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Pork Powerhouses 2015: Expansion Looms

When corn is cheap, hogs get plentiful. The annual Pork Powerhouses® ranking of the 25 largest producers in the U.S. shows a gain of 128,000 sows in the past year. With two new packing plants set to open in 2017, producers are gearing up to supply more pigs. Click here to see the Pork Powerhouses list.

Twelve producers have partnered with Clemens Food Group in the new, fresh pork processing facility under construction in Coldwater, Michigan. Most of those farms are expanding, including Hord Livestock Company in Bucyrus, Ohio, and Cooper Farms in Oakwood, Ohio, both with 24,000 sows.

In Iowa, Seaboard Triumph Foods is breaking ground this fall on a fresh pork plant near Sioux City. Most of the farmer owners of Triumph Foods, with 445,500 sows total, are already expanding. Both the Clemens and the Seaboard Triumph plants will kill 10,000 hogs a day.

"This is a big move for our industry, two new plants at the same time," says Mike Brandherm, general manager of Hitch Pork Producers, Guymon, Oklahoma. "What does Seaboard do to source pigs in the new plant in Iowa? We are waiting to hear if there's room to grow."

"We are considering expansion," says Bob Dykhuis, CEO of Dykhuis Farms (16,000 sows) in Holland, Michigan. “The new slaughterhouse in Michigan will create a need for more pigs at the other slaughterhouses. We are considering what our role could be in filling that need. I am having our current sow farm sites evaluated for siting to see if we can make them larger in size.”

Questions or comments about this report? Email Betsy Freese at betsy.freese@meredith.com.

JBS Makes a Move

Shaking up the industry even more was the announcement on July 1 that JBS USA Pork, a subsidiary of Brazilian-based JBS S.A., was buying Cargill Pork, including two packing plants and four hog farms. JBS is already a major pork, beef, and lamb processor, as well as a majority shareholder of Pilgrim’s Pride Corporation, the second-largest poultry company in the U.S. The $1.45 billion acquisition concluded on October 30 without any restrictions from the U.S. Justice Department.

Total inventory of sows today for JBS USA Pork stands at 175,000 breeding females. There is room for another 10,000 sows at the Dalhart, Texas, location.

Smithfield Up in U.S. and Mexico

For the nation's largest pork producer, Smithfield Foods, owned by China-based WH Group, sow numbers are up slightly by 7,000 sows this year to 894,000, says Gregg Schmidt, president of Smithfield Hog Production (formerly called Murphy-Brown). All Smithfield company farms will be converted from crates to group housing pens by 2017, which has caused the increase in numbers.

In Mexico, Smithfield is beginning an expansion over the next five years, says Schmidt. "We have had good success selling into the Mexico City market, which is one of the best in the world. As that market evolves, there will be more demand for good hogs."

In China, a new facility for making pork products with the Smithfield brand will open in November. U.S. pork will be exported to the plant and will be made into American-style products. The meat will be sold in China. If the plant is successful, two more will be built. All the pork will be free of ractopamine, a feed additive that produces leaner pork. Smithfield hogs are ractopamine-free, but millions of U.S. pigs are fed the additive.

Cactus Feeders Jumps In

A new player to the Pork Powerhouses ranking this year is Cactus Feeders, Amarillo, Texas, the largest independent cattle feeder in the U.S. Cactus bought 9,500 sows from Orangeburg Foods in South Carolina last winter and then acquired Swine Graphics Enterprises (SGE), Webster City, Iowa, in May. SGE, which owned 24,500 sows, is now the hog management company of Cactus Feeders.

Why get into the hog business? "Cattle production is tough," says Brad Hastings, president of Cactus Feeders, which is 100% employee owned. "We are looking to grow and to diversify our business. Our mission statement is to feed a hungry world."

Cactus looked at many options, including acquiring more feed yards and buying dairy and turkey farms. Nothing fit as well as hogs, says Hastings, who worked at Iowa Select Farms a decade ago. "Pork isn't a huge stretch. It is the number one protein in the world. We looked at other proteins. Pork worked."

