Slaughter capacity and exports

Weather in our region of the US continues to be cool and wet. I just reviewed the on-line data from the University of Minnesota Southern Outreach and Research Center at Waseca and rainfall since May 1 is above normal. Thanks to a warm June and early July growing degree units are still slightly above normal in spite of temperatures averaging as much as 5 degree below normal the past few weeks. At least in this region corn and soybeans look great.

Along with great looking crops, new production facilities continue to be constructed as the expansion of the US herd continues. Market commentators and analysts are all writing about the new slaughter plants that are due to come on-line in the coming weeks and the impact of these plants on markets. Of course these new plants are one of the driving forces behind the new facilities being constructed.

In order to think about the impact of these plants on our slaughter (and production) capacity I was recently reviewing USDA livestock slaughter data. In 2016 we slaughtered 117.388 million pigs under federal inspection. There were an additional 0.832 million pigs slaughtered (mostly under state inspection standards) for a total US slaughter of 118.220 million pigs.

The breakdown by category under federal inspection was 114.184 million barrows and gilts, 2.885 million sows and 0.319 million boars.

The 2016 total was up from the 115.425 million head in 2015 or a 2.4% increase. This year we will have more than a 3% increase in total slaughter making our total slaughter around 121 million pigs. With another major slaughter plant expected to begin operations late in 2018 and a second shift planned for the new plant in Sioux City we can expect to see continued increases in our slaughter numbers.

Since US per-capita consumption numbers remain steady, the vast majority of this increase must go to export markets. Both NPPC and the National Pork Board have been writing about the impact of the current NAFTA negotiations on our industry. The good news for us is the announcement this morning of the opening of the Argentina market to our pork.

I have been to Argentina several times and have hosted producer groups from Argentina. Their industry is currently growing with the growth fueled by cheap feed grains. Similar to northwest Iowa and southern Minnesota, the basis level relative to the major export ports is a driving factor in this expansion. It will be interesting to see how well the Argentinian producer can do versus imported US products.

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