Industry expansion headlines World Pork Expo
DES MOINES, Iowa — The pork industry is in a growth phase across the U.S., a point evident at this year's World Pork Expo in Des Moines. Hog production has been ramping up the last several months and that has been reflected in the nation's weekly hog slaughter, which has run at record levels through 2017.
However, despite the big supplies, cash hog prices have remained surprisingly strong through the summer, and with the low cost of production, there have been opportunities for producers to make a profit.
"Right now the best producers are around $20 a head this year and will probably be $15 a head for next year," says Dr. Steve Meyer, pork analyst with Express Markets Inc. Analytics.
Those profit levels have stimulated continued expansion in the industry, and Meyer doesn't see it slowing anytime soon.
"2018 could have 4 percent more production again, on top of the 4.1 percent we're going to have this year in total pork production," he says.
South Dakota has seen similar growth, and Mitchell, S.D., pork producer Brad Greenway says it's an exciting time to be in the industry. He has seen many new facilities built in his area and south into Parkston, S.D.
"There's expansion in South Dakota, so I think that's good for the industry. I think it's good to bring the next generation back, so there's a lot of great things happening in the pork industry in South Dakota," he says.
Many producers are finding a real opportunity to enhance their income or be involved in farming by building a finishing barn and striking a production or management contract.
"The way a lot of systems are set up, they can build a facility, borrow some money but literally have no risk," says Steve Rommereim, an Alcester, S.D., pork producer and National Pork Board vice president. "Banks love these facilities."
Rommereim says with the high cost of land, younger producers can't get into farming any other way.
"If you're willing to work, if you're willing to be part of a system, it's a great way for these young farmers to build equity, to develop some cash flow, and to actually take the crop and turn it into something valuable rather than shipping it out for market price," he adds.
The U.S. pork processing industry is also taking advantage of strong packer profit margins, and several plants are in the works. Seaboard Triumph Foods is expanding, and officials shared plans for their $300 million plant in Sioux City, Iowa, at the Expo. Chief Operating Officer Mark Porter says they are planning to open either August 28 or September 8.
"We'll start off at a few hundred and aggressively ramp to our full first shift volume at 10,400 a day," he says.
And even before phase one of the plant is fully operational, they already have broken ground on an expansion project. Once completed in the summer of 2018, it will include a second shift and have a slaughter capacity of 21,000 head per day.
Seaboard and Triumph each will supply a third of the hogs for the plant. They are out on the market with contracts and spot buys to fill in the last third of the total supply and working with local producers as much as possible.
Rommereim is excited to have another packer bidding for hogs in his area.
"I see it as a very good opportunity for better prices as these plants are fighting for their pigs, for my pigs," he says.
The underlying driver in the swine business has been strong domestic and export demand for U.S. pork.
"Exports have been stronger than anticipated," says Bill Even, CEO of the National Pork Board. "The current amount of exports from U.S. pork is just under 26 percent. The U.S. Meat Export Federation estimates that number will go to 29 percent here by the year 2020."
And that is providing continue optimism in the pork industry at a time when the general commodity sector is depressed.