Lori Walsh: Times are tough for hog producers in South Dakota and this weekend things got worse. Smithfield foods based in Virginia announced it is halting production at this pork processing plant in Sioux Falls. The plant is close until further notice. That announcement came over the weekend after Governor Kristi Noem and Mayor Paul TenHakan called for the closure of the Sioux Falls facility for 14 days. The plant employs around 37,000 employees and that area has become a cluster of COVID-19 infections. The South Dakota Department of Health reports that 293 of the 730 positive cases in the state are Smithfield employees and that number jumped by 10 more cases today. Now, Smithfield has sounded the alarm for what the plant closure might do to the nation's protein supply chain. It also has a devastating impact on South Dakota producers. Joining us today with insight. We have Shane Odegaard of Odegaard Family Farms, and Jim Petrick from the Gabriel South Dakota Area, another producer. Shane, welcome. Thanks for being here.
Shane Odegaard: Thank you, Laurie.
Lori Walsh: Jim, thanks for being here as well.
Jim Petrick: You bet. Thanks for having us.
Lori Walsh: Shane, I want to start with you. Tell us a little bit about your operation first.
Shane Odegaard: My family operates a diversified farming operation up here by Lake Preston, South Dakota. We have 700 sows, farrow to finish. And then we also raise a few cows and then we raise corn and soybeans that are turned, used for feed for our hog operation.
Lori Walsh: And Jim, tell us a little bit about your operation please.
Jim Petrick: We also operate a diversified farming operation and we've got kind of two segments to our pork business. We've got one farm where we produce some genetics and some high end market hogs for the restaurant and export trade. And then our other farm, we bring in weanling pigs and finish them out to market weight.
Lori Walsh: Let's talk about this weekend, but before that, let's go back a little bit because with the trade war and other things happening in the world, times are already kind of tough. Jim, tell us a little bit about how things were set up, and then let's walk into what's been happening over the past few weeks.
Jim Petrick: Yeah. Lori, there's been some real challenges in the industry. I mean on our specialized farm here with our high end pigs, obviously the restaurant trade has been greatly diminished and so our producers that we work with in that segment of the business have been struggling for a period of time here already trying to figure out where's all the pork going to go? Are we going to be able to get all the market hogs harvested? And so on and so forth, but now it's really turned... I mean it's really wrapped its arms around the entire industry now with this Smithfield deal this morning. In fact, we ended up taking market hogs to Madison, Nebraska because they were scheduled to go to Smithfield on Friday night last week. And so, what's going to happen from here? Who knows? But the industry, we've always been very efficient, and we've done that by keeping our barns full and, and keeping the packing plants full and there's just not another outlet. There's just not another plant out there that's going to be able to take up the Slack if the Smithfield plant's shut down very long. So, it could be pretty devastating for producers.
Lori Walsh: Jim, for people outside the industry, one of the questions that needs to be answered is why is it urgent to get them to market right away? Why can't they wait. So, explain to us a little bit about how that works in hogs.
Jim Petrick: You bet. Like for people like Shane and myself, if we breed a swine female, she's going to be pregnant for about 114 days. And then when those piglets are born, in at about five and a half months, they're going to be ready to go to market. And so if Smithfield is going to be shut down this week, we really needed to know nine or 10 months ago so we could plan accordingly because the pipeline is full of these pigs. And pigs gain... They eat feed, they grow every day and once they reach their ideal market weight, their value diminishes if they get too heavy. So, if we have to go two weeks without marketing hogs, they may weigh 340 pounds instead of 295 pounds and consequently the processors aren't going to want to buy them very bad because they're outside of their ideal market weight.
Lori Walsh: Shane, tell us a little bit about how this is affecting folks. What needs to be added to what Jim is explaining here?
Shane Odegaard: Well, I guess like Jim said, it's the pork production in our facilities today are designed on a continuous flow basis. And so for every pig that goes to market, there's one being born. And so, with this hiccup, me not being able to market pigs, I've got a barn right now that's got roughly 900 head in it that need to go to market. That are at market weight. And I also got pigs that are born that will need that barn for a home here in two weeks or less. And so if there's any hiccup in the flow, I am running up against a problem right now that I don't know what to do with these pigs. I mean, if I can't sell them, we're going to have to make some really, really hard decisions here on the farm.
