Court ruling to concentrate market power in US pork industry
The past few years have been some of the most challenging for U.S. hog farmers. They have faced trade retaliation and the major supply chain disruptions caused by the COVID pandemic. Now, just as producers are regaining their footing, a federal district court judge has issued a ruling that promises to concentrate more power with pork packing plant operators at the expense of smaller hog farmers who will be disproportionately harmed by the court’s action.
The federal court judge struck down a provision of the U.S. Department of Agriculture’s New Swine Inspection System (NSIS), which allowed for faster harvest facility line speeds. NSIS, initiated during the Clinton administration and evaluated at five pilot plants over 20 years, was approved for industry-wide adoption in 2019. Unless reversed by June 29, the federal court ruling could have potentially catastrophic consequences for pork producers, resulting in a 2.5 percent loss in pork packing plant capacity nationwide and $82.3 million in reduced income for hog farmers, according to Dr. Dermot Hayes, an economist with Iowa State University.
While the court decision will affect all hog farmers, smaller producers will disproportionately bear the brunt, especially those located near affected processing facilities. When there are more pigs than harvest capacity, the value of hogs will plunge. Compounding this market response, the court’s ruling will give processors the ability to cancel contracts with producers, forcing them to scramble to find a processing plant with capacity, likely requiring them to transport their hogs long distances. According to Dr. Hayes, long-haul hog deliveries will add $10 per hog of additional cost for farmers already faced with razor-thin margins. This one-two punch will mean many farmers will not be able to break even.
Ironically, many lawmakers in Washington have recently called for increasing meatpacking capacity by increasing the number of plants nationwide. It’s clear the court’s decision works counter to this objective. One proposed solution to increase plant capacity is to bring smaller state plants up to federal inspection standards. It’s important to note that these facilities represent less than one percent of overall pork harvest capacity in the United States.
The U.S. pork production system, the most advanced in the world, is characterized by robust competition, innovation and efficiency. If small hog farmers are forced out of business, this could reduce competition, drive industry consolidation and concentrate more power in the hands of pork processors—all with the stroke of a judge’s pen.
We need the administration to appeal the federal court decision and seek a stay, halting the ruling from being enacted at the end of this month. This will prevent the upending of our healthy, dynamic and highly competitive pork production system.
Jen Sorenson is president of the National Pork Producers Council