Jim Long Commentary – March 28, 2016 – Prestage Foods to Build New Pork Plant

Jim Long President – CEO Genesus Inc.

info@genesus.com

Prestage Foods to Build New Pork Plant

March 28, 2016

The race to add more packing space in the United States continues. Last week Ron Prestage DVM announced on behalf of the Prestage family, their plan to build a 650,000 sq. foot $240 million pork processing plant in Mason City Iowa. Company officials say they made the decision after seeing that the consolidation of the pork packing industry how it had decreased competition for live hogs and helped depress prices to hog producers. The company says it sees the need to construct this facility increasing competition and maximizing the value of all hogs produced in the United States. The plant has a one-shift capacity of killing 10,000 hogs per day, employing 1,000 employees. The plant is being built to allow expansion for a second shift. It is planned that the plant will be operational mid-2018. Prestage Farms has over 170,000 sows and produces 850 million pounds of pork annually. Prestage is also a large turkey producer with 425 million pounds of turkey annually in a fully integrated system. Mr. Bill Prestage is the founder of Prestage Farms. We remember him vividly, coming to the Michigan Pork Producers Congress thirty years ago. Mr. Prestage   gave a speech that we remember to this day. Mr. Prestage was from Michigan and moved to North Carolina to work as a feed salesman for Central Soya Master Mix. He then formed a partnership with Bill Carroll to create Carroll Farms that was a large turkey-hog producer. In 1987, Mr. Prestage and his family formed Prestage Farms. Today Prestage employs nearly 2000 associates and contracts with over 450 farm families. Going back the thirty years and Mr. Prestage’ speech, what we remember is a Horatio Alger story of a feed salesman who had a dream and a plan. Positive riveting can-do spirit. The epitome of the American Dream. There are very few speakers that leave a lasting impression. Too many speakers are consultants etc. who never put anything on the line. They tell you what you should do and how to do it but have never built anything and never will. Mr. Prestage speech made a lasting impression on us. When we read of the Prestage Family investing $240 million it tells us they have faith in themselves, their people and the pork industry. He inspires us to drive on. Nothing is to big too dream.   PACKING PLANT The US Packing Plant expansion is going forward. Our list:
Plant Daily Slaughter
·       Triumph, Iowa 16,000
·       Hadfield, Michigan 10,000
·       Prime Pork, Minnesota 5,000
·       Moon Ridge, Missouri 2,500
·       Prestage, Iowa – 10,000
· 43,500
  If we got it right these new plants will add 43,500 hogs per day to current production capacity or about 200,000 per week or about 11 million per year. The equivalent production of 500,000–550,000 sows. Today all US hogs are getting harvested. Where are all hogs going to come from? Most of the hog production of the new plants is already under control through ownership of the hog production. There is a good chance that over 8 million hogs per year currently going to existing pants will be lost directly to these new plants. We don’t see sow expansion over the next year anywhere close to what the new packer capacity will be. We expect that over the next few months the push for packers to line up ongoing hog supply will be intense. The packer margins of over $40 per head we have seen in the last while will be a thing of the past. The pendulum is swinging to hog producers. “If your aspirations are not greater than you resources, you’re not an entrepreneur.” ~C.K. Prahalad  
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