Plant Capacity, Exports and Economics: What's Next for Pig Farmers?
Jennifer Shike, FarmJournal's Pork
May 14, 2020
The pork industry is dealing with a whole lot of balls in the air that people aren’t used to juggling, says Steve Meyer, ag economist with Kerns and Associates.
Since COVID-19 struck, the pork industry has faced new challenges and opportunities each week. This week, plants are back online and exports are solid, but it’s still a fairly fragile environment both for the processors and producers supplying those plants, says Christine McCracken, Rabobank senior analyst – animal protein.
“Nothing is as bad as what producers have faced – a lack of markets and frustration of not being able to deliver pigs,” McCracken says.
Getting Plants Back to Normal
The first rule to getting out of a hole is to stop digging, Meyer says. Getting pork processing plants up and running at normal capacity is critical for the pork industry as the backlog of hogs waiting to be harvested continues to grow.
But is it possible to get back to normal or at least above 90% processing capacity in the near future?
“Not in the near future,” Meyer says. “We're going to pick some low hanging fruit here early and then it's going to be slower as we go into the summer months. I don't look for us to be back near those levels until maybe August. It's going to take a while and there's going to be some steps forward and some steps back.”
Processing plants are up against major hurdles, most notably assuring their workforce that it’s safe to go back to work. But not far behind that are all the physical changes the plant has to make in order to assure worker safety and abide by CDC and OSHA guidelines.
Much debate remains about whether the packing industry will ever be able to resume normal run rates, McCracken says.
“When I talk to the plants, I get very mixed answers. Some say they will see no net change –they can engineer around it even with social distancing at the plant,” McCracken says.
She thinks this may be more possible with the newer plants than some of the older plants. As a whole, McCracken doesn’t expect the industry to get back to 100%, but she believes getting to over 90% capacity is possible during the summer months as the industry works through the overhang in inventory.
“I think it becomes a bigger issue during the second half of the year when we were expecting these big supplies of hogs to come to market,” she says. “Producers have done a lot to curb production. But I’m getting mixed answers on how much liquidation the industry is really seeing. It depends on who you ask.”
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