Lori Walsh: What are the options?
Jim Petrick: It's really a double edged sword because consumers are going to feel it from the standpoint of less product being available in the supermarkets. But for the producers it's even going to be more challenging because like Shane said, at some point in time, I hope we don't get to that fork in the road, but maybe at some point in time, we'll have to euthanize baby pigs or something just because there won't be a barn to put them in that's available or something.
Lori Walsh: Right. That was my question. When you really have very, very few options, and none of them are appealing at all, for the producers or for anybody. Tell me a little bit about what is... Is there a best case scenario if Smithfield closed for 14 days and then went back into operation? If they turn things around more quickly than anticipated, there's still problems there. Is there a best case scenario, Shane?
Shane Odegaard: Well, you know the Sioux Falls plant harvest roughly 19,000 pigs a day and that equates to 18 million servings of pork that go to feed the people of this country or the world. And those pigs, the ones that are being displaced now with this two weeks shutdown, if it closes for 14 days, there's a quarter million pigs that could not be harvested for food. And we've already got the pigs in the flow and the line in our barns here to meet the market, to be marketed in two weeks from now. So what do we do with those pigs that are supposed to been going now that we can't really hang onto them for two weeks. And like Jim says, that to be above the ideal market weight and we won't even have a home for them. Yeah. I mean the worst case scenario is, is we have to euthanize them and right now, after being on the phone this morning, I'm afraid that's starting to look like our only option at the moment.
Lori Walsh: Hmm. Are South Dakota farmers hit harder than... I mean, where does Smithfield pull from? Is it regional or do they come from further away? Are South Dakota farmers taking it the worst.
Shane Odegaard: Oh, well the Morrell's plant, or excuse me, Smithfield plant in Sioux Falls sources their pigs from basically, majority come from a three-state area. About 45% come from a Western Southwest Minnesota, 35% come from South Dakota. The remainder would come from Iowa, Nebraska, and North Dakota. But yeah, it's affecting more than just the South Dakota pig farmers. It is affecting everybody within probably within a four hour driving distance of the Sioux falls facility.
Lori Walsh: Jim, do you think Smithfield failed?
Jim Petrick: Yeah. Best case scenario is that maybe a small percentage of these pigs will be able to be harvested at other plants, but it's not going to... These plants are already running at high capacity and we as producers are producing at full capacity. And so, hopefully a small fraction of these pigs will be able to be harvested elsewhere. But once Smithfield in Sioux Falls gets opened back up, I would anticipate they will have to be probably pulling a Saturday shift and maybe even a Sunday shift to make up for the bulge that's in the pipeline right now. But we're kind of an uncharted water here. Nobody really knows. But we'll try to remain optimistic that we'll work our way through this volume of hogs.
But, the other thing consumers need to understand is usually the hogs that are harvested this time, a lot of them won't go into the coolers to make up for the shortfall of pork in the summertime because in the summertime, typically the hog numbers decline a little bit and consumer demand for pork goes up. And so it may make for a little bit higher prices for the consumer at the end of the day too. Just because not all these big maybe are going to make it to the pipeline.
Lori Walsh: All right. And you both mentioned having diversified operations. What kind of a financial hit is this for hog farmers in the state? How quickly could operations go under just because they are unable to take the animals to market?
Jim Petrick: Well, we've seen what's happened in the dairy industry, Lori, and unfortunately in agriculture right now, it's not like there's another segment of our operation that's very lucrative. And so there's not a lot of things to fall back on right now. So I think the next 60 days will really be a big test of producers, their will, and their working capital, and their relationships with their lenders because it's going to be a very trying time.
Lori Walsh: Yeah. Are we seeing any federal assistance that's directly targeted toward the ag. Industry? That would be part of the plan to keep operations open.
Jim Petrick: I'm not sure if the ink is dry, but I understand cattle producers are going through the same thing right now. And I was told by a customer in Kansas that there was going to be some money made available for the beef producers that are going through this deal right now. But what's in there for pork? I don't know. I've got a conference call at 1:00. We might hear a little bit more of them but I'm not sure.
