With pork processing companies building larger facilities to accommodate an ever increasing supply, now weather plays havoc with the largest pork processing plant in the world.

Tyler Fulton H@ms Marketing Services says disruptions in the operation of the world’s largest pork processing plant have made an already tight U.S. processing capacity situation even tighter. I

f it isn’t one thing it is another and this time the drop in cash hog prices over the past couple of months has exceeded the typical seasonal slide, as U.S. hog slaughter numbers approach and exceed U.S. processing capacity.

Fulton, the Director of Risk Management with h@ms says for several weeks the numbers have matched or exceeded the 2.5 million hogs, thought to be the weekly U.S. processing capacity.

“One of the things that has been a primary factor of the past couple of weeks is the ongoing issues that Smithfield’s Tar Heel facility is dealing with over the last three to four weeks or so. Ever since Hurricane Mathew came through and resulted in a plant closure, we have several weeks now where they have not been able to fully operate that plant,” he said.

He says the most recent impact being the facility did not operating for three days. Because it is the largest packing plant in the United States, and for that matter in the world, that left roughly 90 thousand hogs delayed from slaughter and probably is backing up of their production schedule.

“It’s hard to know exactly what impact that is having but it’s generally not viewed to be a positive one in the medium term because at that point those hogs will need to be processed and we don’t want to fall behind at a time when we’re so close to packer capacity,” he said.

Fulton recalls in 1998, when the hog supply exceeded processing capacity, it led to a collapse in live hog prices and, while a similar collapse is unlikely, given being close to packer capacity, any issues in even one or two plants could make a difference.

Fulton says the glut of hogs available for slaughter in the U.S. in large numbers have resulted in increasing pressure on North American live hog prices.

“We’re seeing that typical seasonality where the cash hog prices tend to decline from the peak in the summer to some of the lowest prices of the year in November and December,” he said. “But the decline that we’ve seen this year has easily exceeded expectations and beyond the seasonal norm. In fact, depending on which cash market region you reference, we’re now seeing cash prices that are hovering in the mid-40s per hundredweight U.S. and that takes us to the lowest levels that we’ve seen in several years. It’s kind of part of that seasonal influence that you expect to see every year but we are taking it up to a whole other level.”

Fulton says the next two months will play a critical role in determining how 2016 is viewed in history.

“Given that we’re so close to packer capacity, the margin for error is quite slim and the price implications are significant because of the packer capacity issue.”

While not soon enough for the current glut of live hogs, the signing of the Canada- European Union Comprehensive Economic and Trade Agreement offers an opportunity for Canada’s pork producers to expand and have access to a market of over 500 million people.

George Matheson, chair of Manitoba Pork, says the European Union is the world’s largest importer of agriculture and agri-food products. Canada’s access to that market has been limited by trade barriers but this agreement provides for tariff free access for about 80,000 tonnes of pork per year, phased in over five years, so it holds a lot of promise.

“We do export a lot of our pork product out of Manitoba, 90 per cent in fact and out of Canada it would be more like 60 per cent,” said Matheson. “In Manitoba we export to close to 35 different countries worldwide and we just plain and simply want the opportunity to access even a wider variety of markets.”

Matheson says they’ve always considered the EU as kind of the last frontier, never been able to access it significantly with the most recent statistic being for 2011.

“I think we had 400 some odd tonnes exported to the European Union, so very little compared to exports to other countries around the world. The European Union has 500 million inhabitants and they consume a lot of pork. Their total consumption is 30 times that of Canada so it would be a great opportunity for us,” he said.

Matheson says Canada needs to get past the European Union’s technical barriers, but he is hopeful the two governments will move forward quickly with ratification of the agreement and resolution of any remaining barriers that might stand in our way. •

— By Harry Siemens