Excel Pork's announcement last week that it will end hog slaughter at its Marshall, Mo., plant will affect farm profits – and may have long-term impact on hog prices in the United States, say University of Missouri livestock economists.
Excel Pork, a division of Cargill, announced as of July 25, it will convert the hog-slaughter plant to process case-ready product.
"Excel was the only major slaughter plant in the state that bought hogs from Missouri producers," says Ron Plain, Missouri extension economist. Premium Standard Farm's plant at Milan, Mo., processes pigs from its own farms or under contract arrangements. Now, hogs from Missouri farms will have to go out of state for slaughter.
Glenn Grimes, Missouri professor emeritus, says previous closings of the Marshall plant caused area live hog prices to drop 50 cents to $1 per hundredweight in a 50-mile radius of Marshall.
Farmers also will face increased transportation costs.
"It's not an insurmountable problem, but it is an extra cost," notes Plain. The logical place for Missouri hogs to go will be to Excel plants at Ottumwa, Iowa, or Beardstown, Ill., which will remain open. Grimes estimates transportation costs to either plant would be about $1.90 per hog. Producers who are raising hogs under contract for Excel have a clause under which Excel will pay transportation from Marshall.
From USDA reports, Plain estimates the Marshall plant slaughters more than 8,000 hogs a day, or 40,000 per week. "The Marshall plant was one of the few plants still operating a single slaughter shift, making it more vulnerable to extra costs," he says.
Excel is planning a 2,000-head-per-day increase in slaughter capacity at its Ottumwa plant, but the loss of Marshall's 7,000-head-per-day slaughter capacity still leaves a 5,000-head-per-day void in the national hog slaughter capacity.
The capacity loss will not cause any problems this year, but it is not clear what impact it will have in 2002 and beyond. Most economists are calling for next year's market hog supplies to be near slaughter capacity levels – a per day decline of 5,000 head will make it a much closer call.
When U.S. hog production exceeded slaughter capacity in late 1998, hog prices dropped to 8 cents per pound. Earlier, trade estimates indicated U.S. plant capacity would become critical this year. "It looks like we can get through the fourth quarter of this year," says Plain. "But we can't stand much more growth by the fourth quarter of 2002."
Grimes estimates critical capacity could be reached at 2 percent growth. "With the closing of the Marshall plant and cut back to one shift in the Hormel plant at Rochelle, Ill., we're back to about where we were in 1998."
No new slaughter plants are scheduled to come online, Plain said. Seaboard Corporation cancelled plans for a new plant at Elwood, Kan., across from St. Joseph, Mo. "There have been no new announcements on plans from Seaboard," adds Plain.
Plans are being developed for a farmer-owned slaughter plant at Shelbina, Mo. However, estimates indicate that would replace only about one-fourth of
lost capacity at Marshall.
Similar farmer-owned plants also are being considered in Illinois and
Nebraska. "But it takes about 18 months from groundbreaking to first kill," points out Plan. "And the farmer cooperative in northeast Missouri has not yet announced a membership drive."
The plant closing at Marshall represents changes in pork retailing. The facility will convert from slaughter to processing. Carcasses will be cut and packaged into case-ready product. Large retailers, such as Wal-Mart, receive meats pre-packaged, ready for the display case, instead of having in-store butchers cut and package the meat.
After remodeling, the Marshall plant will process carcasses from other Excel plants.
University of Missouri