The headlines are blaring and loud. Smithfield shutting down their processing plant indefinitely. The panic is on. There will be a pork shortage. But as a pig farmer, let’s break it down to see what is really going on.
Smithfield Foods employs 3700 people in their Sioux Falls plant. More than 550 family farms supply the plant with livestock from their farms. But the COVID-19 virus has taken its toll at the plant. We are all aware the Coronavirus is high contagious wreaking havoc on large metropolitan areas across the nation such as New York City, New Orleans, and Detroit. But, Sioux Falls, SD is also a hotspot with 293 Smithfield Food’s employees testing positive. There’s no doubt the number will continue to increase. Sioux Falls is now considered the 4th largest hotspot in the country for COVID-19.
Smithfield Foods plant closes indefinitely
On Sunday, April 12 (Easter Day) an announcement was made by the company’s president, Kenneth Sullivan, the company would be closed indefinitely. Originally, they planned on being shut down for three days over the Easter weekend as a few employees tested positive for COVID-19. Then the decision was to move it to 14 days. But the COVID-19 positive cases kept increasing. The latest news is they plan to shut down the plant indefinitely. Words like “indefinitely” shakes the markets. Markets do not like uncertainty. Personally, I wish they would have stayed with the original 14 days and then stated they would relook at the situation at that time. I hate the word “indefinitely.”
What do pig farmers do with their pigs?
If you are one of the 550 family farms that supply Smithfield Foods with pigs, I am sure the level of nervousness and fear is off the charts. Will pig farmers go the same route of dumping milk by dairy farmers? It’s not like you can wait and sell the hogs later. Pigs can’t be stored in some warehouse and then pulled out when the packing plant reopens. The hog industry (and other ag sectors) has a very delicate production structure. Pigs are continually bred, born and marketed and it’s very difficult to just stop and/or change without proper planning. COVID-19 gave us NO time to plan. Chaos ensues due to the disruption of the supply/processing/distribution systems.
Pork shortage headlines
The pork shortage is all about the meatpacking plants that are shutdown. They are not processing the pork. Herein lies the problem. Packing plants are shut down but farmers have an abundance of pork to sell. And this is the scary part. Basic economics of supply/demand tells you that oversupply over demand will reduce the price. Low supply that doesn’t meet demand will raise the prices.
As a farmer, we are on the losing end of the economic equation. We will have an oversupply of pork because we don’t have enough packing plant space. This is like a sucker-punch to farmers.
What are the economic ramifications?
According to an MPR article, Minnesota Pork’s Dave Priesler stated that as of last week, Minnesota hog farmers are losing $2.5 million a day. A year ago, lean hogs were $90, today they are about $43 and this was pre-Smithfield Foods plant closing indefinitely. The $43 is not profit–it is nowhere close to covering expenses. What happens in Sioux Falls affects ALL hog farmers. This price hit is devastating. If it continues, we will lose farmers.
As it’s not only hog farmers facing tough times. COVID-19 has turned the ag world upside down. Another example is our local market for corn is no longer buying corn until October. Again, another market disruption.
This is affecting every single farmer. We love to farm. It’s what we do best. No doubt we are in times that we have never experienced before. We are holding onto this rollercoaster of a ride. But in the end, we need stable markets and a price that meets our expenses. Please pray for us.