The Effects of Hog Mega-Barns on

Communities, the Environment, and Independent Hog Producers

submitted by the National Farmers Union Region 7 (Alberta)

to the Flagstaff County Appeal Board

for its consideration of the application of Taiwan Sugar Corporation

Hardisty, Alberta        October 6, 2000

Preface

The National Farmers Union welcomes this opportunity to bring the views of its family farm members to the Flagstaff County appeal hearing.  The National Farmers Union is a direct-membership national farm organization that works on behalf of family farmers and rural communities.  The NFU is organized in each Canadian province, with the exceptions of Newfoundland, Nova Scotia, and Quebec.

The NFU was founded over 30 years ago by farm families and has worked since that time to help ensure that agriculture is socially, economically, and environmentally sustainable.  The confluence of the current farm income crisis, environmental problems such as global warming, the transfer of many sectors of our economy to foreign multinationals, and the decimation of rural communities indicates that the current model is not sustainable.

Executive Summary

● Large corporate hog producers and attendant vertical integration threaten family farm hog production by pushing down prices, closing markets for family farmers, and obscuring price signals.  In effect, the domination of the hog production and packing sectors by a handful of large, vertically integrated corporations destroys the open market in hogs.

● Vertical integration and the transfer of hog production from family farms to large corporate packers/processors is a policy decision, not an inevitable result of economic forces.  Governments, at all levels, can make choices that will either turn agriculture over to distant corporations or retain it in the hands of local families.

● Although the corporate proponents of large hog barns promise jobs, economic development, and markets for feed grains, these corporate barns provide significantly fewer of these benefits than the family farm hog producers these corporations displace.  Corporations employ fewer people per hog and spend less in their communities than family-farm hog producers.

● While large hog barns do not deliver promised economic benefits, they do pose real environmental threats to surface and groundwater.

● Large hog barns also give off objectionable odours, increase fly populations, destroy the quality of life for surrounding residents, and lower property values.

● While it is natural for communities to want to attract jobs, wealth, and capital for investment, transferring hog production from local families to corporations such as Taiwan Sugar, Smithfield, and Maple Leaf facilitates and accelerates the extraction of wealth and capital from rural areas.

The National Farmers Union strongly recommends that Flagstaff County deny Taiwan Sugar Corporation permission to build its proposed hog barns.

The Effects of Hog Mega-Barns on Communities,

the Environment, and Independent Hog Producers

submitted by the National Farmers Union Region 7 (Alberta)

to the Flagstaff County Appeal Board

for its consideration of the application of Taiwan Sugar Corporation.

Hardisty, Alberta                                                            October 6, 2000

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Who will own the economy?

The corporate takeover of agriculture is proceeding, not acre by acre, but sector by sector.  The corporate takeover of hog production that began in the U.S. in the 1980s, came to western Canada in the mid-1990s.  Six years after it started, the corporate takeover of western Canadian hog production is well advanced.  This takeover is remarkable for its swiftness and its almost certain irrevocability.

The corporate takeover of agriculture is one of the last battles in a long war over who will own the economy—local families or distant investors.  Fifty years ago, local families owned the shoe stores and clothing stores.  Local families owned the restaurants and were not compelled to remit franchise fees to Los Angeles head offices in return for advertising campaigns and computer-designed decors.  Even many grocery stores were locally owned.  Over the past fifty years, nearly every sector of the Canadian economy has passed out of the hands of the local families and into the control of a decreasing number of increasingly-large corporations.  The farm sector is the single exception.  But as the last holdout, it is besieged.

The corporate takeover of agriculture is not, however, inevitable.  It is not an inescapable outcome of economic forces.  It will only happen if citizens and, especially, elected officials act to pave the way for the takeover, rather than resisting it. 

The corporate takeover of hogs

Traditionally, farm families raised hogs in thousands of small and medium-sized barns on farms spread across rural Canada.  Their barns held a few dozen to a few hundred sows.  Often, these were diversified farms and these families used the hogs to “add value” to low quality feed grain; to diversify their operations and, thus, reduce risk; to provide winter work and work for younger family members; and to provide manure to fertilize field crops.  Because hog numbers were small, production was dispersed, and the manure was kept dry, these farms created few problems such as manure leakage or odour.

In the mid-1990s, non-farmer investors and corporations began building huge hog barns in Western Canada.  These corporations and individuals sought to replicate the corporate mega-barn model developed in North Carolina, Missouri, and other states over the previous decade.

Vertical integration

Corporations that own hog barns and packing plants—and often feed mills and other related businesses—are called “vertically integrated.”  Saskatchewan Wheat Pool (SWP) is the clearest western Canadian example of vertical integration.  It buys feed grains through Canada’s largest elevator network; it owns CanGro processing, one of Western Canada’s largest producers of animal feed; it owns barns through its Heartland Livestock subsidiary; it owns livestock-sales facilities; and it has a 45% ownership share of packer Premium Brands Inc. (formerly Fletcher’s Fine Foods) whose main packing facility is in Red Deer, Alberta.

Explaining its “Barley to Bacon” strategy, SWP states: “the [hog production] industry has witnessed…the consolidation of the industry into a smaller number of more vertically-integrated players. …. Our aim is to secure a consistent supply of quality pigs for the higher margin aspects of our operation while utilizing the Pool’s expertise in grain procurement, livestock management, and food processing.” [1]   What SWP means is that producing feed for hogs and killing and packing hogs are both very profitable (these are the “higher margin aspects” of the pork production chain).  SWP, like other vertically-integrated companies, raises hogs to secure supplies for its packing plant and to secure markets for its feed products. 

