Will Iowa lose more meatpacking plants?
Pork industry woes leave many worried
Columbus Junction Mayor Mark Huston understands how devastating Tyson Foods’ decision to close its Perry plant is for the Dallas County town of about 8,000.
As in Perry, Tyson employs about 1,300 people in Huston’s eastern Iowa town. And also as in Perry, the Arkansas-based company is its biggest employer.
Tyson “has an absolutely huge impact on our town,” Huston said.
Losing the jobs would hurt — even more in Columbus Junction, which has a quarter of Perry’s population.
“A town our size, there wouldn’t be much we could do about it,” Huston said.
And with the pork industry facing its harshest financial conditions in 25 years, meatpacking workers, city leaders and others across the state worry that more of Iowa’s 11 major processing plants could end up on the chopping block.
The economic hit in Iowa, the
nation’s largest pork producer, would be substantial: Food manufacturing contributes about $9 billion annually to the state’s economy and employs nearly 61,000 workers, federal data shows.
Are the worries justified?
Tyson says it will continue ‘right-sizing.’ What does that mean for Iowa?
Meatpackers haven’t been able to avoid high prices for corn, soy meal and other feed that have contributed to large losses for pork producers, says Lee Schulz, an Iowa State University livestock economist.
Tyson reported $648 million in losses in the fiscal year that ended in September, compared to $3.2 billion in profits in 2022. And Hong Kong-based WH Group, which owns Smithfield Foods, operator of several Iowa plants, said U.S. and Mexico pork operations lost $551 million in the third quarter compared to $85 million in profits a year earlier.
Over the past year, Tyson said it would close eight older, less efficient U.S. chicken plants. And Tyson CEO Donnie King told analysts last month the company would continue “right-sizing” its operations, presaging the March 11 announcement that Tyson will close the Perry plant at the end of June to “optimize efficiency.”
But Schulz and Steve Meyer, chief livestock economist at Ever.Ag, a Texasbased agricultural technology, risk management and market analysis company, said the financial picture is beginning to improve for producers and packers. Tyson’s fiscal 2024 first quarter, ending in December, showed a $107 million profit as operating income from its pork sector climbed to $39 million, compared to a $21 million loss a year earlier.
“I don’t think there are any other plants in danger at this point,” Meyer said.
He noted that in addition to Perry, pork plants in California and Minnesota already had been slated to close. Premium Iowa Pork, based in northwest Iowa, has bought the Minnesota plant and says it plans an announcement on its future in the spring.
Even though those plants are small, their closure “relieves the pressure to some degree,” Meyer said.
Huston said he hasn’t heard “any rumblings” that Tyson will shut the Columbus Junction plant. The single-shift facility processes 10,000 to 13,000 pigs daily, he said, and it’s “been going full bore.”
But he’s not reassured, saying it’s unlikely large corporations would share their plans widely.
In Perry’s case, Gov. Kim Reynolds, Iowa economic development staff and city officials said they didn’t get word of the shutdown plan until shortly before Tyson’s public announcement.
“Conditions change and company outlooks change,” Huston said. “It’s always a hazard.”
‘ The least-efficient plants are the most vulnerable’
Meyer said that as a single-shift plant, Perry was hamstrung.
“Double-shift plants have a lot of cost advantages,” spreading “a lot of fixed costs out over far more pigs,” he said.
The 61-year-old Perry plant, initially operated by Oscar Mayer, had been remodeled, but because of its relatively limited size, “it would have been hard to adapt ... to a double-shift plant,” he said.
Tyson’s Waterloo and Storm Lake pork plants, both with two shifts, are considered “some of the most efficient in the country,” Schulz said. Waterloo workers process about 17,250 hogs daily and Storm Lake, 19,500, he said. The Perry plant slaughters about 9,000 hogs daily.
“The least-efficient plants are the most vulnerable,” Schulz said.
In addition, newer competitors have emerged.
Prestage Foods opened a $350 million pork processing plant in 2019 near Eagle Grove in northwest Iowa, and Seaboard Foods began operating a $300 million plant in 2017 in Sioux City.
While new plants carry hefty price tags, they also offer size and labor-saving technology that add to their efficiency, Schulz said.
