Radio 570 WNAX (SD)
June 13, 2022
At the end of the month, the US Department of Agriculture will issue its Quarterly Hogs and Pigs report. Ag Economist, Steve Meyer with Partners with Production Agriculture offers his perspective on the outlook.
Pork producers are having to contend with high grain costs and other high input costs. Meyer says he doesn’t see the situation showing much improvement.
Meyer says last year producers witnessed strong demand for their pork product. He isn’t certain if that demand will remain as strong for this year.
audio [2:02 min.]
What impact will Smithfield's California exit have on the industry?
"Where will the pigs be harvested and processed?" remains a major question facing any expansion of the U.S. pork sector.
Steve Meyer, National Hog Farmer
Jun 13, 2022
Last week's announcement by Smithfield Foods that it would close its Vernon, California plant is, to me, more concerning, than alarming, regarding the U.S. pork industry. Let's consider the context and potential impacts of this latest reduction in packing capacity.
Vernon is not just part of greater Los Angeles. It is, in fact, very close to downtown Los Angeles and is far from an ideal location for a pork slaughter and processing facility. Several of the stories about the closure mentioned odor complaints of nearby residents.
The plant is one of the older ones in the United States and was built by Clougherty Packing to produce its Farmer John brand products that are major players in the California market. Hormel purchased the plant in 2005 and then sold it to Smithfield in 2015.
As of 2019, the most recent year in which Smithfield responded to my survey of packing capacity, the plant could harvest 7,300 head per day. That represents 1.5% of total U.S. slaughter capacity. Full-out operations would handle 1.825 million hogs per year over 250 days.
Virtually all of the hogs going to the plant came from Smithfield's Circle 4 operation in Utah and sow farms in Arizona. These western operations involve somewhere around 70,000 sows. I don't know the output of these farms but it is common knowledge that they have had a number of ongoing disease challenges that have limited their productivity…
… I understand that less that 10,000 of Smithfield's Utah sows are compliant with Prop 12 at present. The company was at a critical point of deciding whether to convert the remaining sows in order to sell product from the Vernon plant in the huge California market.
So what does this mean for the rest of the U.S. pork sector?
First, it means nothing very quickly. Smithfield's announcement said it would cease all operations at the plant in early 2023. That implies that no processing operations will continue and puts the impacts into next year...
... Second, reports are that the company will reduce the Utah operations by about two-thirds meaning that some animal flow currently going to Vernon will survive the reductions and, presumably, move to the western Cornbelt...
... Third, the reduction in total slaughter capacity will not amount to 1.5% from last year's level due to some capacity increases driven by chain speed waivers...
... Finally, the closure further limits future possibilities...
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