While President Trump talks tough about trade agreements that don’t well serve U.S. interests, the U.S. pork industry is quietly setting export records this year. And it’s basking in a profit windfall as a result.
Hog market consultant Steve Meyer is telling pork producers at the World Pork Expo this week in Des Moines, Iowa, that pig prices are playing out better than many people expected when the year started. “Mostly, it’s because exports have outperformed expectations,” he says. “Pork exports were predicted to be up about 7% from last year, but so far they are up 14%; about 24% of our total production has been exported.”
Mexico, the main focus of Trump’s trade taunting, has been a particularly strong pork market in 2017, he continues. It started last fall. While they take all kinds of pork cuts from the U.S., they’ve been particularly good buyers of “green” hams, Meyer says. South Korea, along with several Central and South American countries, has also increased its purchases of U.S. pork.
“If we, for some reason, should lose our pork export markets [disease, or canceled trade agreements], it would put a third more pork back on the domestic market. That would send the price of pork down at least 60% on the retail market,” he adds.
But as of now, U.S. pork producers are moving product and making good money. With relatively low corn prices, the average cost of production for pork producers is about $60 to $65 per cwt (carcass) right now, Meyer says. Meanwhile, futures prices through the summer and early fall are well into the black, some around $80 per cwt. “I’m seeing average profits per head of about $20 for good producers this year. I consider futures right now a little on the high side, and pork producers should take advantage of them.”
Later this year, there’s more beef and poultry coming. With all of the meat industries in expansion mode, Meyer thinks it is possible that in either 2018 or 2019, the U.S. could match or exceed the all-time record for per capita meat consumption. That was set in 2006 at 220 pounds. “I wasn’t sure we’d ever reach that level again,” he says.
Meyer thinks total pork production will be up 3% this year and 4% in 2018. But it won’t take a 4% bigger sow herd to accomplish that because average litter weaning size continues to grow at roughly a 2% clip per year. With that level of growth in litter weaning size, it only takes 1% more sows in the breeding herd (now at just over 6 million U.S. sows total) to get a 3% expansion in market pigs.
“There seems to be no end to the improvement in litter size,” Meyer says. “I think there may be some things coming on the genetics side that will accelerate it even faster.”
As for corn prices, even with the summer starting out on the dry side, Meyer says it’s too early to worry about drought and a crop shortfall. With record corn production in two of the last three years, we’ll have a 2.6-billion-bushel carryover this fall that should keep prices from moving up quickly.
The pork industry is about to get a very hungry new pork consumer. It comes in the form of a new, state-of-the-art packing plant in Sioux City, Iowa.
This plant, which will need 21,000 market-size hogs every day when it hits full stride, is the $300 million joint-venture investment of two Pork Powerhouses, Seaboard Foods and Triumph Foods. Sitting on the west side of Sioux City, the new plant will be almost 1 million square feet and will attract hogs primarily from Iowa, Nebraska, South Dakota, and Minnesota. It will also attract a new workforce of about 1,000 people by the end of 2017; this number could be more than 2,000 by the end of 2018 when the second shift is up and running.
At that point, the chain speed maxes out at 1,106 head per hour, the most allowed by federal regulation.
To be truthful, the new plant won’t be out looking to buy 21,000 hogs on the open market on day one. It will take a few months of gearing up to get to one-shift capacity of 10,000 hogs a day. A second shift probably won’t come on until late 2018.
And, about two thirds of the hogs will come from Seaboard and Triumph hog farms. The other one third will be bought on the open market from other pork producers, which the new entity is already in the process of lining up.
Officials from Seaboard Triumph Foods (the name of the joint venture) shared the latest news about the project at a press conference during World Pork Expo. Mark Campbell, the CEO of Triumph Foods, said the first hogs should go through the plant in September. And, he said, it will feature some of the newest technology in the packing industry – full ultrasonics of every carcass, the latest robotics for evisceration and fabrication, seven unloading docks for hogs, and 31 outlet docks for fresh pork cuts. The waste treatment system is fully enclosed and will recover methane for powering the plant.
Mark Porter, COO of Seaboard Triumph Foods, said the company is working with Sioux City and other surrounding communities to recruit workers. They’re trying to get the area upgraded to designation as a primary refugee resettlement community to bring potential new workers to town. Because Seaboard and Triumph already have their own existing hog packing plants in Guymon, Oklahoma, and St. Joseph, Missouri, respectively, they will probably bring in workers from those plants to get started and train.
Porter said wages will be competitive for the area, starting at no lower than $15 an hour. And, he added, “We expect the new plant will raise hog prices for all producers.”