December 18, 2006

More slaughter facility would result in overcapacity in the US

Plans for the farmer-owned Triumph Foods Illinois plant to go ahead is causing jitters in the hog slaughter industry.

With a high probability that the US hog industry would need to downsize in the next few years due to higher feed prices, expanded slaughter would result in overcapacity in the US, experts say.

With already tight margins, the opening of the new plant would probably mean the closure of older plants.

Meanwhile in Canada, plans for a plant by Olymel and Big Sky farms looks all but scuttled and Maple Leaf announced it is abandoning plans for a pork processing plant. The news was proof that high feed prices and the strong Canadian dollar have taken a heavy toll on the Canadian hog industry, industry analysts said.

For the first ten months of 2006, US pork imports were down 1.6 percent with all of the decline from Canada.

Net pork exports as a percent of production for January-October of this year is at 9.25 percent, up 1.32 percent from 12 months earlier.

USDA in their December update of the supply and the use of corn for the 2006-2007 marketing year did not change use estimates, but increased their estimate of corn prices by US$0.10 per bushel from a month earlier. The new estimate average for the year is US$2.90-3.30 per bushel. The December estimate for price of soybean meal was unchanged at US$165-190 per tonne from a month earlier.