Debating corporate ownership in the hog industry

Most states in the Midwest now allow meatpacking companies to own hogs and contract with farmers to house and feed them. Nebraska is one of the last states to prohibit the practice as a way to protect family farms. (Photo by Grant Gerlock, NET News/Harvest Public Media)
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March 10, 2015 - 6:44am

Nebraska is one of the last states to still prohibit meatpackers from owning livestock. Some lawmakers would like to allow it in the pork industry to help boost the rural economy. Opponents say it puts too much power in the hands of packing companies.

In the top pork producing states, many farmers are under contract with giant meatpackers like Tyson or Smithfield Foods. The packers actually own the pigs and pay the farmers to raise them. Nebraska outlawed that kind of deal in the late 90s, but now lawmakers may reconsider.

Hog farmer Terry O’Neel wants Nebraska to allow corporations to own pigs. When he looks at the scope of the pork industry, he sees Nebraska losing ground to other states that allow it. Especially Iowa, Nebraska’s neighbor and the top pork state in the nation.

On a frigid afternoon, the winter wind cut across O’Neel’s farm near Friend in eastern Nebraska. But his pigs didn’t feel the chill. They were tucked away in heated steel barns across the yard from his home.

“We just weaned approximately 500-head of pigs today and they’re in a facility that’s about 85 degrees,” said O’Neel as we ducked into his farm office to get out of the cold. “Just like being in the Caribbean.”

Terry O’Neel stands in front of hog barns on his farm near Friend, Neb. O’Neel is concerned Nebraska could lose one of it’s pork processing plants if the state’s hog industry doesn’t keep up with neighboring states. (Photo by Grant Gerlock, NET News/Harvest Public Media)

Three bills introduced in the Nebraska legislature aimed at growing the state's livestock industry:

LB 176 - Lifts a prohibition on Nebraska pork processors from owning hogs. It leaves in place a packer ban on cattle operations.

LB 175 - Provides extra economic incentives for designated livestock friendly counties to attract livestock operations such as dairies, hog feeders, and cattle feedlots.

LB 106 - Standardizes the county siting process for farm operations by designing a statewide matrix for scoring permit proposals. Also establishes a state board that would review, and could approve, permits rejected by county boards.

O’Neel started out in the hog business in the mid-1980s, feeding 40 pigs on dirt lots. But when the industry changed O’Neel’s farm changed with it. He started building the long, steel barns you see dotting the landscape. Each can feed hundreds or thousands of animals. Now with 7,000 hogs on his farm, he still considers himself small compared to some of the hog feeders in Iowa.

Both Nebraska and Iowa have lost thousands of hog farms in the last 20 years, but Iowa has added millions of animals at the same time. That’s come with some environmental challenges, but what bothers O’Neel is a lot of Iowa’s pigs are processed in Nebraska packing plants.

“We’re missing out on that opportunity,” O’Neel said. “I’ve seen what’s happened in Iowa. I’m seeing what’s happening in South Dakota. It seems like we’re becoming an island.”

He calls Nebraska an island because the state prohibits meat companies from owning livestock. Iowa and other Midwestern states also used to ban corporate farming to protect family-owned operations. But after a slew of court challenges, Nebraska’s packer ban is one of the only laws still standing.

In states like Iowa, Minnesota, and North Carolina, much of the hog industry now involves farmers who have contracts to feed pigs owned by meatpacking companies like Cargill or Tyson. Nebraska does not allow meatpacking companies that slaughter hogs in the state to also own livestock. State Senator Ken Schilz of Ogallala, Neb. says that policy is getting in the way of rural growth.

“(Nebraska has) been in population decline for the last 50 years,” Schilz said. “So we’d better start doing some things to entice people to come back.”

Schilz introduced a bill which would lift the packer ban on livestock ownership, but only for hogs, not cattle. It’s a slightly different version from a bill he introduced last year. And it’s part of a package of proposals aimed at growing Nebraska’s livestock industry. Another bill would standardize the county zoning process, while also creating a state board that could review rejected siting permits for livestock facilities. A third bill would create economic incentives for counties to attract livestock operations.

The idea behind allowing farmers to contract with pork processors is to provide another source of income for farm families who may not have enough land to bring a son or daughter back in the business. Schilz says with packer contracts, more young farmers could get loans to build hog barns.

Critics say that would mean giving up control over the most valuable part of the farm, the livestock. Traci Bruckner of the Center for Rural Affairs says Nebraska’s ban on packer ownership prevents meat companies from dominating the pork industry the way they do the chicken industry. She says consumers might not notice, but you can see the results in farm country.

Ryan Schieffer’s family has raised hogs for at least three generations on their farm near Crofton, Neb. While most of the industry has moved toward indoor feeding barns, Schieffer prefers to let his animals wander outside. (Photo by Grant Gerlock, NET News/Harvest Public Media)

A red wattle piglet is born on Ryan Schieffer’s hog farm. He switched to direct marketing the heritage breed after it became difficult to compete in the conventional industry. (Photo by Grant Gerlock, NET News/Harvest Public Media)

“We think farmers should own livestock in the state, not packers,” Bruckner said. “If vertical integration was the answer rural America would be a paradise, and it’s not.”

Instead of more hog buildings on fewer farms, Bruckner and others want to see more farms adding smaller numbers of pigs. Bruckner says promoting packer-owned livestock would make that harder for farmers like Ryan Schieffer.

Schieffer sells a few hundred hogs each year from his farm near Crofton in northeast Nebraska. But his operation is a throwback, considering where the hog industry is today. The animals wander in and out of open sheds that have been around for decades. He feeds them by filling and carrying buckets by hand.

“I see that old barn with rusted tin on top but it still shelters those girls just fine,” Schieffer said as he carried two buckets into a hog pen.

Until recently, Schieffer was still trying to sell his animals to big packers for commodity prices. But that traditional cash market barely exists today.

“It’s gotten to the point where that’s not working anymore,” Schieffer said. “It worked in my dad’s generation, but no it doesn’t fly now.”

That’s why, last year, Schieffer and his wife Jessica started raising red wattle hogs, a heritage breed. Now, they sell meat directly to individuals and restaurants as High Land Hills Farm. He says it’s working, but it’s a different business.

“You can do a lot with a little if you want to raise them this way, but, it’s not just ‘take these to Tyson, or Smithfield.’ You have to find your own markets. That’s where it gets tricky,” Schieffer said.

And that’s really what’s happening as the pork industry becomes more concentrated. Small and mid-sized producers are forced to either get bigger, get out, or get into a niche market.

Taking away Nebraska’s packer ban would give farmers another way to grab a share of the pork industry. But the concern is whether that could actually leave hog farmers with fewer ways to compete in the long run.



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