FCSAmerica Staff Reports
| Oct 27, 2016
There’s change in the wind for pork producers in the Western Corn Belt. Three new sizeable pork plants are under development, with two of them opening in Iowa, the nation’s top pork- and corn-producing state.
- A processing plant scheduled to open in Sioux City, Iowa, in mid- to late 2017 will handle 10,000 hogs in a single shift, with the potential for two shifts a day – or about 3 million hogs a year. Triumph Foods, a vertically integrated, farmer-owned pork producer and exporter, has teamed up with Seaboard Foods, an international pork producer and purveyor, to build the $264 million processing plant.
Between 70 and 80 percent of hogs are expected to be sourced from owner farms. Triumph finishes hogs primarily in the upper Midwest, while Seaboard presently has most of its finishing units in the lower Midwest/Plains. At two-shifts, the new Seaboard Triumph plant would match Triumph’s plant in St. Joseph, Mo., built a decade ago and the last major pork packing plant to open. Combined, the two companies would represent the second-largest hog producer and rank in the top five processors in the United States.
- Producers, primarily from the Eastern Corn Belt, are among those partnering with family-owned Clemens Food Group to open a plant in Coldwater, Mich. When the plant opens in late 2017, it also is expected to slaughter 10,000 head a day. Pennsylvania-based and family-owned Clemens and its partners are investing more than $255 million in the plant.
- Expected later is a similarly sized plant slated for Wright County in the Webster City area of Iowa. Prestage Farms is investing $240 million and hopes to break ground next spring, with first-shift operations planned to begin in mid-2018. The company plans to source 40 percent of the hogs for the new packing plant from independent farmers.
Prestage was founded and headquartered in North Carolina by Bill and Marsha Prestage in 1983 but it has had a substantial presence in Iowa for 12 years, with 140 contract production sites in 30 counties in the state. Prestage also produces hogs in South Carolina, Mississippi, Alabama, Texas and Oklahoma.
- Two smaller pork processors on the edges of our business territory are expected to begin production this fall: Moon Ridge Foods in Pleasant Hope, Mo., which will process 2,000 head a day and Prime Pork, in Windom, Minn., which will process 4,000 head a day.
The United States has lost pork packing capacity of nearly 123,000 head in the past decade and 3,600-plus head a day in just the past year, said Steve Meyer, vice president and pork analyst at Express Markets Inc. Analytics in Ft. Wayne, Ind. But the addition of five plants by the fall of 2018 will add total capacity of more than 9.6 million head a year – or weekly production of more than 185,000 head at one shift per day. This will put national capacity about 8 percent above 2015’s average national weekly slaughter rate, Meyer said.
However, the new plants won’t help the market this fall. Jeff Wiepen, vice president of agribusiness lending at Farm Credit Services of America, cites current supply at more than 6 million hogs, with more coming.
“There is definitely a concern the supply increase will be too fast,” Wiepen said. “Demand is good but exports have not been robust enough recently and growth would be needed to keep prices from falling as more pork pours onto the market.”
Current national capacity is approximately 452,000 head a day, which implies 2.44 million head can be handled weekly this quarter, slightly below last year, according to Meyer. The forecast for the fourth quarter is almost 31.2 million – 2.4 million a week – and every week in December, when the most hogs come to market. So it’s possible the numbers will be larger than currently rated capacity, Meyer said.
“For sure, the next two or three years will be the most interesting for pork producers in quite some time,” Wiepen said.
Local Economic Impacts
The economic impact of these three new large plants undoubtedly will be felt for miles around and in a myriad of ways.
On the production side, new contract opportunities will be available and some of the plants intend to buy a portion of needed supplies in the open market. The plants also will need to purchase energy, water and other materials, supplies and services.
Kevin Rasmussen of Goldfield, Iowa, welcomes the Prestage plant, which will be just 12 miles from his 1.000-sow operation: “Competition is good in markets. And – as ethanol plants have shown - anytime we can add value locally, it is a win-win situation. I can envision this creating opportunities for beginning farmers to build contract barns, as well as creating a new market for independents, like myself.” Rasmussen currently ships his production to Storm Lake, Iowa, or even as far as Guymon, Oklahoma.
Corn and soybean basis could see an improvement in the area as feed demand ramps up.
The new plants also will generate new jobs, which mean more employees, more demand for housing and more money to spend in area communities. Each plant is expected to create 800 to 900 production jobs and some 200 management and clerical jobs at the outset, increasing to more than 2,000 jobs if second shifts are added.
The Seaboard Triumph’s payroll, for example, is expected to total $48 million a year, according to Sioux City officials, who say the plant is the city’s biggest-ever economic development project. That’s before health care and other benefits.
On the downside, Meyer raises the concern that older, and especially smaller, plants in the area may find it tough to compete with these newer, more efficient plants. “At least initially,” he said, “it is likely these large plants will pull some deliveries from existing operations.”