Pigs are plentiful, shackle space is tight, and hog prices are
crashing. Welcome to the first quarter of 2017. Or is it 1998 all over
again?
The Successful Farming® exclusive
2016 Pork Powerhouses®
ranking of the largest 35 producers in the U.S. shows an increase of
123,000 sows from one year ago. With 3.77 million sows, these companies
control two thirds of the pig production in the U.S. The largest
company, Smithfield Foods, actually cut back on U.S. sows this year, but
22 of the top 35 companies expanded.
Top 10 Takeaways from Pork Powerhouses 2017
1. New packing plants are driving expansion.
Seaboard Foods (290,000 sows) added 73,000 sows this year, mainly
through acquisition, as it gears up to supply the new Seaboard Triumph
Foods plant set to open next summer in Sioux City, Iowa.
Seaboard bought
35,000 sows from Christensen Farms, a partner in Triumph Foods, and
acquired Texas Farm, which had 25,000 sows and room to grow to 40,000.
“We are going to continue to build our sow base in the next six to 12
months,” says Stephen Summerlin, senior VP of operations for Seaboard.
“We are looking at both growth and acquisition, but acquisition
opportunities make more sense in the economic landscape.”
Farms in the eastern Corn Belt are expanding to supply the new
Clemens Food Group packing plant opening in September 2017 in Michigan.
Four companies in the Pork Powerhouses ranking are based in Ohio, and a
few more in that state are expanding toward the 20,000 mark.
Independent producer Prestage Foods of Clinton, North Carolina
(175,000 sows), is building a packing plant near Eagle Grove, Iowa, that
will process 10,000 hogs a day starting in 2019. About 40% of the hogs
will be purchased from independent producers, says Zack McCullen, vice
president of swine production for Prestage.
“We are really excited to get it up and going. Iowa is a great place
to build a plant with all the corn and pigs,” he says. “We can supply
60% of the plant with our own pigs and will buy 40% from local farmers.
Producers are excited about the plant because it gives them another
option to sell pigs.”
With two large plants coming on line in 2017 and another in 2019,
will older plants shut down? Greenwood Packing in South Carolina closed
its 3,000-head-per-day facility in May. None of the other packers is
flinching – yet.
“Smithfield is laser-focused on achieving growth, not shrinking. We
have no plans to close any of our plants,” says Gregg Schmidt, president
of Smithfield Hog Production.
2. Sows are more productive.
Even though Smithfield dropped from 894,000 to 880,000 sows in the
U.S. this year, pig numbers for the company are stable. “We have the
same number of pigs with fewer farms,” says Schmidt. “In the next two to
three years, we will hold where we are in sows and get more
productive.” (Smithfield is adding sows in Mexico and Poland.)
Pigs per sow per year continue to climb, says Matt Culbertson,
director of global product development at PIC, the world’s largest swine
breeding stock company. The company has a composite dataset of
customers that supplies information for benchmarking.
“Five years ago,
30 pigs per sow per year seemed more like a dream or a stretch target to
the majority of the industry,” says Culbertson. “Today, I’m aware of
multiple systems achieving 30 pigs per sow per year over a 12-month
period across all of their sow base.”
3. Packer margins are wide.
The feeling from independent producers can be summed up this way:
I’ve got a big investment in my farms and someone else is making the
money. There is no real fundamental market for hogs, no bidding process.
I’m squeezed out of the market.
With more hogs than shackle space this winter, is it December 1998
again? “I’m asking myself that question,” says Harley Sietsema, owner of
Sietsema Farms in Allendale, Michigan. “Do we lock in hogs at a small
loss now rather than taking a big loss later?”
Sietsema remembers 1998 well. “We subsidized the business until the
market got better. I see us having to do that this winter.” His three
strategies to survive the downturn in hog prices are to sell futures, to
buy inputs as cheaply as possible, and to tighten production
parameters.
It’s going to be an interesting winter, agrees everyone on the Pork
Powerhouses list. It may come down to who has the capital to hold out
for nine months. How quickly will people pull the trigger and say
they’ve got to get out of this business?
