Dwindling hog numbers hobble Iowa pork processors
By STEVE MARBERY
Hog supplies are rebounding in the eastern Corn Belt. Though the hog barn building pace is modest compared to the western Corn Belt, demand for lean, finished hogs is prompting expansion. Traditional farrow-to-finish units are heading in two directions. The main trend is a shift away from breeding-farrow-to-finish by long-time producers who are planning for retirement. A few producers are converting to specialized farrowing if they can link with finishers as part of a network or co-operative. Total inventories are increasing as producers improve efficiencies, but the sow base is eroding. Few new sow units are being built. But the region is benefiting from a surplus of feeder pigs from North Carolina, where packing capacity is "maxxed out".IBP, Inc.
Dwindling western Corn Belt hog supplies prompted cutbacks in slaughtering by IBP, Inc. at two of its four Iowa plants in February. Based in Dakota City, Nebraska, the company suspended slaughter at its 6,500- head-per-day Council Bluffs, Iowa, hog plant and shelved one of two 6,500- head-per-day shifts at its Columbus Junction, Iowa, plant. IBP's cutback followed suspension of one shift by Smithfield Packing Co. (John Morrell) at its Sioux City, Iowa, plant. IBP's Iowa move has implications for the eastern Corn Belt, where it is trying to expand beyond one shift at its 13,000-head-per-day Logansport, Indiana, plant. This is the company's only facility east of the Mississippi River. IBP may have reduced its Iowa kill rate partly to sustain the Indiana plant. Hogs are being diverted from Iowa to supply the Logansport facility, which is working at approximately 50 per cent capacity.Indiana Packing Co.
Unlike the western Corn Belt, which has many markets, Indiana has just two major hog plants: IBP, Inc. and Indiana Packing Co. at Delphi, 20 miles away. Owned by Mitsubishi of Japan, the company exports most of its pork. It is killing at 75 per cent capacity: 5,000 head per day on the first shift and 4,000 on the second shift. Indiana Packing buys 70 per cent of its hogs on carcass merit from three to four states.Besides competition for meager regional hog supplies, Indiana Packing and IBP are scrapping for packing plant labour in a region with low unemployment and a varied industrial base, including automobile manufacturers which pay up to US$16 per hour starting wages. In recent months, Mexican immigrants have been arriving to fill packing plant jobs, which pay only US$7 to $8 per hour. Lack of labour, not hogs, could be the region's biggest limitation.
Michigan - Thorn Apple Valley
The state's only hog packer, Thorn Apple Valley (TAV) of Detroit is killing more than 12,000 hogs per day (two shifts) and running at 80 per cent capacity. Most hogs originate in Michigan, Indiana, Ohio and Illinois on a liveweight basis. The company also buys Ontario hogs. Approximately 50 per cent of hogs collected by the Michigan Livestock Exchange in Indiana, Ohio and Michigan are delivered regularly to TAV on a long-term contract, which gives the packer an edge in the eastern Corn Belt.Ohio - Routh Packing Co.
The only major Ohio hog market, Routh Packing Co., is slaughtering 3,300 head per day, 75 per cent of its capacity. Based in Sandusky, Ohio, Routh is unique among regional packers, preferring relatively lightweight hogs and buying 90 per cent of them carcass merit. The packer has a long-time clientele of suppliers from as far away as Illinois, booking its hogs one to two weeks in advance. Average slaughter weight is 234 pounds with backfat of 0.8 inches. Routh's reliance on out-of-state producers and demand for its dry-cured branded hams won't change as a result of Ohio expansion, which primarily is linked to sow units and packers in other states.Steve Marbery, Pork Producer's U.S. correspondent, resides in Mount Pleasant, Iowa.
PACKER PROBE
Maple Leaf Foods, after posting a $43.7-million loss in 1995, due mainly to an $80.5-million charge to cover debt arising from Wallace McCain's purchase of the company in 1995, was back in the black in 1996. For the year ending Dec., 31, 1996, Maple Leaf reported net earnings of $42.1 million on sales of $3.21 billion. Net earnings for the final quarter of 1996 increased by 70 per cent to $15.3 million, up from $9 million during the same period in 1995.The company reported that its Meat Products Group, which includes Maple Leaf's hog kill and processing operations, had increased operating income for 1996.
