By Chris Clayton
DTN Ag Policy Editor
OMAHA (DTN) -- A former president of the National Pork Producers Council has announced plans to form a new company and build a $240 million processing plant in Mason City, Iowa.
The Carolinas-based Prestage Farms announced the rollout of Prestage Foods of Iowa LLC to build a 650,000-square-foot pork-processing facility that could handle as many as 10,000 hogs a day and employ as many as 1,000 people.
Ron Prestage, a veterinarian and head of Prestage Farms, said in a news release the processing facility is the next logical step in vertical integration for his company, which has contract growers in Iowa, as well as North and South Carolina, Mississippi, Oklahoma and Texas.
"We have always believed that our family and employees must be engaged in the communities in which we operate and the industry we represent. Having produced market hogs in Iowa for the past dozen years, we believe Mason City is the right place for us to strategically build this new plant," said Prestage, who was president of NPPC last year.
Prestage said more pork processing is needed because of consolidation in the packing industry that has decreased competition for hogs and depressed prices for producers.
Steve Meyer, a pork market analyst with Express Market Inc., agreed with Prestage that pork producers are starting to suffer from a lack of processing capacity that is starting to see some new players jump into the processing business. The larger, existing meatpackers have been unwilling to expand capacity because it benefited them to keep the status quo.
"If you are already in the business, you don't have very much incentive to expand because you cause everybody to pay more for hogs, including yourself," Meyer said. "That's been one of the problems here is the existing players didn't have a lot of incentive to expand. The lack of capacity now puts all the bargaining chips in the hands of the packers."
Meyer noted there are new facilities under construction by others working to get into processing, including plants in Sioux City, Iowa, and in Coldwater, Michigan, that could open in 2017. Other companies also are looking to refurbish smaller facilities to add some packing capacity as well.
In the short term, Meyer said projections show the tight packing capacity could put a strain on both pork producers and packing workers later this year due to increases in production.
The Prestage facility will start construction later this summer once state permits and approvals are completed. The facility could begin processing operations in mid-2018.
Prestage Farms operates hog and turkey farms and already owns a turkey processing business. Besides employing more than 2,000 people, the company also works with 450 contract farmers, the company stated in a news release.
Chris Clayton can be reached at Chris.Clayton@dtn.com
Follow him on Twitter @ChrisClaytonDTN
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