Conagra announced it will close the Odom's sausage plant in Little Rock, Arkansas. Conagra had bought Odom's primarily for its brand name and product line. Conagra prefers to buy raw materials rather than be in the primary harvesting business. The closure suggests there is no crisis in sow harvest capacity, as weekly U.S. sow slaughter has run well below plant capacity for many years. The supply of sows is declining, which challenges sausage companies that rely on them as a raw material.

1. Vol. 10, No. 201 October 17, 2012
Conagr officially announced on Tuesday what many pork
industry observers had expected: It will close the Odom’s sau- WEEKLY FI SOW SLAUGHTER & CAPACITY
sage plant in Little Rock, Arkansas. Conagra bought the company in Thous. Head
April and many expected immediately that the branded food giant did so 130
primarily to get control of Odom’s Tennessee Pride brand name and line 6-wk Mov Avg
120
of value-added products. Conagra has exhibited little interest in recent
years in being in the primary animal harvest business, preferring to buy 4-Day Capacity
110
raw materials from others and using them to make finished fresh and 5-Day Capacity
100
frozen meat products. They do operate the Abbyland Foods sow har-
vest plant in Abbotsford, WI and indicated that Odom’s sausage manu- 90
facturing business would be moved there. The table on page 2 shows
80
U.S. sow slaughter plants and their daily capacities as compiled by
Paragon Economics for National Hog Farmer magazine in May 2011. 70
A Meatingplace story also indicated that Little Rock’s “hog
60
processing” will move to Wisconsin. We are not sure if that means
slaughter or not but we doubt that the Wisconsin plant has enough slack 50
capacity to take up all of Little Rock’s sow numbers. Regardless, the
40
closure suggests no crisis in sow harvest capacity. As can be seen in 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
the chart at right, weekly U.S. sow slaughter has run well below even
the four-day capacity of the nation’s sow plants for many years. The
surprise is that there has been no more rationalization of this excess respectively, while both beef prices were higher with the all-fresh series
capacity over time. We believe this “staying power” is a function of old, up 4.2% versus last September. Broiler prices are the big gainer rela-
generally depreciated-out plants that require companies to cover only tive to September 2011, with whole bird values exceeding last year by
small levels of fixed costs over variable costs and the fact that the sau- 12.4% and the composite broiler series gaining 5%, yr/yr to $1.856/lb.
sage business usually carries good margins associated with long- These price data come from the Bureau of Labor Statistics
established brand names. And some are regional stalwarts. Most DLR which computes the Consumer Price Index (CPI) each month. The CPI
readers do not recognize Wampler’s or J.C. Potter but the ones in Ten- for all goods rose to 231.4 (with 1982-1984 =100) in September, 1 point
nessee and Oklahoma, respectively, almost certainly do. The same is or .5% higher than last month and 2% higher than one year ago. In a
true of many of the other names in the sow plant table. reversal of recent trends, food prices grew at a slower rate than the CPI
The other lesson of the chart at top right is that the supply for all items, gaining 1.6% yr/yr. As is suggested above, poultry prices
of sows is a continuing challenge for sausage companies. There were the leader among proteins, gaining 4.8%, while meat prices grew
are simply fewer and fewer of these animals available. After the slow by only 1.6% and dairy prices fell by 2.3%.
decline of the early ‘80s, sow numbers stabilized through 1995. Note
that the dramatic drop in 1997 was BEFORE the economic bloodletting
that saw cash hogs fall to $8/cwt live in the fall of 1998. The industry RETAIL MEAT PRICES, USDA
was already consolidating rapidly. Weekly sow slaughter then averaged All-Fresh Beef Choice Beef Pork Composite Broiler Turkey
about 60,000 head for a decade before dropping again in 2009 as high Cents/lb.
feed prices took their toll. Rising productivity (more litters/sow, pigs/
550
litter, weight/pig) have kept total hog slaughter and pork output grow-
500
ing—but that does nothing to help the supply of raw materials for these
specialized processors of cull breeding animals. We suspect that more 450
rationalization of sow slaughter capacity is coming. 400
USDA released it monthly estimates of average meat pric- 350
es on Tuesday and the data indicate a soft month for pork, beef 300
and composite broilers. All of those prices were lower for the month 250
with the decline for composite broilers (2.6%) being the largest and the 200
fall for Choice beef (0.1%) being the smallest. All of those comparisons
150
are for September versus August.
100
Whole broiler prices gained 1.5% to reach a new record high
of $1.455/lb. in September while turkey prices continued their normal 50
seasonal run-up gaining 2.2% to reach $1.621 per pound. 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Pork and turkey prices remain lower than last year by 3.3% and 1.5%,
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2. Vol. 10, No. 201 October 17, 2012
Estimated Daily U.S. Slaughter Capacity
Sows & Boars
Spring 2009 Spring 2011
Rank Company Plant Plant Co. Total Plant Co. Total
1 Johnsonville Foods Watertown, WI 650 700
Momence, IL 1,600 1,600
Oldham's Sausage Holton, KS 1,000 3,250 1,000 3,300
2 Pine Ridge Farms Des Moines, IA 2,850 2,850 3,200 3,200
3 Jimmy Dean (Sara Lee) Newburn, TN 2,800 2,800 2,800 2,800
4 Pork King Packing Marengo, IL 2,000 2,000 2,000 2,000
4 USA Pork Products* Hazellton, PA 2,000 2,000 2,000 2,000
4 Abbyland Foods Curtiss, WI 2,000 2,000 2,000 2,000
7 Bob Evans Farms Bidwell, OH 220 Closed
Xenia, OH 330 400
Hillsdale, MI 330 400
Galva, Il 330 Closed
Owens Sausage Richardson, TX 440 1,650 400 1,200
8 Odom's Sausage Little Rock, AR 1,000 1,000 1,000 1,000
9 Swaggerty Sausage Co Kodak, TN 800 800 800 800
10 Calihan Packing Company Peoria, IL 450 450 450 450
11 Pioneer Packing Company Bowling Green, OH 425 425 425 425
12 F.B. Purnell Sausage Simsonville, KY 400 400 400 400
12 J.C. Potter Sausage Durant, OK 400 400 400 400
12 Williams Sausage Company Union City, KY 400 400 400 400
13 Dean Sausage Atalla, AL 250 250 300 300
13 Wampler's Sausage Lenoir City, TN 225 225 300 300
14 Avco Gadsen, AL 205 205 210 210
15 Southern Quality Meats Pontotoc, MS 160 160 160 160
16 Gunnoe Sausage Goode, VA 110 110 110 110
TOTAL 21,375 21,455
* USA Pork Products kills 80% boars, 20% butcher hogs