Pork Powerhouses 2005: Show Me the Sows
Last spring, after a solid year of profit in the swine industry, talk began to swirl about 200,000 new sows going into production in the U.S. Three million more hogs on the market might tip the industry back into the red, producers feared. Click here to view the Pork Powerhouses list.
(Photo: The new Triumph Foods pork packing plant in St. Joseph, Missouri, will open later this fall. Rick Hoffman (right) is CEO.)
Here’s what the exclusive Pork Powerhouses numbers show:
The largest 20 producers in the U.S. have 140,700 more sows now than last year. Of those sows, 61,200 are new to the industry, and the rest were already in production acquired. More than half of that new growth, about 34,000 sows, comes from exisiting farms where nurseries are converted to gild development units as farms switch to wean-to-finish production. Iowa Select Farms, for example, is adding 20,000 sows this way.
Additional sow growth by the largest producers is planned. The top 20 have new farms on the drawing board, plus plans for more acquisitions.
On top of that, there are new units in the Midwest, some as big as 6,400 sows, being build now by smaller independents. That doesn’t reach panic levels, but it could mean more market hogs by next fall.
Can the industry handle it?
A new plant will help
Triumph Foods in St. Joseph, Missouri, will be online later this fall. At capacity, it is set to kill 1,000 head an hour or about 4 million hogs a year.
Trumph is owned by five of the largest producers in the U.S.: Christiansen Farms, The Hanor Company, New Fashion Pork, TriOak Foods, and Eichelberger Farms. A sixth owner is Allied Producer’s Cooperative, a group of independent producers in Iowa, Nebraska, Kansas, and Minnesota.
“The plant will be a success because it has the three C’s,” says Bob Christensen, owner of Christensen Farms, Sleepy Eye, Minnesota. “Capacity, capital, and commitment.”
The total number of sows by Triumph owners is 351,350. That’s more than enough to produce all the pigs needed by the plant’ however many owners have marketing contracts with other packers. For that reason, the plant will welcome hogs from other farms.
“We are out in the industry today looking for producers to source pigs,” says Triumph CEO Rick Hoffman. “Our owners have enough pigs, but they are committed to other plants.” (For information on selling hogs to Triumph Foods, call jerry Lehenbauer at 816/238-3551 or email him at email@example.com).
All pork from the plant will be marketed by Seabord Foods, and much of it is targeted for export.
Hogs will go here, not there
What effect will the new plant have on the rest of the packing industry?
“We know this plant will have pigs, and someone else will not have those pigs,” says Hoffman. “It will come down to who is the most aggressive and what company can pay more for hogs. “We will see the price of hogs go up,” he predicts.
While new sow farms are still rather scarce, finishing barns are popping up all over. The Farmers Cooperative Society in Sioux Center, Iowa, for example, is hammering in more than 60,000 new hog-finishing spaces this year.
Northwest Iowa has become a hog-feeding mecca, with weaned pigs coming from all corners of the U.S. and Canada to finish out the abundant grain in the area. Many sow farms have disappeared locally, says Brad DeVries, feed division manager for Farmers Cooperative, but finishing is booming. “We provide creative opportunities for local farmers,” says DeVries. “If they have barns, we hook them up with a supply of pigs.
“We call it the Opportunity Pig Business. We help them find pigs and markets. We do the diets, coordinate vets visits, help with records, just about anything they need.”
Sows there, corn here
Another collaboration in that area of the state involves a unique bond between 16 North Carolina farm families and more than 50 in Iowa.
“It’s an incredible story of how North Carolina families and Iowa families have connected,” says Andy Smythe, CEO of Coastal Plains Pork, based in Harrells, North Carolina. Coastal Plains formed in 2003 and is made up of a group of sow farms that range in size from 1,200 to 5,800 sows, totaling 27,000.
“When our group formed there was only one way to be competitive,” says Smythe. “We wanted to establish a ‘best-cost geographic model.’ North-west Iowa offered abundant corn and soybean meal and access to markets.”
