At the World Pork Expo last week, I had the opportunity to visit with many of the readers of this blog. The most common questions asked of me were:
1) when will expansion begin
2) what new item caught my eye at the trade show.
Let’s start with the expansion question. I think little expansion will occur this year. Producers are too busy healing from the past 2 years. In addition, the tougher lending rules imposed by FDIC and federal regulators on the banking industry will make it tougher to ‘speculate’ in pigs than it has been in the past. I got a sense that next summer we will see some building of wean-finish facilities but it won’t be the ‘boom’ of the 2004-2007 era.
One of the keys to new construction will be pig sourcing – where will the pigs come from if a new wean-finish facility is built? The construction of new sow facilities will be slower because of the bigger investment (and much bigger down-payment), the complications associated with siting, staffing and sourcing genetics for a 2500 or 5000 sow site, and the general question of will it only be larger systems that expand with sow units of this size?
This leads to the question – where does the ‘little’ guy fit? In the past, the little guy was 50-100 sows. Then it became 500 sows. Now, a little guy is someone with only 1200 sows. Weaning 500 pigs per week, it is tough to fill newer facilities sized for 2400 head. If you are filling older facilities with this flow, are they in good shape or do they need replacement? If replacement is needed, how do you construct smaller facilities at a cost that is competitive with larger units?
I heard a lot of discussion also about packing capacity. Right now we have sufficient capacity, even with John Morrell’s closed in Sioux City. The Triumph group is seeking funding to begin construction next summer of a new plant in the Moline, Illinois area. Assuming they proceed with construction and open a 15-17,000 per day plant, what plant(s) will be the next to close. Like any other industry, the packing industry is under great pressure to be ‘right sized’. Excess slaughter capacity comes with a big price tag.
What new item caught my eye? Not much other than I noticed that if anyone had a product that might be a replacement for fishmeal in pig starter diets, they had a booth. If you haven’t heard, fishmeal is becoming scarce due to a variety of world supply issues. By this fall, most expect it to be too expensive to use in pig starter diets. The major nutrition suppliers have been busy sourcing alternatives with several of the most likely products fully booked by these suppliers.