Bloomberg News

Cargill Boosts Texas Hog Output as U.S. Pork Exports Seen Rising

September 01, 2011

Sept. 1 (Bloomberg) -- Cargill Inc., the fourth-largest U.S. pork processor, predicts U.S. exports of the meat will keep climbing and plans to begin breeding hogs this month at a Texas farm it bought from a competitor.

An expanding middle class in developing nations should help to increase global meat consumption, said Dirk Jones, president of Cargill Pork in Wichita, Kansas. The U.S. has the land and labor available to raise hogs more cheaply than countries such as Mexico, he said.

“We do take a longer-term view,” Jones said in a telephone interview yesterday. “Our industry should be optimistic about growth. We see the growth continuing in the industry, specifically in the export market.”

U.S. pork exports climbed 15 percent in the first six months of 2011 to about 2.45 billion pounds, according to government data. Per-capita pork consumption in China, the world’s second-largest economy, jumped 18 percent to 38 kilograms (84 pounds) in 2010 from 32.3 kilograms in 2007, USDA data shows.

“The real growth is outside the U.S.,” said Erin Borror, an economist for the U.S. Meat Export Federation. “Export markets are outbidding U.S. customers.”

Cargill bought its 21,500-acre hog production site near Dalhart, Texas, in April. It paid $33 million to Smithfield Foods Inc., the world’s largest hog producer, for the facility, which will supply pigs for Cargill’s processing plants in Beardstown, Illinois, and Ottumwa, Iowa. Meat from the hogs reared at the Texas site, which has been idle since spring 2010, will be sold both domestically and outside the U.S., Jones said.

Feed Costs

About 5.8 million sows were held for breeding in the U.S. as of June 1, almost the lowest on record, the Department of Agriculture said June 24. U.S. per-capita pork supplies will drop 3.8 percent to 45.9 pounds this year, the government has forecast. The price of animal feed has climbed, with the most- active corn futures in Chicago rising 70 percent in the past 12 months.

Cargill’s expansion plan is one of the only ones in the U.S. pork industry, said Steve Meyer, president of Paragon Economics in Des Moines, Iowa.

“People are afraid of expensive corn,” he said. Tyson Foods Inc. and JBS Swift are the second- and third-largest U.S. pork processors, according National Pork Board data cited on Tyson’s website.

--Editors: Simon Casey, Steven Frank

To contact the reporters on this story: Shruti Singh in Chicago at ssingh28@bloomberg.net; Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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