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Vol. 13, No. 99 / May 21, 2015 Seaboard Foods and Triumph Foods announced last week that they would build a new, state‐of‐the‐art pork slaughter plant in Sioux City, Iowa. The announcement comes on the heels of last winter’s announce‐
ment that Clemens Food Group (owner of the Ha ield Quality Meats pork plant in Ha ield, PA) would partner with several large, Midwestern produc‐
ers to build a plant in Coldwater, MI. The two announcements are cri cal for the future growth of the U.S. pork industry but, needed as they are, nei‐
ther will provide any capacity help un l 2017 at the earliest. First, let’s consider the current situa on for the pork slaughter sector. The table on page two shows plant capaci es for all U.S. plants down to 2000 head per day. Smaller plants are aggregated here due to space limita ons. The full detail of this table can be seen in the Na onal Pork Board’s Quick Facts publica on which is available in .pdf form at h p://www.pork.org/pork‐quick‐facts/. “Capacity” in these plants is a fuzzy concept. The limi ng factors differ from plant to plant. In one it may be the maximum speed at which carcasses can move through the harvest floor (ie. chain speed). In another it may be the rate at which carcasses can be disassembled into wholesale cuts. In yet another, the limita on may be the amount of cooler or freezer space that is available. The capaci es shown in the table and represented in the chart were given in response to the ques on “How many hogs can you pro‐
cess if supplies are plen ful and margins are good?” Most plants can push a few more through in those situa ons by speeding up the chain slightly, add‐
ing an hour or two per shi or adding/extending Saturday opera ons. Some plants work Saturdays as a normal part of their opera ons. Others never work Saturdays regardless of the margin condi ons. Our experience has shown us that the U.S. industry can operate up to 5.4 days per week without much trouble and without having much nega ve impact on hog prices. Thus, we convert the daily capacity from the table on page 2 to a weekly capacity es mate in the chart using that 5.4 day workweek. Obviously, the line in the chart is not hard and fast but it serves as a “warning line”. The Clemens Food Group plant will operate one shi of 8,000 head per day when it opens in, we understand, mid‐to late 2017. Throughput will not be nearly that large in the early weeks. The plant fills a long‐term void created in 1998 when Thorn Apple Valley closed the only sizable plant in Michigan — a closure which was the final gale in the “perfect storm” of events that led to the hog price debacle that fall. It will draw hogs primarily from Michigan, Ohio and Indiana but will also process Canadian pigs primari‐
ly from Ontario. The la er source could become much more important if mandatory country‐of‐origin labelling gets repealed or otherwise resolved and if the U.S. dollar remains strong. Ontario producers are shipping a sig‐
nificant number of pigs to Quebec for processing a er the closure last year of the Quality Meats plant in Toronto. Many of those pigs could come south when the Clemens‐led plant fires up. The Seaboard‐Triumph plant will seek to duplicate the success of the two companies’ earlier arrangement in St. Joseph, MO. Several large producers and one group of smaller producers own the St. Joe plant and Seaboard markets the product from it. By all reports, the effort has been a FI HOG SLAUGHTER, WEEKLY
Based on USDA Hogs & Pigs Report, March '15
Thous. Hd.
2500
Spring 2014 Capacity at 5.4 days/week = 2.438million head/week
2400
2300
2200
2100
2000
Pred '15
1900
2015
1800
2014
Holy Week 2014
2013
1700
Pred '16
1600
J
F
M
A
M
J
J
A
S
O
N
D
resounding success and the group began looking to duplicate it several years ago on a site in East Moline, IL. That plan hit a number of roadblocks, not the least of which was $7 corn and the Great Recession. In the mean me, Smithfield Foods decided to close its John Morrell plant in Sioux City, IA leav‐
ing one of the na on’s iconic “meat” ci es without a major pork packer in spite of being surrounded by a significant and s ll growing concentra on of market hogs. Sioux City was a logical loca on for a new plant and Seaboard‐
Triumph will locate this one well south of the downtown area that had grown weary of the conges on and odors that once were considered normal and welcome in the area of the now‐closed Sioux City Stockyards. The com‐
panies’ announcement said the plant would process 3 million hogs per day on one shi . We find that math a bit troubling since it implies 12,500 head per day (and thus per shi ) and we know of no plant that runs a harvest line that fast. The Smithfield plant in Tarheel, NC can exceed that number per shi but the plant, unlike any other one in the U.S. (and perhaps the world) has two lines under one roof. Neither company promised a second shi at these plants but we suspect they will add one when sufficient sales opportuni es and hog sup‐
plies are developed. Spreading plant and management costs over more pounds is just too a rac ve to not pursue if the opportunity arises. That conclusion might apply more to the Seaboard‐Triumph plant simply because there are more hogs in the region. Why is this important? It is clear from the chart above that hog supplies THIS YEAR will put that U.S. hog packing sector very near its capaci‐
ty. We do not think the situa on this fall will be ght enough to cause much problem with pig flows or prices beyond the normal impact of high pork supplies. But the breeding herd is growing and producers are returning to their pre‐PEDv levels of both produc vity and, we think, produc vity growth that averaged 1.8% per year from ‘07 to ‘12. If that happens, supplies in Q4 2016 will be large but NEITHER OF THESE PLANTS WILL BE ON LINE IN TIME TO HELP! They will, nonetheless, be sorely need in ‘17 and beyond! The Daily Livestock Report is made possible with support from readers like you. If you enjoy this report, find if valuable
and would like to sustain it going forward, consider becoming a contributor. Just go to www.DailyLivestockReport.com
to contribute by credit card or send your check to The Daily Livestock Report, P.O. Box 2, Adel, IA 50003.
