Sort & Cull

New Big Bets on Hog Expansion

John Harrington
By  John Harrington , DTN Livestock Analyst

When it comes to speculating about the expansion of livestock herds, there are essentially two kinds of talk: cheap and expensive. While both types can prove to be completely wrong-headed, the missing of the dartboard by the latter is typically more painful and long-lasting than the former.

On the other hand, expensive talk, exactly because it risks more severe consequences, tends to be more reliable and more predictive of actual, hooves on the ground, expansion.

Major pork integrators Seaboard and Triumph Foods have just made a costly pronouncement this week, unveiling a joint venture to construct a new processing facility in Sioux City, Iowa. The plant is expected to process about 3 million market hogs annually operating a single shift (i.e., a daily kill of approximately 10,000 head) and employ approximately 1,100 persons.

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No idle chit-chat, these guys are putting money where their mouth is to the tune of an estimated $264 million. Construction is expected to begin this summer with the first blood on the floor likely to pool by July 2017.

Actually, this represents the second round of expensive expansion talks since last December. That's when the Clemens Food Group of Hatfield, Pennsylvania, announced plans to construct a large pork plant in Coldwater, Michigan. At full capacity, the new facility is also expected to cut through 10,0000 barrows and gilts on a daily basis, starting sometime in late 2017 or early 2018.

It boggles the mind what would happen to the spot cash market if kill capacity was suddenly increased by 20,000 head early next week. Yet these bold visionaries are imaging a generous swine population more than two years down the road.

Talk about "Field of Dreams": Build the shackle space, and hogs will come, indeed.

Such aggressive investment in infrastructure bespeaks a very high level of confidence in herd expansion. Such corporate faith may be based on assumptions regarding the persistence of cheap feed, a new surge in country productivity, or the explosive potential of global pork demand. Whatever.

While the real future of herd expansion remains very much in the bubble, subject to a wide variety of unknown variables, all meat producers in the market casino would probably be well advised to at least take note of the changing quality of dice-throwers.

For more of John's commentary, visit http://feelofthemarket.com/…

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