Pork production may top processing

by 5m Editor
18 October 2004, at 12:00am

US - With current record high prices for hogs, there are expectations that pork production could rise in 2005 to more than the industry can process, even though the U.S. packer capacity is expected to increase by late 2005, according to a new study funded by the Pork Checkoff.

“I think we’re okay on capacity for this fall, even though we’re going to have some days when we challenge that,“ said Steve Meyer, president of Paragon Economics and a consultant to the national Pork Checkoff program. “Having sufficient capacity to slaughter the larger numbers of hogs that reach market weight each fall is critical to efficient and orderly marketing and to maintaining producer’s bargaining position in the farm-to-packer marketplace.“

The Checkoff-funded study shows current capacity is 407,875 head per day. That includes only federally inspected plants and is directly comparable to USDA’s daily estimates of hog slaughter under federal inspection, Meyer said.

“These plants represent a very high percentage of federally inspected slaughter capacity,“ Meyer said. “State inspected plants are not included in the survey, even though they provide sales and processing opportunities for pork producers.“

Ron Plain, a University of Missouri agricultural economist, says he is concerned about large pork production estimates for late 2005, as shown in the recent data from the U.S. Department of Agriculture. USDA’s quarterly Hogs & Pigs Report indicated the swine breeding herd on Sept. 1 was up 1 percent from a year ago and producers planned to boost sow farrowings by 1 percent.

The survey showed that the top four pork packing companies have 64.7 percent of the U.S. hog slaughtering capacity. The top eight firms cover 82.5 percent of total harvest capacity. Of companies that can process 2,500 hogs per day, Excel had the largest capacity increase during 2004 at 4,000 head. Hatfield Quality Meats increased its capacity by the largest percentage, at 30.8 percent.

Slaughter capacity may be larger by next fall. A new plant is scheduled to open in St. Joseph, Mo., in late 2005. This plant will add capacity of about 8,000 head per day. The plant is being built by Triumph Foods, a producer venture. Plains said this will be the first pork plant in this size category to be built in about eight years.

U.S. plants consistently operate at just over five days per week by using plants on Saturdays. At times of large hog supplies, the U.S. packing sector can operate at 5.5 days per week for sustained periods and up to 5.8 days per week for a few weeks.

“Packer margins usually grow dramatically, mainly at the expense of hog prices, when utilization rates reach 5.6 days per week,“ Meyer said.

The Pork Checkoff began tracking U.S. packer capacity in 1994, when hog slaughter first approached capacity levels. The 2004 survey includes 19 new companies that each operate one plant. These include the producer-owned Meadowbrook Farms plant in Rantoul, Ill.

Source: National Pork Board - 18th October 2004

5m Editor