HOGGING THE PROFITS - Foodopoly: The Battle Over the Future of Food and Farming in America - page 103

ically feasible to confine large numbers of animals together in factory farm facilities without an enormous
amount of land.
The Environmental Protection Agency's disjointed, toothless, and lax oversight of factory farms further
enabled hog operations to increase in size. Weak oversight of waste disposal, a major expense of hog op-
erations, reduces the costs of factory farming and encourages the development of larger and larger opera-
tions. Adequate oversight was blocked repeatedly by the livestock industry, which opposed any regulation
of these pollutants.
Further facilitating the growth of hog factories has been the failure of the Department of Justice to pre-
vent the largest meatpackers from merging into a virtual monopoly. The wave of mergers and acquisitions
has concentrated the pork-producing sector into the hands of a few powerhouses that employ heavy-handed
tactics that minimize the prices they pay for livestock.
This has meant that independent hog operators who sell their livestock on open markets have nearly
disappeared in the face of massive consolidation in the industry. Two out of three hogs are now slaughtered
by the four largest pork processors. These companies not only slaughter and process the hogs, but they ex-
ert tremendous control over farmers through production and marketing contracts. As pork processors have
come to increasingly own the hogs they slaughter, the vertical integration and control of the hog sector has
pushed prices down and encouraged operators “to get big or get out.”
This trend has been documented by the USDA. In 1993, almost all hog sales (87 percent) were nego-
tiated purchases between farmers and packers or processors (known as “spot market” sales). Because the
packers relied on family farmers, it gave these producers some negotiating power with the large corpora-
tions. But by 2006 nearly all hogs (90 percent) were controlled by the packers, either by owning their hogs
outright (20 percent) or through production-contracted hogs (70 percent). 3
These arrangements result in a market supply held captive by packers and depress the spot price, making
it completely unfeasible to have a small hog farm. During the period from 1989 to 1993, before the massive
growth of factory hog farms and contract production, the average monthly price was $75 per hundred-
weight (i.e., one hundred pounds, a standard measurement of weight for some livestock). During the 2004
to 2008 period, average monthly hog prices were $52 per hundredweight, a 31 percent decline. A USDA-
funded study found that a 1 percent increase in the use of packer ownership or contract production causes
the spot market to fall by nearly the same amount (0.88 percent). 4
In a report called “Killing Competition with Captive Supplies,” the Minnesota-based Land Stewardship
Program (LSP) found that “packer control of the market is pervasive” and that “farmers reported facing
daily what they call a mind game, which they describe as pressure from agricultural leaders to conform to
the new factory farm system of hog production.” Among the report's findings: “Packers' practice of ac-
quiring captive supplies through contracts and direct ownership is reducing the number of opportunities for
small- and medium-sized farmers to sell their hogs. With fewer buyers and more captive supply, there is
less competition for independent farmers' hogs and insufficient market information regarding price. Lower
prices result.” 5
Today pork processors, like Smithfield, by far the largest pork producer and packer in the United States
and the world, engage in abusive contract relationships with factory farm operators. These operators as-
sume economic risk by taking out large loans to build the warehouse-like facilities and equipment that
have automated feeding systems. Contracts can require farmers to build or upgrade facilities, which can
require significant investments. For a typical hog-finishing operation, six eleven-hundred-head hog houses
typically cost between $600,000 and $900,000. 6 In 2005, three out of five hog operators (61 percent) were
required to make these capital investments. 7