Smithfield Foods, Inc. announced April 12 that its Sioux Falls, S.D., facility will remain closed until further notice. The plant is one of the largest pork processing facilities in the U.S., representing 4-5% of U.S. pork production. It supplies nearly 130 million servings of food per week, or about 18 million servings per day. More than 550 independent family farmers supply the plant.
As of Saturday, more than 230 employees had tested positive for COVID-19, out of a workforce of about 3,700 people. South Dakota Gov. Kristi Noem and Sioux Falls Mayor Paul TenHaken on Saturday asked the company to close down the plant for two weeks. The company had announced on April 9 it was closing the plant temporarily for a deep cleaning.
“The closure of this facility, combined with a growing list of other protein plants that have shuttered across our industry, is pushing our country perilously close to the edge in terms of our meat supply. It is impossible to keep our grocery stores stocked if our plants are not running. These facility closures will also have severe, perhaps disastrous, repercussions for many in the supply chain, first and foremost our nation’s livestock farmers. These farmers have nowhere to send their animals,” said Kenneth M. Sullivan, president and chief executive officer, for Smithfield.
“Unfortunately, COVID-19 cases are now ubiquitous across our country. The virus is afflicting communities everywhere. The agriculture and food sectors have not been immune. Numerous plants across the country have COVID-19 positive employees. We have continued to run our facilities for one reason: to sustain our nation’s food supply during this pandemic. We believe it is our obligation to help feed the country, now more than ever. We have a stark choice as a nation: we are either going to produce food or not, even in the face of COVID-19,” he concluded.
In preparation for a full shutdown, some activity will occur at the plant on Tuesday to process product in inventory, consisting of millions of servings of protein. Smithfield will resume operations in Sioux Falls once further direction is received from local, state and federal officials. The company will continue to compensate its employees for the next two weeks and hopes to keep them from joining the ranks of the tens of millions of unemployed Americans across the country.
According to the National Pork Board, the U.S. has the capacity to slaughter 506,470 pigs per day. Almost 60% of this capacity comes from just 15 plants.These plants are heavily concentrated around Iowa.
Given the size relative to the industry, the closure of any of these plants has the potential to reduce hog prices and increase wholesale and retail pork prices. A recent analysis by Kansas State University's Glynn Tonsor and Iowa State University's Lee Schultz suggests every 1% reduction in pork processing capacity is associated with a 1.82% reduction in hog prices. Hog prices have already been tumbling over the past couple weeks, potentially reflecting the market’s expectation of some capacity being brought off-line.
The Smithfield plant in Sioux Falls is the ninth largest hog slaughter facility in the U.S., with a two shift capacity of 19,500 hogs per day. Analysts notes that while this is a major issue for hog producers that normally send hogs to this plant, it should be possible with current available capacity to continue to process hogs at other facilities. At that same time, they said, the challenge is that other plants also are facing increasing concerns relating to their employee’s health, the need to do more cleaning, health checks, distancing, etc. Labor was a challenge for packers before this novel coronavirus hit, it is a much bigger issue now, they said.
According to the Food & Drug Administration, there is no evidence of food or food packaging being associated with the transmission of COVID-19. More information on Smithfield’s COVID-19 response can be found here.