ISU Economist Says Line Speed Court Ruling Will Slash Pork Processing Capacity by 2.5%
At the end of March, a U.S. District Court for Minnesota struck down provisions of USDA’s New Swine Inspection System permitting faster line speeds at federally inspected pork processing facilities. Dr. Dermot Hayes, an economist with Iowa State University, says that even with possible mandatory overtime to compensate for lost capacity, the industry will lose 2.5% of overall harvest capacity if the ruling stands.
He explains, “Six pork processing plants are currently operating at higher line speeds allowed under the new USDA inspection system. Five of these plants have been operating at these speeds for more than 20 years under the pilot program introduced during the Clinton administration.” Three of the impacted plants are located near top-producing Iowa.
He says this will cost producers $83.2 million via lower spot market prices, with small hog farmers likely to bear the brunt of the decision. “Packers will likely use Force Majeure provisions to declare their pricing contracts with hog farmers null and void, forcing these farmers to sell their hogs on the spot market,” Hayes says.
The decision is set to take effect July 1, 2021.