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, North America’s daily hog-slaughter capacity could increase by 10 percent, notes RonPlain, University of Missouri agricultural economist. “Barring something unexpected, hog-slaughter capacity should be adequate for the foreseeable future,” he says.

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 Milan, Mo., plant by 35 percent, bringing it to 10,000 hogs a day.

Smithfield Foods has announced a variety of plans, including investing $81 million to expand the Farmland Foods facility in Sioux Center, Iowa. There’s also $100 million targeted for the John Morrell plant in Sioux Falls, S.D. “Overall, Smithfield plans to spend $354 million to expand processed-meat facilities at nine locations in 16 months,” notes Keith Nunes, with Meat and Poultry magazine.

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 East Moline, Ill.

Trim-Rite Foods will build a new $17-million pork plant near Freeport, Ill., to handle 3,000 hogs a day. It will operate as Freeport Farms, and is expected to open in 2007.

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 Saskatoon. It would start with a weekly run of 20,000 hogs, moving to 40,000 with a second shift. The old plant handles 17,000 hogs a week. Olywest officials have outlined plans that range from a new plant that could handle 2.25 million hogs annually, to expanding its plant in Red Deer.

The biggest question mark does fall with the Canadians. That’s because Canada already has underutilized packing capacity, and the U.S. dollar’s decline has further pressured those packers. “Because of the exchange rates, we also could see Canadian producers slow their production growth,” notes Grimes. He’s skeptical whether all of the proposed processing space will be completed.

In 1998, 394,887 hogs created a market-breaking slaughter day. By year’s end, U.S. daily hog slaughter capacity could reach about 420,000 head, with North America’s level around 510,000. It is worth noting that in 2005, there were 53 days that hog slaughter exceeded 400,000 head.

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, University of Missouri agricultural economist. Of course the scenario can change, but here’s what total daily U.S. hog slaughter capacity looks like for now.

Daily capacity would increase to 428,000 head when the Triumph Foods, St. Joseph, Mo., plant initiates a second shift.

Source: Ron  Plain, Glenn Grimes, Universityof Missouri; National Pork Board.