CARLYLE, Ill. — As the calendar turned to 2020, the pork industry was poised for continued expansion as the United States and other nations increased their sow base after a decade of gross domestic product growth.
Five packing plants had been recently added in the United States as part of a rapid expansion to meet domestic and global demand.
“Coming into this year, USDA hogs and pigs report indicated upwards of a 7% increase in total hogs. The U.S. growth of the industry is predicated on the assumption that there will be export demand and we were needing to export about one-third of our production, based on historical consumption in the U.S.,” Bradley Wolter, CEO and president of The Maschhoffs, said in a University of Illinois farmdoc-hosted webinar.
Then COVID-19 hit and many packing plants across the nation were forced to temporarily close after some employees tested positive for the coronavirus. This put a bottleneck into the food system with pigs at market weight and no place to go.
“We grew packing plants, we’ve expanded the industry and one of the challenges along the way at those packing plants has been to find the labor resources to put the human capital in place to run those plants at capacity,” Wolter said.
“With this increase in total hog volume, we hadn’t really solved the riddle yet to harvest the pigs, and there was a lot of angst and concern that as we got out into the fourth quarter in 2020, would we be able to harvest all the pigs that we are anticipating to produce? So, this is before COVID had set its head on us.
“The finishing capacity of the U.S. industry was tight prior to COVID and so uncertainty was the theme prior to COVID, so you can imagine it remains the theme and exponentially so at the moment.”
Food systems are built on the basis of efficiency and that has created some additional vulnerability as indicated by what has played out since the pandemic hit.
Risks Highlighted
Wolter outlined the following industry risks that have been highlighted by the crisis.
Consumer demand was reduced from both financial and supply chain factors.
“We’re very concerned that as financial times set in the demand won’t be there for our products. And the supply chain factor and the fact that we don’t have the labor in place in these plants to run harvest capacities at near the norm,” Wolter said.
“On the backside of those harvest capacities is the fabrication and so we’re literally sending out a lot of primals, heavy bone-in primals and what does the average consumer do with that at the moment. I’m concerned with the absence of knowledge we could see consumption go down.”
A primal cut is a piece of meat initially separated from the carcass in the packing plant. As the demand from food service retail such as restaurants grounded to a halt, packing plants shifted employees away from the fabrication — end product such as pork chops — to the meat harvest area.
“It’s accelerated the sale of pork to China because the Chinese generally buy a six-piece or three-piece carcass. Obviously, there’s not a lot of processing in the meat harvest area, so it’s quicker to get those pigs through the plant and into combos that then go to China,” Wolter explained.
“The bottom line is it’s been a dynamic situation and as labor comes back we’ll further fabricate primals more into boneless cuts, things like sliced chops that you would buy pre-packed in the grocery store. There was certainly a period of time two or three weeks ago that that was just not able to happen.
“When the consumer goes to the store and they find this 12-pound rib-in loin, what do they do with it, and do they turn to an alternative protein at that time and have a pleasurable experience and never come back?”
Harvest capacity was reduced by COVID-19 prevention tactics in plants resulting in a 4 million pig backlog. A 3 million pig backlog remains today.
Government support limitations and size dependent programs reduces the competitiveness of larger systems.
“For example, we have not benefited from any government programs,” Wolter said.
Environmental constraints exist on euthanized pig disposals and they must be managed responsibly.
“We have found very supportive governments around our footprints in which we operate and supportive in helping us think about how we might euthanize and bringing organizations like the Federal Emergency Management Agency to the table, particularly in Illinois. There is risk in my mind if we don’t manage these programs responsibly going forward,” Wolter said.
The workforce has been significantly reduced.
“I’m very concerned in the long-term about the availability of the workforce,” Wolter said.
Capital is a real concern as reduced financial liquidity strains the farm-based supply chain.
“We need a healthy rural fabric and financial liquidity on the backside of all of this is important for all of us but certainly in our farm-based economy,” Wolter noted.
Optimistic Outlooks
Wolter is moving forward with the following optimistic outlooks:
• Necessity is the mother of invention. Position the business for better resilience in an evolving market. “We’ve learned a lot through this. We’ve tested systems we hope to never have to test, but without question we see an evolving market on the backside of this and our goal is to put ourselves in position to participate in that market with more knowledge and the resiliency to capture it.”
• Retain and develop people talent for cost efficient, value-based business. “Our organization — the family — feels that you’ve got to have the best team and this has certainly been an opportunity for us to continue to develop people. And on the backside of this we’re going to have to focus on retaining those folks because it’s the people that allow us to maintain our cost efficient position.”
• Understand and deliver what our customers expect from us in the “new normal.” “We also better understand today the importance of our service to our customers. We’ve always understood that but we’ve tried to really be partners through this process. So, now we turn to the opportunity on the backside of this is understand what they need from us in a ‘new normal.’ We look forward to having a better understanding and ultimately a deeper relationship as a result.”
• Continue to evaluate and manage risks within a biological-based supply chain. “We have to continue to evaluate and manage risk. We’ve uncovered new risk and it forces us to take a look at the biology that we get to understand about the pigs and how we might exploit that to help create a more reliable supply chain.”
• Cultivate our passion for animal care. “It’s rewarding to wake up each day with this responsibility. It’s certainly cultivated that and the opportunity remains for us to continue to cultivate our passion for animal care.”
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