“A new, efficient plant that’s aggressive can put competitive pressure on older plants,” Meyer said. “Not that the older plants aren’t still pretty good.”
Union official: Increased pace means fewer plants needed
Despite the experts’ optimistic outlook for Iowa plants, United Food & Commercial Workers official Mark Lauritsen said he believes more are likely to close. He cited the industry’s push to increase line speeds as a major factor.
“If USDA allows U.S. line speeds to go up, we are not going to need as many packing plants in the Midwest,” said Lauritsen, director of the union’s food processing, packaging and manufacturing sector. “There’s no way around it.”
The union has argued against the request, saying it’s unsafe for workers. Companies disagree, saying higher speeds have been tested for years without increased danger. The USDA is allowing a few pork plants to slaughter more than 1,106 hogs each hour and assessing the impact on worker safety to determine whether the accelerated pace can be expanded.
Lauritsen said Tyson didn’t have to close the Perry plant, given the number of pigs that need to be slaughtered this year. Experts say the U.S. will harvest about as many pigs as last year, even with companies shutting down sow operations, because increased litter sizes are offsetting efforts to reduce the herd.
Lauritsen, whose union will negotiate severance packages for the Perry workers, said smaller, single-shift plants “like Columbus Junction cannot be in a safe position. Plants like West Point, Nebraska, cannot be in a safe position.”
“I wouldn’t be comfortable if I was the mayor of a small town that had a small, single-shift operation,” he said. There’s “a sword of Damocles hanging over these communities. But it doesn’t have to be that way.”
History of meatpacking industry in Iowa has been tumultuous
Whether the Perry plant closure turns out to be the only one in Iowa in the current downturn, the meatpacking industry has a volatile history, experiencing decades of booms, busts and ownership changes.
The Perry plant was built in response to the closure of a previous one, and it escaped a planned closure in 1988 only when a last-minute buyer emerged on Christmas Eve of that year.
Ottumwa Mayor Rick Johnson recalled when John Morrell closed its pork plant in his southeastern Iowa city in 1973. Its population already had fallen from a peak of about 34,000 residents in 1960, and the closure “impacted our community for several years,” he said.
In 1976, Hormel opened a new pork plant in Ottumwa and operated it until 1987. Although Hormel struggled with extensive labor disputes, the Minnesota company blamed the closure of the plant on excess slaughter capacity in the industry.
With the help of state incentives, the plant reopened the same year under Excel, a Cargill Inc. subsidiary, that in turn sold the plant in 2015 to JBS SA. The Brazilian company, the world’s largest meatpacker, continues to operate the plant, and Ottumwa’s population has stabilized at around 25,000.
It’s a similar story in Columbus Junction: Rath Packing Co. opened the plant there in 1961 and closed it in 1983. It reopened two years later under IBP, formerly known as Iowa Beef Processors, which merged with Tyson in 2001.
Over the subsequent 23 years, the community’s reliance on meatpacking jobs has grown, said Huston, the mayor. When the plant closed in the 1980s, about 250 people worked there. Employment is now about five times larger.
“IBP rebuilt the plant and expanded it a bunch,” he said.
JBS in Ottumwa also is critical to that city’s economy, said Johnson, who estimated employment is around 2,600. For rural Iowa towns lucky enough to have a large employer, losing those jobs is “truly devastating,” Johnson said.
“You don’t recover from that type of community loss overnight,” he said.
Lauritsen said the industry’s drive for efficiencies is hurting workers and communities. Corporate executives don’t create profits, “workers do,” he said. “And they need to be taken care of.”
He pointed out that Tyson didn’t work with the city or state to try to find a farmer-owned group or other buyer for the Perry plant.
“They didn’t want competition for hogs. They didn’t want the competition for labor,” he said. “Their only answer was, ‘Close it.’”
Des Moines Register staff writer Kevin Baskins contributed to this article. Donnelle Eller covers agriculture, the environment and energy for the Register. Reach her at deller@registermedia.com or 515-284-8457.
“If USDA allows U.S. line speeds to go up, we are not going to need as many packing plants in the Midwest. There’s no way around it.” Mark Lauritsen United Food & Commercial Workers union official