4. Feed is cheap, thank goodness.
Lower corn and soybean prices are good news for pork producers.
However, cheap feed creates a knee-jerk reaction where more people think
they need to feed the grain, so the hog industry expands even more.
The
downturn in the farm economy means some grain farmers are more reliant
on hog barn contracts for their incomes. They may be more open to
expansion, say producers.
5. China makes everyone nervous.
Chinese imports have kept the U.S. hog industry afloat for years, say
producers. If China slows down, there’s no place else for us to go with
all this meat. Everyone is hoping China doesn’t run out of money. The
dollar is strong, and Europe’s pork is cheap relative to ours.
Shuanghui Development, Smithfield Foods’ sister company in China and
that country’s largest meat company, opened a plant in China last year
to turn pork sourced from Smithfield in the U.S. into packaged meat with
the Smithfield label.
6. PRRS is still a problem.
The PRRS virus hit many of the largest producers from December
through March, especially North Carolina, Ohio, Indiana, and Missouri.
“Out here in the East, PRRS rolls through and causes pig supply problems
for our plant,” says Schmidt. “If we eliminate PRRS, the industry has
the capacity to produce a lot more pigs.”
The disease is inconsistent, says Jimmy Pollock of J.C. Howard Farms
in Deep Run, North Carolina. “Some farms are devastated with higher sow
and preweaning mortality; some aren’t as severely affected. PRRS started
as a mystery disease and it still is.”
7. Management companies are growing.
Carthage System, based in Carthage, Illinois, is up to 145,000 sows
managed, a growth of 25,000 sows from one year ago, and it’s mainly new
construction. The growth of veterinarian-owned Carthage, as well as
Pipestone System in Minnesota, which added 15,000 sows this year, shows
that many farmers don’t want to manage sows; they would rather pay
someone to manage them. On the Pork Powerhouses 2016 ranking, eight
firms are management companies.
8. Barn designs are changing.
Almost every company on the Pork Powerhouses ranking is remodeling
and converting farms. A few finishing barns are being converted to sow
farms, stall gestation is being converted to pens, and some sow farms
are switching to batch farrowing.
The transition to group sow housing happens when the opportunity
presents itself with new construction or investment in new facilities.
New Fashion Pork, a member of Triumph Foods, has a new 1,400-sow farm
near Thorp, Wisconsin, where gestating sows live in groups of 250 in
large pens. There are 32 square feet of space per sow. Sows and gilts
are held in stalls for a few hours to be bred and then released and
allowed to move around within a breeding group pen. The farm also
features turnaround-style farrowing stalls.
One new sow barn design is 280 feet wide. Rob Brenneman built a few
of these superwide barns in Missouri and says, “We love them. We don’t
have as many barns to maintain, so the cost per sow goes down.” The
barns use filtered ventilation with fans cooling the rooms from the
middle.
“It wouldn’t work if they were cross-ventilated,” says
Brenneman. “They are easier to manage.” His barns are built by
Win-Win in Illinois.
9. Antibiotic regulations are driving change.
All producers are thinking about how they can raise healthy pigs
using fewer antibiotics. Nurseries are becoming popular again. “As
people look at reduced antibiotic use, they see potential benefits to
using nurseries to get pigs started better and to going forward more
consistently,” says Culbertson at PIC.
Reicks View Farms near Lawler, Iowa, designed and built a new
2,400-head nursery building that sends air through a cool cell system,
using evaporation to give the pigs the ideal growing environment. A cool
cell pad catches the dust exiting through the fans, reducing ammonia
and odor emissions by 50%.
10. More change is coming.
Many sow farms are more than 25 years old and reaching their
lifespans. Christensen Farms has a large project on two sow pods in
Nebraska, where they are building new barns and stocking 14,000 sows
later this year. The site held 10,000 sows before the rebuild.
“The next three to five years will see a lot of change in the
industry,” says Glenn Stolt, CEO of Christensen Farms, based in Sleepy
Eye, Minnesota. “It’s quite exciting; it feels like the mid-1990s.”
source: successful farming
