The Good, Bad and Ugly When it Comes to the Pork Industry Right Now
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U.S. pork exports are on fire to start the year, led by a strong appetite from Mexico. While exports show strength, domestic pork production looks to be under pressure and consolidation is a growing concern as Tyson Foods announced the closure of a major pork processing plant in Iowa. Right now, the pork industry is a bit of a mixed bag.
The Good: Exports
The bright spot in the industry is news about a rapid star to pork exports in 2024. U.S Meat Export Federation (USMEF) compiled the latest data from USDA, and it shows pork exports in January climbed to 251,424 metric tons in January, a 6% from a year ago. Export value also shot up 6% to $682.1 million.
Exports to Mexico were the most impressive, hitting the second largest on record. USMEF says pork exports to Mexico in January reached 102,181 mt, also a 6% increase year-over-year.
“We like to talk about the developing markets in pork and how they are important: the Asian markets, Africa, Latin America, they're all very important. But when it comes to pork exports, let's focus on number one. And that is Mexico, not China,” says Chip Flory, host of AgriTalk.
Flory interviewed Dan Halstrom, CEO of USMEF, immediately after the report was released. Halstrom emphasized how Mexico is a changing and growing market for the U.S.
“Honestly, Mexico is a much bigger story than just hams,” Halstrom told Flory. “We're starting to see some of the primal cuts like loins, for example, are becoming a much bigger item down there. And quite frankly, we need all the help we can get on loins, And then you have variety meats. Mexico is one of those markets, on a pork side, that’s taking almost the entire carcass.”
“When we talk about an importing market that is taking the entire carcass, what we're talking about is an importing country that's competing with ‘Joe consumer’ in the meat case, and the competition for loins. For so long, Mexico was just a ham buyer. But that's not the case anymore. They're very interested in the entire carcass.”
The Bad: Tyson Closes Processing Plant
Domestically, some disappointing news hit the hog industry in the past week. Tyson Foods announced the decision to shutter its pork processing plant in Perry, Iowa. For the town of nearly 9,000 people, Tyson was the community’s largest employer.
“From a processing standpoint, it’s about 9,000 hogs per day, which is about 2% of the daily kill in the U.S.,” says Flory. “This is an important cog in the pork processing machine out there.”
The Tyson plant in Perry has been in operation for nearly 60 years. Tyson says the plant is set to close on June 28, 2024. In a statement, Tyson says the decision wasn’t easy, but emphasized it was based on the need to focus on optimizing the efficiency in its operations to best serve its customers .
The Ugly: More Consolidation
This isn’t the first time a major pork processor has recently announced the closure of a plant. Pork and poultry plants have been hit hard in the past year. In August, Smithfield Foods announced the closure of 35 hog farm sites in Missouri, as well as laying off 92 employees.
That same month, Tyson Foods said it was shutting down four more poultry processing plants in Arkansas, Indiana and Missouri in an effort to cut costs.
As processing capacity crumbles, hog farmers are coming off one of the most difficult financial years they ever endured. According to Iowa State University’s Model for Profitability, farrow to finish operators in Iowa saw 2023 margins hit a record-low.
“As I as I talk with more and more participants in the hog industry, it feels like this recent Tyson pork plant closure decision was kind of planned. It's part of the consolidation of the industry that is taking place,” says Flory. “They know where these hogs that right now are going into the Tyson plant in Perry, they know where they're going to go after June. So, it's not like it was a completely planned and structured play, but it's part of the industry today, and some would say that it's growth other would say that it's just consolidation of the industry.”
Iowa State’s Lee Shulz says while the recent announcements are a sign of consolidation, trouble started showing up in 2021 when Smithfield announced the closure of a 10,000 head a day pork processing facility in Virginia. Since then, several more have closed, both in the U.S. and Canada.
“When you look at ongoing packing plant closures, both in the United States and Canada, it is a signal that we continue to see some contraction in the industry, as well as now we're seeing some farm closures that that are obviously impacting inventory levels,” says Shulz.
Shulz says the negative margins in the pork industry will continue to shape hog production and capacity, with more consolidation likely ahead.
