If a plant that is isolated from the rest of the processing capacity closes, finding a place for those hogs to go becomes much more difficult
Any time production is halted at a pork processing plant in the United States, it makes an impact from the pig farms to the consumers who purchase the products.
However, the impact can be greater for plants in certain geographic locations.
With several pork plants suspending operations due to a large number of plant employees testing positive for the novel coronavirus (COVID-19), Purdue University economists Jayson Lusk and James Mintert have their eyes closely monitoring the situation. The two discussed the potential impacts during the webinar, “COVID-19’s Impacts on U.S. Food and Agriculture,” held on April 20.
Processing capacity heavily concentrated
“A big portion of our meat processing is concentrated at a handful of plants that have a lot of workers,” said Lusk, distinguished professor and head of the Purdue University Department of agricultural economics. “This works well when times are good because we have really large economies of scale that can affordably process meat for food consumers. But in this time, if you get one or two or three or four of these plants shut down, it can have some real big impacts.”
Lusk showed a map that displayed where the 15 largest pork packing plants in the United States operate. Those 15 facilities process about 60% of all hogs in the country, and each of them account for between 2% and 5% of the country’s pork processing capacity.
Eleven of those facilities are in Iowa or in bordering states, Lusk pointed out.
The one positive with this area being so heavily concentrated during the COVID-19 pandemic is that if one plant ceases production, the hog supplies can maybe be diverted to another plant.
But Lusk still spoke cautiously.
“We can stand (to lose operations at) one or two of those, but if you start getting three or four, that could start having some really detrimental impacts, particularly on the farm side of the market,” said Lusk.
Plants in other regions face more risks
Examining Lusk’s map of pork plants, Mintert, professor and director of Purdue’s Center for Commercial Agriculture, pointed at two plants in particular that are away from other processors, which will create issues for hog producers in their areas.
He specifically mentioned a “very large” Smithfield Foods plant in Tar Heel, North Carolina, and another sizeable Seaboard Foods plant in the Oklahoma panhandle town of Guymon.
“Those plants serve a portion of the industry that’s not well situated to move hogs to another part of the country, and that could create some additional issues in addition to just the capacity issue,” said Mintert.
“It’s going to be a concern for an extended period of time.”
During the webinar, Lusk and Mintert also discussed the struggles some egg producers may incur while shifting their supply from foodservice channels to retailers.
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