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Pork industry ‘moving in the right direction’

Packers will have to run very hard through spring and summer to try to work through backlog.

Conservative estimates show that the U.S. has not been able to process somewhere north of 2 million hogs since packing plants first started having capacity problems in early April, Bill Even, chief executive officer of the National Pork Board, said during National Hog Farmer’s Global Hog Industry Virtual Conference.

“The good news is that here in the month of May, with the enactment of the Defense Production Act and getting PPE [personal protective equipment] as a priority delivered out to our food workers, we’ve been able to take packing capacity that was running at about 40% idle, and I believe the number yesterday, the estimate was about 18% idle,” Even said.

The industry is “moving in the right direction,” he said. “It’s helped out a lot, but the reality is, we don’t have any really good way of recovering from the last four to six weeks of lost packing capacity. We’re going to work hard.”

The average packer will run five-and-a-half days a week for the time being, he relayed, adding, “We’re going to have to run very hard throughout the balance of the spring and summer, including a lot of Saturdays, in order to try to catch back up for the rest of the industry.”

The chain of events has been “devastating” to the industry, Even said. “Like it or not, we were kind of hit right square in the middle of this with some of the early packing plant closures. That quickly cascaded into hog supply backups and shortages of pork in the stores. Ironically, pork or any foodstuffs are in abundance at the farm level; it’s just getting it through our food production system and to the consumer is where we ran into some problems.”

While the pork cutout has recovered and there has been a bit of recovery in the CME futures in recent days, which is all positive, Even said “the reality is the financial impact to U.S. pork producers has been nothing short of staggering here.”

At the beginning of the year, a 3% growth rate was expected for the U.S. pork industry, which was also looking to supply the global animal protein hole left by African swine fever.

The U.S. was “really positioned” to fill that gap but, like everyone else, got “blindsided” by the COVID-19 pandemic and the rapid closure of consumer economies around the world. Then, there was a double impact of the plant closures.

Bryan Humphreys, vice president of producer and state engagement for the National Pork Board, said, “We have to take a step back and recognize that this has been several weeks of incredibly wild swings.”

He said it started early on with an increase in demand as retailers got a bit overwhelmed, and just as producers were adjusting to this reality, everything “broke apart” in the foodservice sector. On top of that, packing plant challenges emerged.

“We’ve just been on this constant cycle of uncertainty within the industry that’s been a tremendous challenge,” Humphreys said.

In addition, the impacts haven’t been the same for every farm, he said, adding, “We know that there are farms out there that have been terribly impacted by this.”

There is no consistency, Humphreys explained.

Still, he said there are some similarities in what the industry is dealing with, including things like how to maintain pig growth, community impact and how the industry will continue to adjust.

“It has been a tremendous ride, and [there has been] some significant variability from farm to farm, beyond just state to state,” Humphreys said.

As for when there will be a return to some normalcy at the farm level, Even said, “I wish I had a crystal ball.”

He said that's the fundamental problem as the industry tries to look ahead: uncertainty.

“I don’t care what business you’re in, having some sense of certainty and predictability allows you to make plans and get your hands around it,” Even said.

Not knowing when plants are going to be operating, what volume percentage they’ll be operating at and whether they’ll be able to get loads out is difficult to swallow. On the foodservice or retail side, he said availability of cuts is a challenge, especially as consumer demand remains strong.

When you think about where the industry is going, Even said there are a couple of things at play. The first is what level of depopulation has occurred in the industry.

“We have a general sense of how many pigs have been backed up in the system, but there is really no clear sense of how many pigs have actually been euthanized,” he explained.

Even said the inventory numbers of lighter-weight pigs in the U.S. Department of Agriculture’s upcoming June “Hog & Pigs” report will provide a sense of where the industry may be in the third and fourth quarters of this year.

While recent additional capacity has been a “godsend,” Even said most producers are interested in where the industry will be in terms of supply versus shackle space in the fourth quarter of this year.

“We were predicting exceeding shackle space again this year, and now that’s a little bit of an open question. There’s no real clear understanding of where those numbers will be at until we get into [the third and fourth quarters],” he said.

The other area the Pork Board is looking into is what producers will expect of their industry and of their government. Even said USDA, the Pork Board and the National Pork Producers Council have all been working to help alleviate the stress on the industry but are being “judged” as to how they’ve performed during times of crisis.

“There’re things we’ve done right; there’re things we need to improve on,” he said, adding that the Pork Board will be meeting soon to assess the situation.

“Right now, our industry is limping along," he said. "Everybody’s got their fingers crossed. As Brian [Humphreys] said, some areas are having a really rough time; other areas are holding their breath.”

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