Packers not leading to more porkers

It’s the other way around: Cheap corn leads to cheap hogs



Many Iowans take it on face value that two new pork plants coming online soon will increase pork production by six million head annually and lead to a proliferation in confinements.

The environmental community was made especially anxious when Iowa Select of Iowa Falls announced last week that it intends to increase capacity by 90,000 head across the state. Combine it with the news that the Iowa Department of Natural Resources is not certain how many hoghouses exist in the state — aerial photos show at least 5,000 more than previously accounted for — and you could think we are witnessing a huge expansion.

It ain’t necessarily so.

Iowa State University livestock economist Lee Schulz tells me that meatpacker capacity simply is catching up to swine production. Iowa generally tracked with an average growth of 1-2% a year in hog inventory over the past 15 years or so. Inventory has increased 23%, driven by stable domestic pork demand and increasing exports. Mexico in 2016 became our No. 1 pork export market.

Packer capacity has not kept pace. The Morrell plant in Sioux City that employed 1,400 and slaughtered 14,000 hogs per day closed. A new Seaboard plant in Sioux City essentially replaces that lost Morrell capacity. The Prestage Pork plant in Wright County likewise will fill demand for slaughter. Five new plants coming online across the country — including Prime Pork of Windom, seeded by Glen Taylor and managed by several IBP/Tyson Storm Lake veterans — plus an expansion of the Tyson Waterloo plant will increase capacity by 10-12%, Schulz notes.

“We’re basically getting back to where we were in 2000,” he said, in packer-production balance.

Iowa Select noted its existing contract demands as reason for its expansion. Schulz explained that many confinements built in the 1980s and early 1990s — the age of many around Storm Lake — are being replaced. Buena Vista County has seen more applications for confinements in the last year than it has over the past five, but most of them were expansions of existing operations.

Iowa is not being overrun by new hogs.

Those 5,000 lost confinements, about 1,200 of which appear to need permitting but do not have it, existed before the announcements of meatpacker expansions.

Schulz said that increased hog inventory is driven by producer profit, not slaughter capacity. Cheap corn and more expensive protein alternatives combined to induce producers to invest in facilities and pigs.

Hogs follow corn, and packers follow hogs.

Pork production nationally is not necessarily concentrating in Iowa, Schulz said. The top hog state hews to the national average growth, suggesting that immigration is not occurring from North Carolina or someplace.

It makes sense for there to be slaughter capacity in Sioux City and in north central Iowa. (It does not make sense for state and local government to subsidize it, since the packers are merely responding to markets.) It makes sense that the confinements should be in north central and northwest Iowa, where the corn is and where the manure can be handled on flat ground. Manure builds soil. That’s good.

This is corn and hog country. It will be for the foreseeable future. The question actually is not whether we can handle growth in pork, which has been moderate, but whether we are already beyond the point of sustaining as many hogs as we do.

Why does production overshoot capacity? History shows us that cheap corn leads to cheap hogs. And then we bet on export markets growing to bail us out of cheap hogs fed on cheap corn. USDA forecasts 25% export growth in pork over the next decade, much of it to developing nations in Latin America. Which raises the question of why they aren’t raising their own hogs anymore, and whether it would be healthier to raise them in Colombia and Honduras than pack more of them into Iowa at 1-2% a year? Actually, Smithfield is laying in more sows in Mexico, for starters, which is something that the North American Free Trade Agreement always suggested: When it becomes cheaper to raise hogs south of the border, that’s where they will be raised. Yet a problem remains in Mexico: NAFTA and climate change have conspired to reduce corn production. Sow facilities are labor-intensive, and labor costs are cheap in Mexico.

The packers know their calculus.

Meantime we are chasing more corn acres at any cost. We are ripping up grasslands that used to feed cattle. Our soil is roiling off the hills and into our rivers, and our corn yields already are suffering from it in protein tests. This so we can increase hog production marginally every year for owners who increasingly do not live in or care about what it is like to live in Iowa.

The hog population has been creeping up over time. And that is what this increase in slaughter capacity is about. The real issue is whether we can sustain what we are building long-term, at an assumed growth rate of 1-2% a year on a depleted natural resource base. We are losing more soil than we are growing. We are at our limits in water consumption from the Jordan and Dakota aquifers. We are speeding water delivery downriver rather than holding it for regional renewal. Can we handle what we have?