Robert Pore's Ag Blog

National Farmers Union President Tom Buis said Smithfield Foods announcement this week that it is purchasing number two producer Premium Standard Farms perpetuates the consolidation and concentration of the meat industry in the United States.

Buis said approval of merging the number one and number two pork producers all but guarantees independent producers will be left without a market.

“National Farmers Union has been steadfast in its call for the federal government to start playing an active role to ensure fair, open, transparent, accessible and competitive markets for all agricultural commodities," he said. "The current lack of enforcement of anti-trust laws has failed America’s food producers and consumers."

He said Smithfield Foods is the number one pork processor and producer in the United States. Premium Standard Farms is the second largest producer, with 225,000 sows. With the announcement today, Smithfield Foods will attain over one million sows, far exceeding any competitor.

Sen. Tom Harkin (D-IA) is calling on the U.S. Department of Justice to thoroughly review Smithfield’s plan to merge with Premium Standard Farms.

Specifically, Harkin said that DOJ should look into whether or not the merger would violate anti-trust laws and what impact the merger would have on pork producers, consumers and hog and pork markets.

Harkin is the ranking Democrat on the Senate Agriculture, Nutrition and Forestry Committee.

“The merger agreement announced today involves a very substantial change in the structure, vertical integration and degree of consolidation in the U.S. pork industry,” said Harkin. “It obviously will have significant impacts on both independent hog producers and those who raise hogs under contract.”

Completion of this merger would increase market consolidation in hog production and processing, potentially hurting the market’s competitiveness.

Harkin said this merger would give Smithfield control of 20 percent of U.S. hog production and 31 percent of pork processing.

Economists have already stated that when four firms control over 40 percent of a sector, in this case hog slaughter, market competitiveness will decline. Currently, the top four firms in the United States control roughly 50 percent of hog production and over 64 percent of hog processing.

“This merger once again points to the need for federal limits on packer ownership and captive supplies of livestock,” Harkin said. “This deal also underscores the critical need for full and effective enforcement of the Packers and Stockyards Act and for additional federal protections for independent pork producers and those producing under contracts.”

In February, Harkin introduced the “Competitive and Fair Agricultural Markets Act of 2006," which includes contract protections for independent producers. The bill would ensure a producer has at least three days to review or cancel a production contract after signing it.

The legislation would also protect producers from having contracts prematurely terminated if they have made a sizable capital investment. Harkin said the bill ensures that producers are not prevented from going to the courts to challenge unfair actions in contract arrangements.

Harkin is also an original co-sponsor of legislation that makes it unlawful for a packer to own, feed, or control livestock intended for slaughter.