Shane Odegaard: Yeah. I would agree with Jim. The ink hasn't been dried on this deal yet, as far as assistance from the national for us pig farmers. I guess the one thing I want to reiterate is, this is devastating to us pig farmers, but also there's a food supply issue that will be rippled down to the consumers. This plant being shut down. Pretty good chance that we may see some... The meat counters that will be a less than fully stocked. And maybe even worse case, sitting empty. Especially if just a plant shut down is extended any amount of time.
Lori Walsh: All right. Going forward, there are wheat farmers and corn... People have bought seed, people have made decisions and now they're trying to think down the road to the harvest and what it's going to look like. How do you make decisions four or five months from now? How do you make decisions for six, nine months from now at this point. Especially when you have such this urgent crushing problem, not only of keeping yourself safe and the people that you work with safe, but dealing with the emergency and then trying to plan for some kind of future. Shane, how do you even attempt that?
Shane Odegaard: Well, it's really, that's a tough one. I mean, I guess if somebody's got a crystal ball out there, I would surely like to have them share some of that insight with me. Right now in our operation here, I just got out of a little family meeting with my... Like I said, we're a family operation. That's myself, two brothers and my uncle, and my cousin and my mom. And we're trying to figure out what our plan is for tomorrow and the rest of this week going forward. And trying to taking one day at a time here and trying to do the right thing. And it's really tough. Like I said, trying to make a plan going forward for the next five, six months it's not... And especially with not knowing where this whole coronavirus infection rate is going to be and how long is that going to drag out, as a matter of a month and two? Or is it going to be dragged out even longer? There's too many unknowns out there that really... The guy's going to have to make a plan and they make it pretty... Make it in pencil because chances are you're going to have to erase it and try to readapt.
Lori Walsh: Yeah. Shane, how do you hold a family together and friends and other producers that you have contact with? Just from an emotional or spiritual or a fortitude kind of conversation, how are you all coping?
Shane Odegaard: Yeah. It was a pretty tense conversation I should say this morning. I shouldn't say tense maybe, but emotions definitely play. Like I said, we're a family operation and so there's six people in our family operation here that rely on this operation for their income, for their daily income to live. And so we've, we've discussed where are we going to go forward? How are we going to continue to pay the bills and keep everybody fed and healthy and stuff. And being a family operation, I mean, we're a business and we operate as a business, because we have to in order to, for efficiencies. And we're dealing with lots of dollars in our every day that go in and out of our hands. Paying bills and stuff and whatnot. And so we have to operate as a business. But yeah, like I said, the emotions fall into this pretty heavily. Because, as I said, we're a family operation and this is our livelihood. We were out with these animals seven days a week, sometimes 20, 24 hours a day. And just to take care of them, make sure they're being fed and healthy and comfortable. And so, I mean, we take this really serious as a family of farmers and that... It's tough. It's really tough. Emotions definitely come into play.
Lori Walsh: Yeah. Jim, your thoughts on that? Just holding it together in this time of just massive uncertainty and decisions that nobody wants to make.
Jim Petrick: Yeah. You were talking about longterm planning and to me it's almost therapeutic to be able to look at the crop side of our business. Because the turmoil in the livestock side is so huge and it changes so much every day. And the crop cycle is just an annual cycle and we have some problems there too for sure. I mean, we've got grain in the bin that's worth a lot less than it was 60 days ago and we're concerned about our wet 2019 corn crop. Are we going to be able to keep it in condition to make feed for the balance of the year and so on and so forth. But, things happen a lot more slowly in the crop side of the thing, so you have to make good decisions because you're only going to get to make them once a year. But they come around slower and it gives you a little more time to be a little more analytical.
Whereas, like I say, this livestock business is a pretty hot potato right now. And that's definitely given me a little more stress and anxiety than the crop side. But at the end of the day when this thing's all over, people are still going to need to eat. And we are still the safest, lowest cost food supplier in the world. And I think there will be better days ahead for us for the producers that can make it through this deal. But, unfortunately we're not all going to make it, that's for sure.
Lori Walsh: Shane Odegaard and Jim Petrick, both South Dakota hog producers feeling the crunch of the closure of the Smithfield plant right now. That is for an indefinite period of time. So sorry that all this is coming down on your shoulders Shane and Jim. And we really appreciate you taking some time to share that with us on behalf of all producers who are struggling right now. Thank you.
Jim Petrick: Thank you Lori for letting us share our story.
Shane Odegaard: Thanks for having us.