No. 103 – Packer Ownership of Hogs: Economic and Political Ramifications

Published December 17, 2003

Quick Links

Should meat packers be allowed to own livestock, and hogs in particular? The issue deeply divides farm communities and both political parties in many Midwest states. More than a few politicians get elected by claiming to defend “family farms” from “big corporations.” Powerful trends toward consolidation and corporatization in agriculture create a sense of urgency.

A new report from an Illinois-based “think tank” sheds some new light on the debate. It concludes that increased packer ownership of livestock is actually beneficial to farmers and packers as well as consumers. The study found:

  • National legislation adopting a ban on packer ownership is unlikely to win support, and state bans are being successfully challenged in court.
  • Low profit margins, foreign competition, and the need for better quality control and better risk management are driving the trends toward corporatization, consolidation, and vertical integration in the pork industry.
  • These organizational trends have resulted in new products, higher total productivity, and higher sales. Packers and farmers alike benefit from these contractual relationships.
  • The environmental impact of large-scale pork production facilities may be smaller and easier to manage than that of older and smaller facilities.
  • A ban on packer ownership of livestock would be tremendously expensive to the industry and to consumers, resulting in lost market share to foreign producers and fewer specialty products for consumers to choose from.

The study’s author, John W. Skorburg, is an agricultural economist and policy advisor for The Heartland Institute, a national nonprofit research organization based in Chicago. Skorburg was a senior economist for the American Farm Bureau Federation from 1995 until earlier this year.

“While proposals to ban or restrict packer ownership of livestock are politically popular, they really hurt the pork industry and the rural communities that depend on it,” says Skorburg. “Farmers are not being exploited by packers, and packers do not seem to be exercising market power.”

“Increased regulatory burdens can put pressure on packers to look elsewhere for investment opportunities,” Skorburg says, “with Canada and Latin American being plainly attractive. A national ban on packer ownership of livestock would cost the industry billions of dollars in sales lost to foreign producers and in lost investment opportunities. U.S. employment in the industry would fall, with negative effects on communities and the tax bases of state and local governments.”