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Industry Report: Global Pork Trade Outlook

By CoBank, Knowledge Exchange Center

  • Total global pork exports increased by an estimated 18 percent year on year in 2016, mainly due to surging shipments to China. Imports to China, however, are expected to slip in 2017. Recent high Chinese pork prices have led to herd recovery efforts that will modestly increase its domestic production.
  • U.S. pork consumption is anticipated to closely mirror growth the U.S. population. Domestic production, however, will continue to outpace domestic usage. This makes exports all the more critical to supply/demand balance and pricing expectations.
  • The European Union was the biggest beneficiary of the surging Chinese pork buying in 2016, accounting for roughly 70 percent of China’s imports. EU pork production forecasts are essentially flat through 2017 due to recent low prices and depressed margins. In comparison, the U.S. is expected to grow output around 2 percent.
  • A wave of commercialization and modernization is transforming China’s pork production sector. Increased levels of productivity as well as improved economies of scale will be realized during this transformation.
  • The developed world has reached a saturation point and per capita protein consumption is likely to grow or decline steadily with overall population trends. On the other hand, demand for high quality animal protein among developing nations will grow with increasing incomes.

Pork Packing Renaissance?

There’s change in the wind for pork producers. Five new pork plants are under development, offering both promise and uncertainty for producers.

  • A processing plant scheduled to open in Sioux City, Iowa, in mid- to late 2017 will handle 10,000 hogs in a single shift, with the potential for two shifts a day – or about 3 million hogs a year. Triumph Foods, a vertically integrated, farmer-owned pork producer and exporter, has teamed up with Seaboard Foods, an international pork producer and purveyor, to build the $264 million processing plant.

    Between 70 and 80 percent of hogs are expected to be sourced from owner farms. Triumph finishes hogs primarily in the upper Midwest, while Seaboard presently has most of its finishing units in the lower Midwest/Plains. At two-shifts, the new Seaboard Triumph plant would match Triumph’s plant in St. Joseph, Mo., built a decade ago and the last major pork packing plant to open. Combined, the two companies would represent the second-largest hog producer and rank in the top five processors in the United States.

  • Producers, primarily from the Eastern Corn Belt, are among those partnering with family-owned Clemens Food Group to open a plant in Coldwater, Mich. When the plant opens in late 2017, it also is expected to slaughter 10,000 head a day. Pennsylvania-based and family-owned Clemens and its partners are investing more than $255 million in the plant.
  • Expected later is a similarly sized plant slated for Wright County in the Webster City area of Iowa. Prestage Farms is investing $240 million and hopes to break ground next spring, with first-shift operations planned to begin in mid-2018. The company plans to source 40 percent of the hogs for the new packing plant from independent farmers.

    Prestage was founded and headquartered in North Carolina by Bill and Marsha Prestage in 1983 but it has had a substantial presence in Iowa for 12 years, with 140 contract production sites in 30 counties in the state. Prestage also produces hogs in South Carolina, Mississippi, Alabama, Texas and Oklahoma.

  • Two smaller pork processors on the edges of our business territory are expected to begin production this fall: Moon Ridge Foods in Pleasant Hope, Mo., which will process 2,000 head a day and Prime Pork, in Windom, Minn., which will process 4,000 head a day.

Market Impact

The United States has lost pork packing capacity of nearly 123,000 head in the past decade and 3,600-plus head a day in just the past year, said Steve Meyer, vice president and pork analyst at Express Markets Inc. Analytics in Ft. Wayne, Ind. But the addition of five plants by the fall of 2018 will add total capacity of more than 9.6 million head a year – or weekly production of more than 185,000 head at one shift per day. This will put national capacity about 8 percent above 2015’s average national weekly slaughter rate, Meyer said.

However, the new plants won’t help the market this fall. Jeff Wiepen, vice president of agribusiness lending at Frontier Farm Credit, cites current supply at more than 6 million hogs, with more coming.

“There is definitely a concern the supply increase will be too fast,” Wiepen said. “Demand is good but exports have not been robust enough recently and growth would be needed to keep prices from falling as more pork pours onto the market.”

Current national capacity is approximately 452,000 head a day, which implies 2.44 million head can be handled weekly this quarter, slightly below last year, according to Meyer. The forecast for the fourth quarter is almost 31.2 million – 2.4 million a week – and every week in December, when the most hogs come to market. So it’s possible the numbers will be larger than currently rated capacity, Meyer said.

“For sure, the next two or three years will be the most interesting for pork producers in quite some time,” Wiepen said.