'It's going to be devastating': Smithfield closure another blow to livestock industry
Hog prices were already in a free fall.
Scott Kirsch is expecting things to get worse now that Smithfield Foods has closed its Sioux Falls plant as it works to address an outbreak of COVID-19.
Kirsch co-owns the Platte Livestock Market, where he’s already noticed the effect of the novel coronavirus pandemic on the prices hog farmers are getting.
“It’s going to be devastating to the industry,” he said of the closures caused by the worsening pandemic and resulting state of emergency.
Smithfield harvests more pigs per year than South Dakota’s roughly 900 hog farmers raise, which means its closure will have ripple effects across the region, reaching into southwestern Minnesota and northeastern Iowa, said Glenn Muller, executive director of the South Dakota Pork Producers.
Muller estimates Smithfield harvests roughly 5 million hogs a year, or 19,000 to 20,000 a day.
“That’s a huge, huge concern if we lose that capability,” Muller said. “To not only our producers but to maintain that food supply.”
Pork producers were already being squeezed in the economic fallout of the coronavirus pandemic. The price of a hundredweight of lean hog has continued to drop in the weeks since the pandemic reached domestic markets. Hog futures reached $75.80 on March 12 and as recently as April 8 had dropped by more than $24 per hundredweight, according to NASDAQ.
The same day, more than 80 employees at Sioux Falls’ Smithfield plant were reported to have tested positive for COVID-19. The Virginia-based meat processing company announced on April 9 it was closing its Sioux Falls plants for three days while some employees remain to clean the plant and add social distancing barriers. On April 12, the company announced it would close the plant indefinitely.
Meanwhile, the surplus of pork is already forcing farmers to make tough decisions. Keeping processors such as Smithfield up and running as much as possible will be key to the industry and consumers, Muller said.
“We need to see some security and we need to keep the food chain intact,” Muller said. “While still being very conscientious about the health and well being of those employees, because they’re a vital part of our industry as well.”
Freezers are full, and demand from the restaurant industry – an important buyer of bacon and other pork cuts – has been greatly diminished due to the closure of non-essential businesses across the country, said Doug Sombke, president of the South Dakota Farmers Union.
His organization, as part of five Midwestern member states of the Farmers Union, owns and operates a much smaller pork plant in Estherville, Iowa. Redwood Farms Meat Processors only takes the odds and ends that Smithfield doesn’t need. But it still has felt the drain on demand from eateries across the country, including New York and Chicago, forcing the group to hunt down buyers, Sombke said.
“We’ve been trying to do everything we can to find new markets to move this,” he said. “Most of this goes to restaurants, not to grocery stores, and that market is already saturated.”
Sombke said some farmers might be forced to euthanize their younger feeder pigs, and Smithfield’s closure further complicates the future of the market.
“I don’t know exactly what their kill rate is,” Sombke said. “But just imagine now those trucks are going to be backed up. It just puts more stress on everybody.”
Losing a giant processor such as Smithfield will impact the rest of the market, continuing to add downward pressure on prices.
Kirsch has noticed a drop-off in buyers as the livestock and meat packing industry copes with the effects of the pandemic. The Platte Livestock Market has been able to navigate market shifts with online sales through CattleUSA.com, which now accounts for about 85 percent of the market’s sales, Kirsch said.
South Dakota livestock farmers, however, are facing worst-case scenarios as prices continue to sink lower, with some potentially being forced to close.
“The farmers are in trouble if we don’t get something turned around now,” Kirsch said. “There’s a lot of people in this country that will not last that long.”
There have been some smaller South Dakota-based operations that have stepped in to buy up some of the state-raised hogs, but there still isn’t enough demand to account for an abundance of supply. This is a time of year when many farms are looking to unload market-ready cows and hogs, Kirsch said.
“Everybody’s got stuff ready to sell now,” Kirsch said.