If one Sioux plant had to go down, it’s better for prairie hog farmers if it’s the City, not the Falls, say market analysts.
But even though the more modern John Morrell plant in Sioux Falls, South Dakota, is going to increase its production because of the closing of the Morrell plant in Sioux City, Iowa, it doesn’t directly help Canadian farmers.
“There’s just a trickle of live hogs moving from Canada to the U.S. anyways,” said Manitoba Pork Marketing Co-op risk management manager Tyler Fulton, whose agency used to sell hundreds of thousands of hogs to the Sioux Falls plant.
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But the closing of the Sioux City plant will hurt Canadian producers in the longer run, because it reduces the packers’ overcapacity and takes away an incentive to find ways to bring in more Canadian hogs regardless of country-of-origin labelling (COOL).
“If that plant had continued to operate, there’d be a much higher likelihood that one of the packers – Hormel or Tyson or Smithfield – would find a way to kill Canadian origin hogs,” said Fulton.
On Jan. 19, Morrell, owned by Smithfield Foods, announced it was shutting the Sioux City hog slaughter plant and moving its production to three of its other facilities, including the Sioux Falls plant that was recently expanded.
Sioux Falls, almost due south of Winnipeg, was once a major killer of Canadian pigs, drawing in hundreds of thousands per year.
But even before COOL, Canadian shipments to the plant had fallen, after Maple Leaf Foods’ Brandon plant opened, and Smithfield adopted the no foreign pigs slant of COOL and shut off the Sioux Falls plants’ role for Canadian market hog sellers.
American packers have been suffering as losses have pushed farmers to cut back herds, forcing the packers to bid up prices to attract hogs.
Chicago lean hog futures prices have shown a sharp rise since August, rising to about $70 per hundredweight from about $55 per cwt. on the April contract, bringing most American farmers to break even levels.
That competition among packers for supply is why University of Missouri hog market economist Ron Plain expected this type of capacity reduction.
“It’s not really a surprise,” said Plain. “It’s a logical business decision.”
The Sioux City plant was in the area with the most overcapacity and could not be expanded to add extra processing, he said.
In its official announcement, Morrell had good news for workers and hog suppliers to the Sioux Falls plant.
“Smithfield has no further plans for plant closures in the foreseeable future,” he said.
While it’s better to see Sioux City go than Sioux Falls, Fulton said, the Sioux Falls plant is unlikely to be a significant destination for Canadian market hogs while COOL lasts. That’s unfortunate for Canadian hog producers because it doesn’t bring competitive price pressure on Maple Leaf in Brandon, which still has a mostly-captive market.
“The capacity of that Sioux Falls plant is going to be met by Smithfield hogs,” said Fulton.
“It doesn’t really matter to us now. It shifts hogs around from one plant to another. We need that plant open to us.”
