New US Packing Capacity Expected to Improve Producer Profitability

US - The Vice-President Pork Analysis with EMI Analytics is confident new US processing capacity will result in improved profitability for North American pork producers by mid-2017, writes Bruce Cochrane.
calendar icon 16 January 2017
clock icon 3 minute read

Strong profitability in the US pork processing industry has resulted in decisions to the construct a number of new pork processing plants.

Dr Steve Meyer, the Vice-President Pork Analysis with EMI Analytics, told those on hand yesterday for the 2017 Banff Pork Seminar this massive expansion will probably result in enough competition for pigs in the second half of this year to squeeze packer margins and move some of that meat value that's been going to the packers back to producers.

Dr Steve Meyer-EMI Analytics:

It's a big move. We were up against processing capacity in the United States this fall.

We ran above the rated capacity for, I think, seven or eight weeks during the fourth quarter.
We knew that was coming.

We've had higher gross margins for packers over the last two or three years and that will get you an expansion and these plants are coming on.

If the US industry is going to grow and the Canadian industry is going to grow we needed more packing capacity and we have two big plants that will open this summer.

Another one will start construction this year, be open in sometime late 2018 or early 2019 so certainly a big expansion.

We've never had an expansion like this in my lifetime.

For years and years we were rationalising capacity in the United States and we've been pretty steady recently but hog numbers continue to grow.

World consumption continues to grow and the standard of living in many parts of the world and, if we're going to take part in that, we've got to have more capacity.

Dr. Meyer notes these new plants are all, to one degree or another, owned by producers and because of that the producers can make decisions to bring hogs to those plants as the plants are built.
He says you don't have to build the plant then chase hogs and, in fact, the two plants opening this summer are expected to be comfortably full by this fall.

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