Hog Plant Closing = Higher Hog Prices?
Does the recent announced closing of the hog plant located in Sioux City, Iowa mean that hog prices will increase during 2010. First, the closing will directly impact 1,500 workers and their families in the area. Some of them may find work at other plants located in the area, but many will need to find new jobs which is tough in this still weak economy.
The Iowa Farm Outlook published a post on the expected impact in the area due to the closure. The Sioux City plant processed approximately 4 million hogs each year and this is almost equal to the expected decline in hog production from 2008 to 2010. Since this should more closely match hog processing capacity to production, this should result in an increase to hog prices in 2010. Prices have already increased substantially from their early 2009 lows, but have much farther to go to get back to their highs.
I have posted before that hog farmers were probably losing at least $20 per hog grown in 2008 and 2009 due to high feed costs and low prices (part of it due to the Swine flu scare). I believe that hog farmer profits in 2010 will be positive and if feed prices decline, they may make very good profits.
Although one plant is closing in the area, there are another 7 plants within 100 miles that process over 28 million head per year. This is certainly an area with more hogs than people.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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