Farmscape for July 27, 2021
An Economist with Partners for Production Agriculture says a court ordered rollback of U.S. pork harvesting facility line speeds will reduce the need for U.S. hog slaughtering plants to source Canadian slaughter hogs.
The Biden Administration has until the end of August to appeal a federal court ruling that took effect June 29 striking down pork harvest facility line speeds allowed under the USDA’s New Swine Inspection System, and reducing the capacity of five U.S. plants from about 13 hundred 50 hogs per hour to about 11 hundred hogs per hour.
Dr. Steve Meyer, an Economist with Partners for Production Agriculture, says anytime these plants hit capacity, demand for hogs slows.
Clip-Dr. Steve Meyer-Partners for Production Agriculture:
The are a couple of plants that were involved in this higher chain speeds, they're far northwest plants, one in Minnesota, one in northeast Nebraska and their need for the marginal pig is down and so there could be some implications on how many pigs are demanded out of Canada.
The same is true of Coldwater Michigan which could be in a position to bring some pigs in from Ontario.
I would classify most of those market hogs coming from Canada as kind of marginal pigs and this certainly reduces the demand for those pigs and takes away an alternative that Canadian producers could have tapped into.
That's the danger of running into capacity.
We did in the fall of 16, we did it in the fall of 19.
Of course, we did it in spades last spring and summer as we reduced packing capacity due to Coronavirus outbreaks.
Anytime you run into capacity you put all the bargaining power in the packer's hands, you reduce the need for those spot market hogs and the price of the negotiated fall relative to others and drag down those formula price hogs.
Dr. Meyer says this sets a precedent for the future that says to get more capacity you may have to build a plant because you can't speed up the plants you have.
He suggests the easiest way to add capacity is to run the plants we have a little harder so that becomes a more binding constraint in the future.
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