Coastal worked with ProPork in Sioux Center to form the finishing company Habit 4. Today, half the weaned pigs are finished by Habit 4 and half are fed on other farms in Northwest Iowa.
“Fifteen years ago there was some animosity between Iowa and North Carolina,” says Smythe. “Iowa looked at us as a competitor. Now we are working together in ways no one predicted. It’s what the market demands.”
Iowa is not alone in hog-finishing growth. Minnesota is also a beehive of activity this fall as finishing barns go up for many of the largest producers. Tremendous crop yields in the area the past few years have encouraged some of the growth.
Expect more growth
While rampant expansion in sow farms is not to be seen so far in the U.S. or Canada, the largest producers are certainly eyeing growth.
“We’ve had some sow bars on the drawing board for years,” says Gordon Spronk, an owner in The Pipestone System, Pipestone, Minnesota. “We may take a look at those.”
Where in the world could you add sows?
If you had the money and could get the permits (never a slam dunk), dropping in a sow farm might be a tiny bit easier today than in the past few years. Producers report that Indiana and Illinois are more welcoming right now to pig expansion than they might have been. Texas still wants pigs but has little water and grain, and only one packer in the region.
The best option, says Smithfield Foods, is to go overseas. “These are exciting times for Eastern Europe,” says Joe Szaloky, director of financial planning and analysis with Murthy-Brown, the pig production side of the company. Smithfield now has 47,000 sows in Poland, up by 14,000 over last year. In Romania, the company is getting its feed wet with 20,000 sows.
While Smithfield went into Poland at a “rapid pace,” says Sxaloky, it is taking a more measured approach to Romania, aiming for long-term cost advantages. Growth is dependent on European politics and economics.
What about Brazil?
Brazil’s dependence on export sales has been “a frustration” for Smithfield, says Szaloky, despite the country’s “significant production advantages.” The company has 14,000 sows down there, but no plans for immediate growth. “At this point, we see Eastern Europe as a more stable growth and investment alternative,” says Sxaloky. “However, the long-term advantages of pork production in Brazil cannot be ignored.”
Slow growth in Mexico
Mexico still has potential for growth says Szaloky. The company’s farms in eastern Mexico have grown steadily and are up to 48,000 sows. In Sonora, Smithfield has 33,000 sows. “People eat a lot of pork and pay a good price for it in Mexico,” he says.
The bottom line with expansion, says Szaloky, is “we go where there are good returns.”
Falling just below the Top 20 in the Pork Powerhouses ranking are these producers:
- Holden Farms: 30,000 sows
- Texas Farm: 29,000 sows (expansion underway)
- Coharie Farms: 29,000 sows (bought sows from Cargill)
- M2P2: 28,500 sows (also manages 25,000 for Hormel)
- Coastal Plains: 27,000 sows
- Schwartz Farms: 25,000 sows
- Garland Farm Supply: 24,000
- GIS Perfect Pig: 23,350 sows (bought sows from Cargill)
- Hog Slat: 23,000 sows
- TriOak Foods: 22,000 sows
- L.L. Murphrey: 20,500 sows
- Eichelberger Farms: 20,000
- Swine Graphics: 20,000 sows
- J.C. Howard:18,000 sows
- Hitch Pork: 16,000 sows
Is acquisition easy?
Heck, no! Just ask Ken Maschhoff. He made the largest sow buy of the year, purchasing the Land O’Lakes swine business. “If I had to give the buy a grade 30 days in, I would have given it a D,” says Maschhoff. “Now I give it an A.”
What changed? “Our original intention was to run it as two companies and keep them separate. It didn’t take us long to realize that wouldn’t work.” Today, the old LOL units are completely integrated into the Maschhoff system. “Culturally, you couldn’t find two operations more opposite,” he says. “Land O’Lakes was not a pig company.
“It’s been a learning experience, and we are doing things very differently than we anticipated a few weeks into the deal.”