It’s Friday before New Year’s and as I work in my office, snow is falling. Winter has been late in arriving in Minnesota. How late – yesterday I saw a producer installing plastic drainage tile lines at the Iowa-Minnesota border. Normally the frost should be at least 1-2 foot deep by this time of year, and getting deeper rapidly. With warm temperatures and no soil moisture, frost is reported to be no more than 1-2 inches deep in many area fields.
On December 23, the USDA released the December 1 Hogs and Pigs report. By now everyone has read that the US sow herd only grew by 25,000 females. Even with productivity increases, it looks like slaughter capacity won’t be an issue next fall. However, a growing number of producers and industry professionals are becoming concerned about the 2013 prospects.
I am aware of several new sow units being planned, with most that I know of planning to begin construction this summer. While some of the new sow construction is replacement activity, with the old sow unit becoming nursery or wean-finish sites, at least 60% of the activity that I’m aware of expansion.
Generally construction of a new sow unit is timed so gilts can begin populating the gestation barn while the farrowing rooms are built, with the target for first matings to occur by mid-late September. In many cases, the goal is to begin farrowing pigs shortly after January 1 if no construction delays occur. For the US industry, this means farrowing intentions for the Dec-Feb period for the 2012-2013 year will be higher. This also translates into an increase in pigs coming to slaughter beginning in early June of 2013.
Of concern is the ability of US and Canadian plants to slaughter many more pigs during the fall spike in pig numbers coming to market. In the US we have been sitting at 430,000+ pigs slaughtered per day for several months. Producers have commented to me on some difficulty with scheduling extra loads for slaughter – packers have been ‘full’ this fall with most loads scheduled for delivery at least 2 weeks in advance.
If expansion is occurring, some slaughter capacity is available by US and Canadian plants operating fuller shifts on Saturday. During 1998, the last time we really had a slaughter capacity issue, there were even a couple of plants that killed pigs on Sunday. While this is a short term solution to slaughter capacity, long term it is hard on people and equipment.
Will/can the US packing industry add capacity by the fall of 2013? Obviously they can’t add any new slaughter plants to the mix. The last major plant constructed in the US was the Triumph plant in St Joseph, MO and once ground was broken for construction it was a 3+ year process before the plant was operating anywhere near design capacity.
There are still a number of major slaughter plants in the US that are single shift. They remain single shift plants for a variety of reasons, ranging for availability of hogs within a reasonable transport distance to site specific issues such as water disposal restrictions, etc. Several of these plants have indicated that under the right conditions, they would like to add a second kill shift to the plant, effectively doubling capacity. However, this can’t happen overnight as most of these plants would have to expand their cooler capacity by quite a bit to handle the extra volume of carcasses and chilled products from the breaking and processing lines.
While 2012 is shaping up to be quite profitable to US pork producers (as long as exports remain strong), question marks are looming for 2013.