2020 hog slaughter has certainly challenged capacity this year, and it’s been a good test – and no minor test at that – said Iowa State University ag economist Lee Schulz.
“Higher slaughter levels are weighing on prices as you’d expect. We have all the uncertainty around demand. But, if you are looking for some positives in that, we are testing those capacity levels and coming out pretty good,” Schulz told AgriTalk host Chip Flory on Tuesday.
People often refer to capacity as the “sticker on the plant,” Schulz added, or how many hogs you can run through the plant. But this year has shown everyone the importance of operational capacity, which is a different story.
“Really, we need to talk about operational capacity and that’s what’s been impacted really before and during and after the major spike we had this spring,” he said. “Labor continues to be a challenge. You add on the complexity of PPE provisions, distancing impacting plants and you see it in several of the cuts like when you have a boned ham vs a bone-in. You see a wide spread there because we are constraining the ability to do that. You’re seeing byproducts, variety meats volume value down because we’re saving a little less of that carcass because of those constraints we’re facing.”
And it’s not like we have a fresh wave of labor coming into the industry, Flory added. Fortunately, Saturday slaughters have offered more flex in the system.
“We didn’t have to draw on [Saturday slaughters] as much as we thought we would this fall,” Schulz said. “That’s been important because it’s given workers a reprieve. Around the holidays, we aren’t expecting that slaughter level because we are going to give the workers the holiday time they deserve. That may be challenging in the weeks following that because as we’ve talked about, we’re dealing with large slaughter levels.”
Lower slaughter levels than expected
Hog slaughter levels were not as high as many feared after the USDA’s September Quarterly Hogs and Pigs Report, Flory noted.
“We beat up USDA a lot about that report, but we have to remember that’s based on surveys of producers. There’s just a lot of uncertainty in the markets with COVID supply and demand,” Schulz said. “Maybe some of those hogs were delayed so they were pushing the lighter weight category.”
By and large, USDA came in larger than what we realized, so Schulz expects to see a revision in next Hogs and Pigs Report.
“It’s important to understand and hindsight is 20/20, but I think we’re much better missing large than missing small,” Schulz said. “We expected larger supply, we had concerns there, and maybe that was priced into the market and a detriment for a short period of time. But actually we came in lower and that was supportive of it from a market standpoint – not only in real time but going forward as well.”
A domestic demand success story
Considering what the country has faced from macroeconomic conditions and the tight supplies and higher prices, Schulz said the movement of pork domestically has been incredible.
“Domestically, we talk about good pork demand. But I think you’re talking about great pork demand here in 2020,” he said.
Price has something to do with it, Flory added. But he also believes U.S. consumers have taught themselves how to use those primal cuts.
“They’re using pork chops well. They’re using loins well. They’re using pork roasts, pork butts and doing things with pork that they haven’t done for a while,” Flory said.
Listen to the full interview on AgriTalk.
More from Farm Journal’s PORK:
It’s Anyone’s Game: How Will the U.S. Pork Industry Diversify Pork Exports?
Hogs and Pigs Report: A Dose of Reality and a Little Magic
U.S. Pork Exports Maintain Record Pace
Hours of Service Waivers Extended Again for Livestock and Feed Haulers
