Sioux City John Morrell Closing

Last week Smithfield announced the permanent closure of the John Morrell slaughter plant in Sioux City, Iowa. At both the Minnesota Pork Congress and the Iowa Pork Congress, the Manitoba Pork Producers had a booth where they were interacting with producers on a variety of topics, including the impact of MCOOL on their industry.

 

Both the Mexican and Canadian governments have filed a claim against the US in the World Trade Organization. Many expect a full hearing on this claim later this spring, with a ruling sometime this summer or fall.

 

In the mean time, the number of Canadian born feeder pigs that are coming to the US has dropped dramatically. In 2007, 6.77 Canadian feeder pigs (pigs weighing less than 55 kg) came across the border to US finishing sites. In 2009, this number dropped to 5.1 million pigs and it appears the number will be even smaller in 2010.

 

The vast majority of these pigs go to Iowa and southern Minnesota sites. This concentration of Canadian feeder pigs in the region will continue as Tyson is the only major packer which has continued to sign purchase agreements with owners of Canadian born pigs. The best information that I can locate suggests that Iowa is the final destination for over 60% of all Canadian born feeder pigs, with another 20+% going to Minnesota, and 4-5% going to both Nebraska and South Dakota.

 

Prior to MCOOL, the John Morrell plants in Sioux City and Sioux Falls killed a large number of Canadian born and raised pigs. In 2007, there were 2.60 million slaughter barrows and gilts imported into US slaughter plants. This number dropped to only 550 thousand barrows and gilts in 2009. This change in slaughter barrow and gilt imports represents approximately 2% of our yearly kill.

 

The Sioux City John Morrell plant had an estimated capacity of 14,000 pigs/day when killing on a double shift. This amounts to about 3.5 million head per year capacity so the loss in Canadian born pigs is more than this plants estimated capacity. As the number of Canadian pigs declined, along with the very recent reduction in the US born pigs available for slaughter beginning this spring, pressure on the packing industry to match capacity with supply had to be an issue. Whether the closing was Sioux City or some other location, it appears that market forces are working to match capacity with supply.

 

For the short term, the closure of the Sioux City plant won’t have much of an impact on prices due to the expected decline in pig numbers. Steve Meyer of Paragon Economics, Inc. estimates that the US slaughter capacity is currently in the range of 431,000 hd/day when corrected for the plant closure. As the US industry works to regain the equity it lost the past 2 years, it doesn’t appear to me that we will have slaughter numbers approaching this capacity for several years.

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