Pork packers in the United States and Canada have expanded their collective capacity to harvest and process hogs since our last update in 2007 (see “Pork Packing Sectors See Constant Change,” Sept. 15, 2007, p. 30). Today's higher throughput potential has been accomplished primarily through remodeling and operational changes. Only two new pork slaughter operations appear in this year's packing capacity update.

U.S. Count Climbs

Table 1 shows the results of this year's U.S. capacity survey. Total weekday capacity of 444,925 head/day exceeds our September 2007 estimate by 16,590 head or 3.9%. Of that increase, 4,485 head represents plants being added to the survey. The balance represents an increased capacity of 12,105 head, or 2.8%, for companies included in the 2007 survey.

Two of the additions are not new plants but are new pork processing operations. The largest of those, at a potential 1,500 head/day, is Dakota Pork's light hog operation, which uses the former Pork America plant in Estherville, IA. Heritage Acres Farms is a limited liability company owned by 52 Missouri pork producers. The firm has a long-term lease on the former TaiShin Pork plant in Pleasant Hope, MO. The plant has a capacity of 1,200 head/day, but it is currently operating at only about half that rate.

The other additions to this year's list are established companies that, for one reason or another, I had been unable to reach or confirm capacity information in years past.

Swaggerty Sausage, Pioneer Packing and Southern Pride Meats are all sow slaughter operations. VanDeRose Farms of Iowa processes roaster pigs and light hogs and Dayton Meats of Oregon processes butcher hogs.

Major packers increased capacity at a number of plants without major expansion projects. The largest single increase was at John Morrell's Sioux City, IA, plant where 2,800 head/day was added. This basically replaces the second shift reduction at that plant back in February 2007. Excel increased the capacity of its Beardstown, IL, plant by 2,000 head/day, while Seaboard increased throughput at Guymon, OK, by 2,400 head/day. Indiana Packing and Triumph Foods both added 1,500 head/day to capacity. Indiana Packing's increase marked the completion of an expansion initiated back in 2006.

The only major loss of U.S. packing capacity, of course, was the closure of the Meadowbrook Farms' plant in Rantoul, IL. The producer-owned cooperative had struggled since its inception, and ceased operations last fall when it became embroiled in a dispute with a major specialty product customer over contracted sales. The company filed for Chapter 7 bankruptcy earlier this year and the Rantoul facility is now for sale.

A complete listing of all 56 U.S. slaughter plants is posted at: http://nationalhogfarmer.com/US-Packer-Cap.

Canada's Capacity Up Sharply

Table 2 shows estimates of Canadian pork packing capacity — expressed in “head/week.” The counts were provided courtesy of the Canadian Pork Council and other Canadian groups.

This year's number is 55,000 head/ week larger than our fall 2007 number, but there is a caveat: 45,000 head/week of the increase is due to Olymel's Red Deer, Alberta plant being listed as potentially double-shifted. The plant has enough cooler and fabrication space to handle two slaughter shifts, but I have listed only one shift in the past due to labor and hog availability situations that made a second shift completely impractical.

The labor situation in Canada has improved since 2007, as oil prices have moderated. But the hog supply situation in Alberta has gotten significantly worse. The province's market hog inventory has fallen by 405,700 head or 22.8% since July 2007, according to the April Hog Statistics Report from Statistics Canada. Assuming two turns per year, that means Alberta's annual production is now about 811,400/year lower than in 2007.

Saskatchewan's market hog inventory has fallen even more dramatically — down 526,600 head or 44.4% since July 2007, which means the current hog output is roughly one million head per year lower than in 2007. With those kinds of reductions in hog numbers, a second shift at Red Deer is hardly possible.

In my mind, the effective capacity of the Canadian pork packing sector is 460,800/week, which is 7,650 head more than my August 2007 estimate.

Nine plants increased capacity by 1,000 head/week or more since 2007 — and seven of them are in Quebec. I don't think it is coincidence that packers were growing in the Canadian province with the highest level of government support for pork producers.

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The largest increase was 6,000 head/week at DuBreton's Riviere-du-Loup plant. Trahan added 3,000 head/week at its plant in Yamachiche, Quebec. The largest increase outside of Quebec was 1,750 head/week at Conestoga's Breslau, Ontario facility.

Canadian capacity was reduced by two plant closures (Kamouraska and Oronor, both in Quebec) totaling 5,000 head/week and a 3,000/week reduction in the listed capacity of Quality Meat Packers' Toronto, Ontario plant.

What Does the Future Hold?

In a word — difficulty. Higher slaughter capacity and lower pig numbers do not make for healthy financial times for pork packers. Canada's herd is still shrinking rapidly. The U.S. herd's reduction pace has been much slower, but the undeserved shock of H1N1 Influenza A may quicken that pace in short order.

More shackle spaces chasing fewer hogs will eventually push hog prices higher. Competition to buy hogs and sell meat will put packer margins in a vice that will eventually drive consolidation. The magnitude and timing of that consolidation will be critical. An over-reduction of capacity as hog numbers respond to those higher prices could put us in a capacity squeeze at some point in the future. That's hard to believe right now, but we shouldn't forget the long view of this dynamic market.