Fashion show pic

No one is complaining about hog prices this year. At the same time, no one is rushing out to build new sow barns either. That's good news for the industry. Forever scarred by the market crash of '98, the nation's largest pork producers expect the worst next year.

[ILLUSTRATION OMITTED]

For that reason, Triumph Foods, with a combined 330,000 sows owned by its shareholders, is aggressively moving forward with its new packing plant in St. Joseph, Missouri. Owners include several Pork Powerhouses[R]: Christensen Farms, The Hanor Company, TriOak Foods, New Fashion Pork, and Eichelberger Farms (a family-owned Iowa farm with 19,000 sows). Another shareholder is Allied Producers Cooperative, made up of more than 30 producers.

Mass grading and foundation work at the Triumph site is in progress, with plant construction to be complete next fall. There is no time to waste, as productivity on sow farms across the nation is sky-high and pigs are healthy. These prices aren't expected to last.

"There is no question these producers will be better off a year from now owning their own processing plant," says Rick Hoffman, CEO of Triumph.

No small project

The new plant is designed to process 1,000 hogs an hour and will cost $135 million. Seaboard Farms, an integrated producer with 213,600 sows and one packing plant, will market all pork products for Triumph. Both companies will use consistent genetics (PIC), animal health, and nutrition in order to produce high-quality pork.

Once the plant is up and running, it will make the scramble for open-market hogs more competitive. "There will be a sucking sound when the plant opens," says a Midwest producer. "Those hogs will come out of the hide of the other packers. They'll be chasing hogs 15 months from now."

Still more sows

There should be no shortage of hogs next year. Sow numbers for the 30 largest Pork Powerhouses[R] in 2004 show an increase of 137,100 over 2003. However, only about 10,000 of those sows were true expansion; the rest was acquisition as the industry continues to consolidate.

Even with little true expansion in sows, hog numbers are sure to rise. The largest companies all report sky-high sow productivity this year. (Where to feed those pigs could be tricky as construction costs, especially steel and plywood, get more expensive by the week.)

"We just finished our best production year ever in 31 years," says Jeff Worstell, production manager for Cargill Pork. Great health is the number one reason the company achieved record numbers for pigs/sow/year and livability, he says.

A PRRS plan of action put into place three years ago has been "highly successful," Worstell says. Discipline in executing the plan--which includes guidelines on trucking, vaccination, animal movement, and depopulation--is key. It also helps not to have sows in hog-intense areas.

One area where Cargill owned sows for years was North Carolina, but no more. The company is selling all their sows in the state and concentrating on the Midwest where it owns two Excel packing plants. "We want to be closer to our plants," says Worstell.

PRRS whipped?

Nobody is saying that. Several of the largest producers struggled with the virus last winter and expect to struggle again this winter. However, the industry seems to have learned how to control the most devastating effects of PRRS.

"PRRS is still around, but we are smarter," says Paul Knudsen, manager of LTS of Mankato, Big Gain Feed's livestock marketing division in Mankato, Minnesota. LTS markets nearly 1.2 million pigs a year for approximately 300 producers in Iowa, Minnesota, Nebraska, and Wisconsin.

"We know better how to acclimate gilts so when they come into the sow herd, it doesn't fire things up," says Knudsen. "We built new isolation barns, and it has paid off. Production in our producers' sow units for the past year has been phenomenal."

Another factor in better health, says Knudsen, is later weaning. "As an industry we've put three days back on the weaning age, and it's made a difference." Going from 15-day weaning to 18 days has improved performance of weaned pigs, he says.

The nation's largest producer, Smithfield Foods, is also cranking out the pigs. "Sow productivity is greatly improved over last year," says Jerry Godwin, president of Murphy-Brown, the pig production division of Smithfield. "We need fewer sows in the industry, because each sow is being more productive. We have to be cautious about expansion."

Buying and cutting back

Smithfield's sow numbers are up because it bought Farmland Foods and Alliance Farms, with a combined 68,000 sows. At the same time, the company is cutting back sows in the East. "When all is said and done, we will take 35,000 sows out of North Carolina," says Godwin.

About 25,000 sows have left the Smithfield family already, most as part of Coastal Plains Pork, a group of former Smithfield contract producers who split off and started their own cooperative. Those sow farms are now shipping weaned pigs to the Midwest for finishing by Pro Pork, based in Cherokee, Iowa. (Pro Pork has almost 15,000 sows of its own in Iowa, Nebraska, and South Dakota.)

[ILLUSTRATION OMITTED]

This doesn't mean Smithfield will stop growing. "If we can buy sows already in production that fit strategically for our business, we will buy them," says Godwin.

Sow expansion continues in Mexico by Smithfield. The company's joint venture in Vera Cruz is up to 41,000 sows, and wants to add 10,000 sows a year. In Sonora, Smithfield has 33,000 sows with no plans to increase.

Brazil numbers are steady at 11,500 sows for Smithfield, with no plans for expansion. "Brazil is still risky and too dependent on exports," says Godwin. "We have talked about a joint venture with a packing plant down there; if that happens, we will grow."

In Poland, the company has 33,150 sows and is trying to grow by 10,000 a year. The new game in Eastern Europe is Romania. Smithfield launched a project there earlier in the year and plans to eventually put in 90,000 sows.

"There is very little pig production in Romania now, and they are a net importer of pork," says Godwin. "Romania has great land for farming."

No joy up north

In Canada, things are unraveling. Sow expansion for the largest eight producers has stopped, and equity is leaving the business. The exchange rate is now working against the Canadians, and BSE (mad cow) has disrupted the meat markets by creating an oversupply of beef. On top of that, the dumping charges brought by the National Pork Producers Council against Canadian live exports is a major concern. The results of that investigation are due mid-October.

Canadian producers are now increasing finishing spaces in the north. Hytek, for example, is pulling 150,000 weaned pigs back into Canada for finishing in the next year.

"We want to take the border out of the way," says owner Don Janzen. "We don't want that risk at all." Hytek has signed leases for new finishing spaces in Manitoba.

Time to get out?

In both Canada and the U.S., some producers see the current situation as a good time to get out while prices are good. Nobody expects things to stay rosy for long.

"The industry still has too many sows, and we are still producing too much pork," says John Thomas, general manager of Tyson Foods' Pork Group. "If not for unrealistic exports and unbelievable pork demand now, we'd have prices like '98."

No one wants to see that.