United States-Meat plant closures.
UNITED STATES-MEAT PLANT CLOSURES.
John Morrell & Co. parent company Smithfield Foods is closing plants around the country, and Sioux City officials have been working to ensure the city is part of the pork producer’s future.
Now the national economy, Smithfield ’s interest in consolidation, and hundreds of acres of newly annexed industrial land are fueling speculation that this northwest Iowa city is positioning itself as the best site for a new Morrell plant combining Sioux Falls and Sioux City operations.
"I think we both have to be aware of the possibility that they might do something in the future," Sioux City Mayor Mike Hobart said of Morrell. "I think both cities have to be as aggressive as they can."
Smithfield , the nation’s largest pork producer, owns two aging plants in Sioux City and another in Sioux Falls , where John Morrell & Co. has been one of the city’s largest employers for decades. But Smithfield abandoned a $100 million Sioux Falls expansion in 2005 and shuttered six plants around the country earlier this year. In documents filed last month with the Securities and Exchange Commission, the nation’s largest pork producer said its "focus has shifted from acquisitions to integration."
Meanwhile, Sioux City officials have annexed hundreds of acres of land around Sioux Gateway Airport this year as they aggressively woo heavy manufacturing industries, including unnamed food processing companies.
Sioux City Councilman Aaron Rochester said the city would be willing to "bend over backwards" for Morrell and is willing to offer incentives to promote consolidation. A new consolidated plant in Sioux City , Rochester said, would be "wonderful." For Sioux Falls , where the company employs about 3,000, it could be disastrous.
Smithfield official: No move planned
Smithfield always has been guarded about its plans and abandoned a planned $100 million Sioux Falls expansion in 2005. At the time, the company said the renovations were necessary to keep the Sioux Falls plant profitable.
Keira Ullrich, investor relations manager with Smithfield Foods, said the company has no plans to relocate the facility to the recently annexed land south of the airport.
But Sioux City officials are optimistic their efforts will end up landing major manufacturing companies. Earlier this year, the city annexed 400 acres of land south of the Sioux Gateway Airport , an area called Southbridge . Plans call for annexing another 4,600 acres. The city also has 259 acres ready for tenants at a nearby business park west of the airport.
"We’re not Aspen or Vail, Colorado ," said Brent Nelson, a senior planner with Sioux City . "We’re an industrial town, so that’s what we need to be prepared for."
Jeffrey Hanson, the community development operations manager in Sioux City , estimates the city has invested about $10 million into the Southbridge area to get it ready for development. Some of that has been for the design of a new water treatment plant. That plant will help service the city’s existing water system, but it also will expand capacity to meet the needs of manufacturing industries that are heavily dependent on water - industries such as food processing.
The area also is attractive, officials say, because it’s close to Interstate 29, the airport and rail spurs. The city is trying to get more rail capacity. There’s even a nearby loading area for barge traffic on the Missouri River .
"It’s definitely a multimodal site," Hanson said.
Officials in Sioux City are tight-lipped about the companies they’re pursuing.
"They’re not willing to share much of anything with anybody," said Dale Petersen, mayor of neighboring Sergeant Bluff.
But there is no doubt officials in Sioux City have had conversations with Smithfield about building a new plant there. Ritch LeGrand, president and chief executive of the real estate firm NAI LeGrand & Co. in Sioux City , said the city had some momentum with the company but, like the expansion in Sioux Falls , that interest waned.
"We’ve been pushing them to do that for years," LeGrand said.
"We certainly aren’t giving up on it," he added. "They would be an ideal prospect."
Cost of two old plants vs. one new plant
Today, the two Smithfield plants in Sioux City employ about 2,000 people.
"I can’t speak for Morrell," said Marty Dougherty, the city’s economic development director. "I can tell you that we call on them. We do retention visits with them."
Whether a new plant in Sioux City would incorporate operations in Sioux Falls is an open question. Industry analyst Peter Carstensen said the company would have to weigh the costs of shutting down two older plants with the benefits of a more efficient plant. It also would depend on how much money the company could get for its existing real estate.
"They are costly to operate," he said of the older plants. "If you can get the money to consolidate the plants and build a new, modern efficient facility, it’s a close question."
The city is also trying to lure a major manufacturer of wind energy components. On Friday the city launched a work force survey of the area. The manufacturer needs about 400 employees, with pay of $16 to $25 per hour.
For pork, ’18 months of no profits’
Greg Lear of Spencer and a member of the Iowa Pork Producers Association, said he’s heard rumors on and off for the past 10 years that the John Morrell plant in Sioux City either was closing or moving to a new location.
"If it’s profitable, Smithfield will stay," Lear said, adding that he hasn’t heard information that would substantiate any of the rumors.
He did say, though, that it’s been a tough year for the pork industry. "We’re into a decline in the number of pigs that are being raised in all of the United States ," he said. "It’s been 18 months of no profits."
He added that country-of-origin labeling has decreased the number of companies willing to take Canadian pigs.
"How that’s going to effect Smithfield , I don’t know economically," he said.
Smithfield has been hurt by the recent economic slump. It sold its beef division last year, and government filings show it has used those proceeds to pay down debt. On Thursday, an analyst warned the company might have trouble meeting its debt covenants.
But if money can be found for a new plant, Carstensen said it’s a good time to build.
"This is not a bad time if you’ve got the money, because people in the construction industry are hungry," he said.
South Dakota was prepared to offer Smithfield $4 million in incentives when officials announced the $100 million expansion in Sioux Falls . Those incentives since have expired.
The Governor’s Office of Economic Development keeps in contact with company officials, Director Kim Olson said, but Smithfield has not applied for any new incentives.
Still, local officials remain optimistic Morrell will be in town for the long-term. Although the company backed out of its $100 million expansion here, officials point out the company still has made significant improvements.
"They continue to make an investment in their Sioux Falls property," said Dan Hindbjorgen, vice president of the Sioux Falls Development Foundation. "Thank goodness for John Morrell, because they are great corporate c
