Getting a handle on packing capacity in the fall was much easier, but remains troubling — if not for this fall, then certainly for the fall of 2013. The bottom line is this — there is no packing plant cavalry riding to the rescue if hog numbers get too large by the end of 2013. Producers need to factor that into any growth decisions they make for the next couple of years.  

Steve Meyer

May 15, 2012

3 Min Read
Slaughter Projections Will Test Packer Capacities

 

In the fall of 1994, agricultural economists were discussing the wave of pigs destined for slaughter in the coming months. The thought of not having enough shackle spaces to get all available hogs harvested efficiently and in a timely manner had never crossed their minds.

But the question had merit. The packing sector had undergone a major rationalization since a then-record slaughter of 96.07 million head in 1980, a record that stood until 1995. Lower hog supplies drove hog prices to record highs in 1986 and 1990. Packers lost money as hog prices spiked and plants operated far below their least-cost throughput levels. Old-line packers were paying union-scale wages while IBP, the new kid on the block, paid non-union wages and brought new technologies to boxed pork. It was a horrible time for packers, and plants closed at a steady pace through 1993.

 

Current Capacities

A quick phone survey of packers who were not too keen on sharing capacity data confirmed economists’ suspicions. Things got very tight in November 1994. Saturday slaughter runs soared. Hog prices dipped into the mid-$20s on a liveweight basis for the first time since 1980. Little did we know that the fall of 1994 was child’s play compared to what lurked ahead in the fall of ’98, when prices would fall below $8/cwt. and producers exited the industry in droves.

Born of this situation was my periodic effort to keep track of U.S. packing capacity.

This spring, I have posed the packer capacity question on several occasions. Getting a handle on packing capacity in the fall was much easier, but remains troubling — if not for this fall, then certainly for the fall of 2013.

 

Fall 2012 Predictions

My 2012 survey involved only the top 11 packing companies because that’s how far down the list I had to go to get to the only significant increase in capacity since last year when Rantoul Foods, Rantoul, IL, reopened the former Meadowbrook Farms plant last summer. The plant’s current capacity is 4,200 head/day. There were a few tweaks to the capacities of other plants (Table 1).

All changes considered, the 2012 figures from the 11 companies surpass the 2011 estimates by 3,250 head/day. Assuming the total capacities for all remaining 46 companies on my master list (slaughtering 100 head/day or more) remain constant, this addition puts current total capacity at 440,780 head/day. That capacity would handle 2.38 million head during a “normal” fall week, assuming the sector operates 5.4 days/week, on average.

Using the USDA’s March Hogs and Pigs report to forecast weekly slaughter, there are four weeks in which the 5.4 days/week will eclipse slaughter capacity this fall. The highest weekly slaughter would likely hit 2.411 million head in mid-November. The all-time record weekly total at 2.477 million head was set the week before Christmas 2007. That was accomplished with a total slaughter capacity of 444,925 head/day (2.403 million head/week).

How about 2013?

The average for pigs saved per litter has grown 2% per year for the past four years. The U.S. breeding herd has grown by just over 0.5%, year-on-year, for the past three quarters. Should those rates continue in March through May 2013, fall market hog supplies could be 2.5% higher than this year, putting weekly slaughter totals at 2.46 million head. Even more troubling, those levels could persist for several weeks. Very little can be done to enhance capacity by the fall of 2013. 

The bottom line is this — there is no packing plant cavalry riding to the rescue if hog numbers get too large by the end of 2013. Producers need to factor that into any growth decisions they make for the next couple of years. 

 

About the Author(s)

Steve Meyer

Ever.ag Livestock Division

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