This week Tyson Foods announced it will put plans for a Kansas poultry complex on hold.  The company had pledged construction of a $320 million dollar plant in Leavenworth County just two weeks prior. By mid-week, more than a dozen other Kansas communities had lined up to take a crack at the 1,600 jobs the project was forecast to bring.Local rejection of industrial bond funding drove Tyson’s move, and adds to the contentious debate over corporate giveaways in Midwestern states. As producer Colleen Bradford Krantz discovered, the planned addition of a handful of hog processors also has brought mixed reactions from heartland area producers.

By late next year, Iowa hog producer Rick Chipman should be able to point his livestock trailer in any direction and, within four hours, reach any of eleven hog packing plants.

Rick Chipman, Chipman Farms: “We have been blessed with a lot of packing space in this area. Unfortunately, the industry as a whole needs more. We have pushed our packing capacity to its limit the last few years and so it’s a good thing that we are see additional packing spaces open up.”

Chipman, whose Chipman Farms near Harlan will feed out nearly 60,000 hogs this year, said he’s cautiously optimistic about the five new or renovated Midwest hog processing facilities that will open be fall 2018.

Rick Chipman, hog producer, Harlan, Iowa: “It shows the vibrance and the growth of the industry. …We really like how companies and groups of producers are investing in new technology and state-of-the-art facilities….We certainly like the competitive spirit that we have between the packers when we go to make contracts.”

The five hog packing plants will ultimately have a combined slaughter capacity of at least 9.5 million hogs annually. That would represent about 8 percent of the 118 million hogs slaughtered in the U.S. in 2016.

Ron Prestage, Prestage Farms, president: “The supply is already set based on how many market hogs are grown and the demand is determined by how much people want to eat pork and, in the U.S., how successful we are at exporting pork outside the country. That is not going to change as a result of new plants being built or not built.”

Prestage Farms’ plant near Eagle Grove, Iowa, is expected to open in November 2018, ultimately processing 10,000 to 12,000 hogs a day.

According to Ron Prestage, the additional plants should create more competition among packers for market hogs – which could make for increased producer profits in the Midwest - as the facilities aim to operate at capacity when possible. If the supply of hogs increases too rapidly, however, prices could dip instead.

Ron Prestage, Prestage Farms, president: “We, of course, saw this happen in 1998, when you run into a situation where you actually exceed shackle capacity at which point packers really don’t have to bid anything for hogs because they’ve already got all their shackles filled.”

The new plants feature more robotics, snap-chilling, and low-impact livestock handling, which may offer an operating advantage over older plants, primarily within the Midwest.

Increasingly, pork plants are leaning toward vertical integration, with owners or partners supplying a large percentage of the animals, rather than buying on the open market.

The Prestage Farms’ plant in Iowa plans to harvest some of its own hogs, but will buy open-market hogs for about half of its first-shift supply. If a second shift is added, those hogs will all be bought from other producers.

Ron Prestage, Prestage Farms, president: “The poultry industry has evolved to a point where it’s almost entirely vertically integrated. I’m not going to criticize other companies that have moved toward a more vertically integrated model. But it’s not really the big motivation for us…We kind of felt like for the health of the industry, it would probably be good if there was a little more competition and some new packers.”

In Windom, Minnesota, a group of individuals – including hog producers – spent nearly $70 million remodeling a beef packing plant that had closed less than a year earlier.

Now open as Prime Pork, the renovated facility brought 300-plus jobs back to the community of 4,500 when it opened last spring. Company officials say 80 percent of the hogs will ultimately come from either plant owners or permanent suppliers. The ultimate goal is for Prime Pork to sell a consistent product.

Wayne Kies, chief operating office, Prime Pork: “All the hogs that we get from the three producers will be basically fed the same diet and have the same sire as far as the boar…That is really the key to the customer – to ensure that when you buy a pork chop today, it is going to taste the same today as it does a month from now.”

Employees are already processing 3,500 hogs a day, but the final objective is to slaughter 6,000 a day by year’s end.

In Sioux City, where the new Seaboard Triumph Foods plant opened this month, officials said they will have to be particular when buying one-third of the hogs from independent producers. The company, which hopes to add a second shift next summer, in order to process 21,000 hogs each day, wants to make sure those additional hogs also meet quality and traceability standards demanded by a global marketplace.

Mark Porter, Seaboard Triumph, Chief Operating Officer: “We are also pretty proud of the control of quality that brings with literally having the ability to bring feed to the hog farms to the processing center to the package and delivering that to the customer – presenting a very high quality product…Our requirements with our open market hogs are that they are essentially identical in configuration – genetics, nutrition, animal care – all of those requirements are the same as if they were internally sourced.”

Chipman understands packers need to meet the demand for consistency but worries what it would mean for the industry long-term if packers continued raise more or all of their own hogs.

Rick Chipman, hog producer, Harlan, Iowa: “That’s been a difficult thing for me to kind of chew through…It would be very damaging to independent producers like myself, particularly if the packing shackle space was completely tied up…But when I’ve approached packers in the past, they have seemed to want to keep a balance between ownership and buying from individuals. And that’s a good thing. They don’t seem to want all the pigs. The pig business is quite risky.”

Reported by Colleen Bradford Krantz of Market to Market, colleen.krantz@iptv.org.