Things are looking up for Michigan packer Thorn Apple Valley. The company reported significantly better results for its second fiscal 1997 period. For the quarter ending Dec. 13, 1996, Thorn Apple reported net earnings of US$2 million, or 33 cents per share on revenues of US$259.1 million, compared with a US$1.8-million loss on revenues of US$251 million in the second quarter of 1996.
Thorn Apple president and chief executive officer Joel Dorfman said industry imbalance between hog numbers and plant capacity continues to apply "severe margin pressure" to the company's fresh pork business. Dorfman said although pork prices rose to meet higher raw product costs, selling prices were not high enough to offset raw material costs.
Nebraska-based IBP Inc. has pointed the finger at reduced exports and plant start-up costs for lower sales and earnings in 1996. The company said tight hog supplies and expansion of U.S. pork processing capacity continued to take a bite out of pork operation profitability. Until pork numbers improve, or production capacity declines, pork margins will continue to be squeezed, the company said.
But IBP remains bullish on pork's future, noting that strong demand for pork protein among consumers in emerging nations makes pork attractive long-term.
Overall, the company reported earnings of 19 cents per share for its 1996 fourth quarter and US$2.06 per share for the year. In 1995, the company paid shareholders a 36-cent dividend for the fourth quarter and US$2.67 for the year. Total sales for 1996 were US$12.54 billion, down from US$12.67 billion the previous year.
U.S. processing giant Smithfield Foods Inc. reported increased revenue and earnings for its second fiscal 1997 period. The company cited hog prices and improved margins for processed products at newly-acquired John Morrell & Co.
For the quarter ending Oct. 27, 1996, Smithfield reported net earnings of US$9 million on revenues of US$962.2 million compared to a US$4.6-million profit on US$455-million sales for the second fiscal 1996 quarter.
Smithfield chairman and chief executive officer Joseph W Luter III said he was pleased with the company's performance given "difficult conditions". Luter added that consistent fresh pork profitability would not return to the industry until balance is restored to hog numbers and plant capacity. "There are just too many plants reaching for hogs today," Luter said. Sources: company financial reports, Feedstuffs, Reuter.
By ROBERT IRWIN
This month, many producers face the added challenge of juggling fieldwork with pork production, but some will spend more time wrestling with a new wave of environmental challenges than shipping pigs. John Aarts, Seaforth, certainly won't have much time to sit around.He owns a successful 600-sow, farrow-to-finish operation which he runs with his family. Aarts chairs the recently-established Huron County Pork Producers Association Environment Committee. Last month, he had to rush from the Ontario Pork Producers Marketing Board (OPPMB) annual meeting in Toronto to a hastily-called citizens meeting in Ashfield about manure handling.
Guest speaker at the meeting was Ridgetown lawyer Douglas Desmond, who last February began an amendment process in Howard Township, Kent county, to enact a waste management and pollution bylaw he prepared. "I think you might just as well shut down livestock production in Ontario if a person has to live by his rules," Aarts says.
Rondeau Bay pork producer Mike DeBrouwer triggered Desmond's action when he, his brother Jim and partners, veterinarian Bill Moore and feed supplier Steve Uher, applied for a bylaw amendment allowing their Great Lakes Pig Company to use an earthen lagoon manure storage. The township bowed to public pressure and turned down their request but the die was cast for a province-wide crisis.
DeBrouwer, who is a Kent Pork Producers director and OPPMB alternate councillor, terms Desmond's bylaw "preposterous", DeBrouwer says he enjoys farming but isn't equipped to handle all the public attention the situation has thrust on him.
Desmond swears he does not want to shut down production but admits his bylaw would preclude large-scale production in his township and subject existing operations to greater scrutiny. He wants covered manure tanks, an end to continuous-flow manure systems and minimum setback distances of up to three miles.