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The Daily Livestock Report is published by Steve Meyer & Len Steiner, Inc., Adel, IA and Merrimack, NH. To subscribe, support or unsubscribe visit www.dailylivestockreport.com. Copyright © 2015 Steve Meyer and Len Steiner, Inc. All rights reserved. The Daily Livestock Report is not owned, controlled, endorsed or sold by CME Group Inc. or its affiliates and CME Group Inc. and its affiliates disclaim any and all responsibility for the infor‐
ma on contained herein. CME Group®, CME® and the Globe logo are trademarks of Chicago Mercan le Exchange, Inc. Disclaimer: The Daily Livestock Report is intended solely for informa on purposes and is not to be construed, under any circumstances, by implica on or otherwise, as an offer to sell or a solicita on to buy or trade any commodi es or securi es whatsoever. Informa on is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projec ons of future condi ons are a empted. Futures trading is not suitable for all investors, and involves the risk of loss. Past results are no indica on of future performance. Futures are a leveraged investment, and because only a percentage of a contract’s value is require to trade, it is possible to lose more than the amount of money ini ally deposited for a futures posi on. Therefore, traders should only use funds that they can afford to lose without affec ng their lifestyle. And only a por on of those funds should be devoted to any one trade because a trader cannot expect to profit on every trade. Sponsored by
Vol. 13, No. 99 / May 21, 2015 DAILY U.S. HOG SLAUGHTER CAPACITY
Spring 2013
Ran Company
Plant
1 Smithfield
Plant
Tar Heel , NC
Smithfield, Virginia
Gwaltney, VA
Denison, IA
Monmouth, IL
Prem. Std. Milan, MO
Clinton, NC
Dakota Dunes, SD
3 Swift
Greeley, CO
4 Cargill Pork
Wichita, KS
5 Hormel
Austin, MN
Plant
Company
36500
10,400
10,400
20,500
20,500
Closed
Farmland Crete, NE
2 Tyson Foods (IBP)
Co. Total
34,000
Morrell Sioux Falls, SD
Sioux City, IA
Spring 2014
Closed
10,400
10,400
9,400
9,400
11,400
11,400
10,300
10,300
10,600
117,000
10,600
Waterloo,IA
19,500
19,500
Logansport, IN
15,300
15,300
Storm Lake, IA
16,500
16,500
Col. Junction, IA
9,950
9,950
Madison, NE
7,925
Perry, IA
7,750
7,925
76,925
7,750
Worthington, MN
20,000
20,000
Marshalltown, IA
20,000
20,000
Louisville, KY
10,000
Beardstown, IL
19400
Ottumwa, IA
18400
50,000
10,000
76,925
50,000
19,400
37800
18,400
Austin, MN
19000
19,000
Fremont, NE
10500
10,500
Clougherty Los Angeles, CA
119,500
37,800
7800
37300
7,300
36,800
6 Triumph Foods
St. Joseph, MO
20000
20000
21,000
21,000
7 Seaboard Farms
Guymon, OK
19800
19800
19,800
19,800
8 Indiana Packing Co.
Delphi, IN
17000
17000
17,000
17,000
9 Hatfield Quality Meats
Hatfield, PA
10400
10400
10,400
10,400
10 Rantoul Foods (formerly MeadowRantoul, IL
4800
4800
4,800
4,800
11 Sioux-Preme Packing
Sioux Center, IA
4500
4500
4,500
4,500
13 J.H Routh
Sandusky, OH
4200
4200
4,200
4,200
13 Johnsonville Sausage
Watertown, WI
750
750
Momence, IL
1,650
1,650
Holton, KS
1,000
3,400
1,000
3,400
14 Pine Ridge Farms
Des Moines, IA
3,200
3,200
3,200
3,200
15 Greenwood Packing
Greenwood, SC
3,000
3,000
3,000
3,000
16 Premium Iowa Pork
Hospers, IA
3,000
3,000
3,000
3,000
17 Hillshire Brands (Jimmy Dean) Newbern, TN
2,800
2,800
2,800
2,800
18 Pork King Packing
Marengo, IL
2,000
2,000
2,200
2,200
19 Fisher Ham and Meat
Spring, TX
1,500
1,500
Navasota, TX
500
2,000
500
2,000
20 USA Pork Products
Hazellton, PA
2,000
2,000
2,000
2,000
21 Abbyland Foods
Curtiss, WI
2,000
2,000
2,000
TOTAL -- PLANTS W/ CAPACITIES OF 2000/DAY & MORE
TOTAL -- SMALLER PLANTS
U.S. TOTAL -- ALL HOG SLAUGHTER PLANTS
2,000
423,125
426,325
24,795
25,195
447,920
451,520