more and more trouble getting hogs into plants. The spread between the national weighted average for negotiated (i.e. spot market) pigs and the average for all pigs has gone from -$6.48 the week of August 7 to -$22.52 the week of October 2. I see nothing nefarious in that spread. Spot market hogs are the marginal units that commanded a premium back in May and June and are now not nearly so valuable and are thus discounted. 

This situation is costing producers millions of dollars, and I believe it was avoidable. Most of us involved in the pork industry clearly saw it coming. Why did Mr. Vilsack and company not act more quickly?

Everyone needs to realize that issuing waivers allowing the five plants to go back to their faster chain speeds and thus providing about 85,000 head per week more capacity will not completely solve this problem. And it may not solve it much at all given the labor situation. But having the option of speeding up and moving more hogs through the plants is the “necessary but not sufficient” condition to getting through this seasonally large supply in a manner that doesn’t place further financial hardship on producers. 

While all of this involves government and packers, make no mistake about it:  Producers are the ones catching the brunt of it. 

Maybe someday someone will have a little foresight in these matters. I can only hope.

Sources: Steve Meyer, Partners for Production Agriculture, who are solely responsible for the information provided, and wholly own the information. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.

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