The preamble to his bylaw repeatedly mentions its conformity to Canadian Pork Council guidelines. When challenged on this point, he explains that his bylaw "is an extension of the Pork Council work."
The Voice of Reason, a newsletter put out by Desmond's group, Kent Rural Crisis Fund, warns of killer "mystery protozoa" for which there is no treatment. Manure is described as "virtual rivers of sewage" and there are details of streptococcus suis, said to infect 16 per cent of the hogs in Ontario.
The newsletter, which showed up in rural mailboxes where farming activity was not apparent, claims housewives, slaughterhouse workers and pig farmers handling infected meat have suffered neurological damage and severe, permanent hearing loss.
The group is also opposing the Ontario Federation of Agriculture's (OFA) right-to-farm proposal which would curb municipal powers to restrict agriculture. Ontario Agriculture Minister Noble Villeneuve has been promising for months to release right-to-farm legislation.
Earlier this year at a Ridgetown College forum, Desmond's group told Villeneuve's assistant, Marcel Beaubien, that the OFA bill should be called the "Right for Large Agricultural Corporations to build and operate any way they want without being bothered by the little guy next door." OFA environment committee chair Paul Verkley dismisses the idea of the province getting in the way of restrictive municipal bylaws. "It would be a nice thought." he says.
"Farmers shouldn't expect the right to pollute," Verkley says. "Quebec farmers thought that they had more rights than society was, at the end of the day, willing to hand out."
Verkley says Desmond's cause "is worrisome" because it may have kicked off a trend. The issue is heating up in Grey county. Several other townships in Perth and Huron are planning restrictive bylaws.
Even the largely-rural township of East Hawkesbury, 110 km east of Ottawa, with only a handful of small liquid manure systems, has requested provincial government help to draft restrictions aimed at blocking a new finishing barn. Residents near the proposed site, owned by goat cheese manufacturer John Skotidakis, are also trying to get the Quebec government to step in, arguing the nearby Rigaud River, which flows into Quebec, is affected.
Paul Klopp of Zurich, chairman of Huron County Pork Producers Association Education Committee, says it's important for farmers to work with the system to ensure change comes from the bottom up. He admits, however, that it will be harder to get producer participation, following Usburne township's sudden enactment last month of a regulation forcing farmers who are expanding their operation to pay for a professionally-prepared nutrient management plan.
Klopp and other Huron producers say farmers weren't consulted by Usburne beforehand. He argues farmers are professionals who should be allowed to prepare their own nutrient management plan and save up to $2,500.
The Usborne bylaw only applies to "intensive" livestock operations. One Usburne definition for intensive is more than 150 animal units, but back in Howard Township, Desmond argues "intensive" should mean 100 animal units.
There are also varying theories on how many pigs make one animal unit. Each township seems to differ on how far hogs should be kept from people.
Perth County Pork Producers Association councillor Russ Danbrook says, "manure smells the same," so minimum setback distances can be standardized. On the other hand, he says, animals per acre should vary depending on soil type.
"On Manitoulin Island, you have six inches of topsoil on top of rock, which won't handle as many nutrients as a lot of other places."
County pork producer associations in zone A, the six-county region of western Ontario where most of the province's pigs are produced, have formed a committee to deal with the flurry of bylaws and citizen unrest. DeBrouwer attributes much of the hysteria to "fear of change" which has been occurring in the industry over the past few years. "Pork production is probably the most dynamic section of the agricultural sector. This is an opportunity for us to explain the course we're on."
Shoulder pads strap on sore sows
Nursing sows with shoulder sores tend to be dangerous for young pigs in and around the farrowing crate, according to Danish inventor Ib Amstrup. "The injured sows tend to be restive, and their struggles to find a comfortable lying position mean danger for the litter members," he says. Amstrup's Unitron shoulder pad was introduced at the Danish Agromek fair in January. It's easy to adjust and fit, washable and sells for C$40."Our trials comparing performance are still not completed, but preliminary results indicate that injured sows are more comfortable with the pad, and this translates into more milk, bigger pigs and less mortality," he says. - ND