Cactus isn't the first cattle company to own sows. Hitch Enterprises, Guymon, Oklahoma, entered into pork production in 1995 when Seaboard announced the opening of a pork processing plant in Guymon. Hitch now has 15,000 sows.

"It's tough in cattle, and it's going to stay that way for awhile," says Brandherm. "We don't see the cattle business getting better for a year or two."

Hitch "took a lot of grief" from other cattle feeders when it got into pigs 20 years ago, says Brandherm. "Hog producers were much more concerned with cost of production. Cattle guys were marketers and into risk management." Today, the cattle industry pays more attention to costs and efficiencies, and the hog industry uses risk-management tools such as hedging. Both industries now have tight contracts with packers like Seaboard (Hitch) and Tyson (Cactus).

Canada Waking Up

To the north, Canada is still in a holding pattern on expansion, although some farms that were mothballed in the hog market crash of 2008 are starting to be filled again. There has been a moratorium on building hog barns in Manitoba for a decade.

"We went through a long spell of no barns built in Canada since 2005, and now there is no infrastructure to build," says Florian Possberg at Polar Pork Farm (11,000 sows) in Humboldt, Saskatchewan. "Suppliers shriveled up due to lack of activity. Financial institutions all backed away from hogs after 2008. They were not even going to entertain financing hogs. We are seeing more interest in growth now than in the last five years."

Disease Hits Again

Of concern to every producer on the Pork Powerhouses ranking is disease. Last fall, everyone worried about a recurrence of the deadly PED virus that devastated the industry in 2013-14. It touched a few farms over the winter, but only mildly. Instead, a particularly virulent strain of the porcine reproductive and respiratory syndrome (PRRS) virus hit hard in some areas.

"The new strain of PRRS acted like a new disease in the Southeast," says Schmidt. "When it came through, it was a challenge. Following PED, it was pretty brutal and had a big impact on us this year."

At Prestage Farms in Clinton, North Carolina, the virulent strain of PRRS, called 174, was severe, says Zack McCullen, vice president of production. "We had it pretty bad. After two winters back to back with PED and PRRS, let’s hope we get a break this winter."

In the past two months, cases of Senecavirus A (Seneca Valley virus or SVV) have been reported in multiple breeding herds in the upper Midwest. The virus causes snout and hoof lesions on sows and boars, as well as increased mortality in piglets less than 7 days old. The clinical signs and gross lesions of SVV are indistinguishable from several deadly foreign animal diseases, including foot and mouth disease (FMD), vesicular stomatitis, and swine vesicular disease. This makes rapid response and differential diagnosis imperative.

The concern, says the American Association of Swine Veterinarians, is veterinarians and producers could become complacent and start thinking all cases of vesicular lesions in pigs are SVV and forget about foot and mouth disease. If you see vesicles in pigs, you should assume it could be FMD and contact your state or federal animal health official. Do not transport animals with vesicles.

"We are always concerned when a potentially 'new' virus shows up in the U.S.," says veterinarian Daryl Olsen, AMVC Management Services, Audubon, Iowa. "This virus [SVV] does not cause a lot of losses, but is very concerning due to the clinical signs which mimic other very concerning diseases."

Market Concerns

Most of the Pork Powerhouses are expecting the hog market to crash by December and stay bad through 2016 unless China imports more pork.

"The big unknown is what the increase in sow numbers will be and whether it will materialize," says Schmidt. "How many sows are people adding in anticipation of two new slaughter plants? I hope we aren't too enthusiastic on exporting pork. The U.S. should have massive amounts of pork going to China today and that's not the case."

Where will the extra pork go? "I see only two possible outcomes," says Dermot Hayes, Pioneer Chair of Agribusiness and professor of economics and finance at Iowa State University. "Either we export much of the additional pork to China or we drop the market price of pork so that pigs are killed at much lower weights.

"The Chinese opportunity is so big that China can buy from the U.S. and the European Union," says Hayes. "We need to source enough ractopamine-free pork and get this off the U.S. market. If we don't do this, we will need to cut prices well below current levels to get weights down.

"I am betting on China," he says. "Prices there are surging."

 

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