The rapid changes facing the pork industry over the past decade has everyone asking " How did we get here and where are we headed?" Ron Plain, University of Missouri agricultural economist, has attempted to answer those questions by compiling a list of 10 trends that are changing the U.S. pork industry. He's also identified four trends that have not changed over time.
Let's start by looking at the constants. Here is Plain's list of trends that have not changed – despite some industry expectations.
- Production Seasonality. The move to indoor production facilities more than 20 years ago was suppose to take some of the seasonality out of pork production. Yet, the largest amounts of hogs still go to market during the fourth quarter. June, July and August have remained the slowest months for pork production, averaging 12 percent below the fourth quarter.
- Industry Growth Rate. From 1930 through 2000, the industry has maintained a fairly stable 1.5 percent annual growth rate. Plain does not anticipate this number to change significantly.
- Per Capita Pork Consumption. While per capita consumption has fluctuated over the last 50 years, it remains near the same level as it was in the 1950s. (See accompanying chart.)- Hog Cycle. The hog cycle has long averaged about a four-year duration; and Plain points out that it is still alive and going strong.
On the flip side, several trends have changed the industry. These trends have tended to create more upheaval of the status quo. Plain offers his top-10 list.
1. Improved Breeding Herd Performance. Pigs per litter have increased nearly one pig per litter in the 1990s, which is a significant increase over the trend line. (See chart on page 34.)
2. Fewer and Larger Farms. The number of U.S. farms with hogs has declined every year since 1980, says Plain. The number of farms with 500 or more hogs seems to have held steady, with farms raising one to 99 hogs a year dropping from more than 500,000 farms in 1980 to around 50,000 in 2000.
3. Specialization. More producers are focusing on farrowing or finishing only, with fewer producers operating full farrow-to-finish systems or raising their own feed.
4. Fewer and Larger Packing Plants. The percentage of hogs slaughtered in plants that process more than 1.5 million hogs annually has risen from 21.1 percent in 1981 to 87.3 percent in 1999.
5 Geographic Production Shift. Production has shifted from the Midwest to Southeastern states like North Carolina, as well as more sparsely populated states like Oklahoma, Texas and Colorado. That shift also has promoted the aforementioned specialization as the Midwest now serves as the feeding floor for farrowing sites in North Carolina and elsewhere.
6. Production/Packing Integration. Some companies such as Smithfield Foods, Premium Standard Farms and Seaboard Farms raise hogs and process pork. That was nearly an unheard of prospect a decade ago. Today, more and more individuals and producer groups also are looking at replicating that formula in some manner.
7. Packing/Processing Integration. Nearly all packing companies – certainly all major pork packers – have moved toward producing further-processed pork products. This is another trend that will only continue to grow as boneless, pre-packaged meat products dominate the market.
8. Contracting Growth. Between 1997 and 2000, U.S. pork production contracts rose 5 percent for farrowing and 4 percent for finishing systems.
Marketing contracts have gained even more prominence, with 83 percent of U.S. hogs marketed in 2000 covered by some sort of contractual arrangement, according to Plain.
9. Globalization. Global pork export trade increased steadily throughout the 1990s, though Europe's foot-and-mouth disease outbreak this year slowed the trend somewhat.
10. NIMBY Attitudes. The U.S. public has become more apprehensive about pork production and packing/processing plants. The general public tends to adopt the " not-in-my-backyard" attitude at the first hint of either type of business moving into an area. In recent years this has certainly slowed production expansion and more recently it's affected packing plants. The NIMBY issue will continue to be a factor in the foreseeable future.
All these trends have picked up steam over the last decade, and none show any signs of tempering. How these trends continue, and whether or not any of the constants change, will have a sizable impact on the future of the U.S. pork industry.