Pork Plant Benefits Questioned

OMAHA (DTN) -- Though a Prestage Farms plan to build a pork processing facility in north-central Iowa has been touted as good for economic development in the region, a new economic analysis shows the benefits may be limited.

Iowa State University economist Dave Swenson outlines in a newly released report what the $240 million plant will mean for the region. In general, the plant is expected to bring jobs to the region, he said, but there is a question how much of an economic benefit will be realized.

"Accordingly, one must be circumspect about regional residential growth," Swenson said. "That growth will be tempered by several factors, the first of which has just been mentioned: the probability of a job in Wright County being filled by a Wright County resident is historically just a little more than 50%.

"Secondly, one must look at the total value of all of the jobs created under this scenario. If those jobs pay better than the area average, then we might see a boost in in-migration beyond historical values. If those jobs pay less than the area average for all jobs, then one would not expect in-migration levels to exceed historical experiences."

DTN Livestock Analyst John Harrington said for all the talk about economic benefit to the area, the project may not mean much to the hog market.

"I would say that the benefit to the regional hog market would be minimal," he said.

"It's just tough at this point to anticipate how the marketing patterns will shift," Harrington said. "Prestage wants ractopamine-free hogs, and that suggests some kind of captive supply situation. How will other hogs be displaced and to what plants? I do think the hog market in general will eventually benefit from the greater wave of plant expansions now on the drawing board."

According to Swenson, his analysis shows wages at the plant would come in nearly 20% below the county average of about $57,000 a year.

"This lower level of aggregate compensation across all job impacts will work to potentially dampen in-migration, yield lower than probably expected housing needs, likely disperse the new workforce throughout the county as well as into neighboring areas, not produce net local government fiscal gains (via all taxes paid by the new workers)," Swenson writes in the analysis.

"Net fiscal gains are assumed when multiplied -- through pay per job exceeds the county average. In instances where the incomes per all jobs lag the area average, the average new household is expected to consume more local government services than it is able to support through local taxes."

The plant would generate 1,193 jobs in the Wright County region, but Swenson said many of the jobs would be filled by residents in nearby counties.

"Readers are cautioned to not assume that the county's labor force will grow by that number," he said.

"Workers will live in a variety of mostly nearby places, and Wright County residents have the luxury, too, of working in a variety of nearby places. Using data from the Census Bureau, for example, we know that just 56% of the employed people living in Wright County actually work in Wright County.

"Furthermore, of all job holders working in Wright County, just 53% are county residents -- strong fractions of the county's job holders live outside of the county."

Prestage Farms announced plans to build the plant earlier this month.

The Wright County Board of Supervisors took initial steps for the development of the project, labeled Prestage Foods of Iowa, near Eagle Grove.

The 650,000-square-foot facility would process as many as 10,000 hogs a day, employing about 900 people.

The new plant would be about an hour south of where Prestage Farms originally planned to build near Mason City, Iowa. After previous plans to build were rejected, the company said it was contacted by 19 different communities interested in the project.

About 6.5 million hogs are marketed within 250 miles of the Wright County location.

Prestage Farms, based in North Carolina, operates both pork and turkey production plants, as well as a turkey processing plant. The company has contract growers in Iowa, North and South Carolina, Mississippi, Oklahoma and Texas. The Iowa facility would be the company's first pork-processing plant.

Read Swenson's analysis here: http://bit.ly/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

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