It’s basic knowledge that you can’t force a square peg into a round hole. The pork industry learned in 1998 that you can’t force increasingly more hogs through set packing plant capacity.
Much has changed since that time. Pork producers are set up to market a record number of hogs this year, but packers are geared up to handle it.
Actually, in the next three years,
Indeed, pork packers have been a busy group. Just like pork producers, packers have super-charged their efficiencies to grow capacity from existing units, notes Glenn Grimes, Plain’s colleague. Among the technology helping expand capacity are chill cabinets that quickly drop carcass temperatures and keep plant processes moving.
Premium Standard Farms is among those getting more out of the same four walls. PSF plans to expand its
Smithfield Foods has announced a variety of plans, including investing $81 million to expand the Farmland Foods facility in
The Triumph Foods plant opened for business in January. When it gets to full capacity, which means adding a second shift, it will process 16,000 market hogs a day. The producer-owners plan to build another plant in
Trim-Rite Foods will build a new $17-million pork plant near
Canadian packers have made growth promises as well. Maple Leaf Foods will invest $110 million to build a new plant to replace an old one in
The biggest question mark does fall with the Canadians. That’s because
In 1998, 394,887 hogs created a market-breaking slaughter day. By year’s end,
Excess slaughter capacity eventually forces packers to bid aggressively for hogs, which could squeeze their margins significantly, notes Grimes. In turn, it could offset some of the bearish factors facing hog prices such as abundant meat supplies, sluggish domestic demand and shifts in export sales. After all, processor demand for hogs last year was stronger than the retail demand for pork, notes Plain.
“We’re not likely to build the hog herd enough to challenge plant capacity in the next 10 years,” says Grimes. But the uncertainty lies within how tight packer margins might get. It could eventually force a plant or two to close. “With big, double-shift plants, their ability to control margins is not good. That’s largely what is causing the very inelastic demand for hogs at the plant level,” he adds.
So, the subtle dance between supply and demand continues. But, for some time to come, slaughter capacity is not likely to cause a headache.
The Daily Maximum
Pork producers saw the harsh reality of trying to push too many hogs through a set number of packing plants in 1998. However, looking ahead, maxing out pork-packer capacity isn’t on the radar screen.
“I don’t see it being a problem anytime in the next 10 years,” says Glenn Grimes,
Daily capacity would increase to 428,000 head when the Triumph Foods,