In a conversation with a writer this week I was asked a variety of questions about this falls markets and the opening of new slaughter plants next summer. I've also had conversations this week with equipment suppliers and producers that shed some light on producer intentions.
Right now, producers are adopting the mind-set that 'cash is king'. Equipment suppliers are telling me sales aren't as good as they expected due to order cancellations and delays. I'm also aware of some sow unit construction being deferred until next year because of expected cash flow constrictions this fall.
However, long term I'm still hearing of planned expansion in the sow herd with more construction planned for 2016. Will it be more than what was added this year - most likely yes in my opinion.
Why the on-going long-term optimism? Feed grain price projections for the coming year(s) and the expectation of increased packer competition for slaughter pigs as the new packing plants come on-line beginning next summer.
Let's start with increased packer competition and slaughter animal needs. The new Triumph plant at Sioux City will slaughter pigs owned by its owners (Seaboard, New Fashion Pork, Christensen Farms, Hanor, etc). If we assume 10,000 pigs/day, 270 kill days and 21 pigs sold per inventoried female per year from these systems, this takes the pigs from approximately 128,000 sows. As this plant ramps towards a second slaughter shift, this means the addition of 128,000 sows by someone.
The same thought process goes for the proposed Prestage plant in Wright County, Iowa. While Prestage has said 60% of the kill will be pigs they own, the total numbers still add up to a need for more sows.
What about our existing slaughter capacity? What does the intended growth of these new plants mean for existing plants? One obvious answer is fewer Saturday kills at all plants. Long term the pressure will on plant owners to find ways to recover fixed costs for their plants or face shuttering one or more plants.