Almost every  mega-barn producer is vertically integrating.  Quadra Group’s pigs are contracted to Premium Brands.  Premium Brands also purchased a 40% ownership stake in Peace Pork, a Northern Alberta producer which produces 110,000 hogs annually.  And Premium Brands has formed an alliance with Rocky Mountain Pork of Alberta.  Big Sky Pork has signed a deal with Mitchell’s Gourmet Foods (Owned by giant packer/producer Smithfield Foods).  Maple Leaf Foods, part of the McCain family empire and one Canada’s largest pork packers, bought Manitoba-based Landmark Group in 1999.  Landmark Group included Landmark Feeds, the largest livestock feed company in western Canada, and Elite Swine which manages the production of 1 million hogs per year.  United Grain Growers (42% owned by U.S. food processing giant Archer Daniel’s Midland) purchased 32% of Puratone which produces about 400,000 hogs per year.  It is extremely likely that, with the expansion of its Winnipeg packing plant, the world’s largest hog producer, Smithfield Foods, will soon begin opening barns in western Canada.

Vertical integration changes the economic landscape of hog production.  Independent farmers need to make a profit on the hogs they sell.  Vertically-integrated corporations are less dependant on making a profit on their hogs.  If the price of hogs dropped very low, a corporation which owned both barns and packing plants would see large losses at the barns, but equally large increases in profits at its packing plants.  If the output of the company’s barns matched the capacity of its packing plants, for every dollar it lost on pig production, it would make an extra dollar at its plants.  Low hog prices are far less damaging to an integrated company than they are to a family farm hog producer.

Vertical integration has other negative effects.  When packers own their own hogs, they take those hogs first.  The result is that independent family farmers often cannot gain access to the market.  In addition to owning hogs in their own barns, packers also often sign supply contracts with mega-barn producers, further restricting market access for smaller producers.  Mega-barns are driving family farms out of the business, not because family farms cannot produce hogs as cheaply, but because, in an industry dominated by large sellers and buyers, small producers have trouble gaining market access.  Those who wish a demonstration of this reality should attempt to supply their local supermarket with vegetables.

In addition to creating problems with market access, packer ownership and contracting hinders price discovery.  When a significant portion of the hogs move from packer-owned barns into their packing plants, many more move under long-term supply contracts, and only a minority sell at public auction, it is difficult to discover the “fair market price” for a hog.

U.S. cattle producers report that large beef packers use cattle herds they own to depress prices.  These producers claim that when cattle prices rise above levels that packers feel are desirable, the packers withdraw from the market and draw from the cattle herds they own—their “captive supply.”  Since fat cattle need to be sold within a short time frame to capture a profit, this packer withdrawal quickly depresses prices.  Once prices fall, it is alleged, packers resume buying from farmers and the packers restock their captive supplies.  It is not unreasonable to suspect that some corporate pork-packing-plant owners choose to own (seemingly-low-profit) hog mega-barns for much the same reasons: to ensure supply and to exert downward pressure during times of price increases.

The University of Nebraska issued a report which projects that a 10% level of vertical integration results in a 13.3% decline in hog purchases from independent producers and a 6% price decrease to independents.  A 50% level of vertical integration results in a 26% price decrease. [2]   Confirming these projections, Hogs Today Magazine indicated that North Carolina had reached the 50% level of integration and that prices to independent producers were 24% below those on direct purchases from large producers.

The solution to the three problems outlined above—lack of access, lack of price transparency, and packers pushing down prices—is single-desk selling.  This is a system where a single marketing board markets all hogs in a province on behalf of all producers and pays them equally for comparable hogs.  Single-desk selling ensures that all sellers have equitable access to the market.  It gives small- and medium-sized family farm producers market power when dealing with huge, vertically-integrated packers.  And it ensures that all hogs are sold at open auctions, through public and transparent contracts, or through fair negotiations between relative equals—the single-desk seller and the large packer.

Manitoba, Saskatchewan, and Alberta had single-desk selling agencies until recently.  All were terminated as a result of pressure from large hog producers and packers.  Thus, the entry of large, vertically-integrated hog producers/packers not only restricts farmers access to markets, obscures price signals, and has the potential to push down prices, these same corporations invariably push for, and win, an end to the single-desk selling agencies that formerly protected farmers from such market distortions and abuses.

Considering the evidence from other jurisdictions, it is almost certain that the takeover of the hog sector by huge, vertically-integrated corporate producers will lead to the loss of most of Canada’s independent, family-farm hog producers.

Community development and jobs?

Corporations who wish to build large hog barns promise jobs and investment to potential host communities.  Before examining the realities of those promises, we should ask why rural communities lack investment capital and jobs.

The globalized, free-trade economy increasingly works to extract wealth from the areas where it is produced—often rural areas—and to propel that wealth to major urban financial centres.  Rural western Canada is a vast wealth-creation machine.  If you throw a stone in a rural area, you hit an oil or gas field; a grain field; a uranium, diamond, coal, or gold mine; a herd of cattle; or a stand of timber.  This great wealth, however, is not captured in rural areas. 

Rural areas are struggling: farmers are risking bankruptcy, stores are closing, schools are increasingly empty, young people are moving to cities, the roads are disintegrating, and the overall economy is languishing.  In contrast, urban centres such as Vancouver, Calgary, or Toronto are booming.  Why is it that rural areas, rich in wealth, are suffering while urban centres that produce little real wealth are booming?  The answer is that the global economy works to extract wealth, wherever it is found in the world—in Alberta wheat fields, Venezuelan oil fields, or South African diamond fields—and to channel that wealth to a decreasing number of transnational corporations and their shareholders, to the benefit of the urban financial centres where they cluster.

Faced with this huge outflow of wealth from rural areas, and often unable to understand the global economic forces which drive this outflow, rural citizens and communities begin to see themselves as poor.  They come to see growing food or producing wood or mining minerals as unimportant—“yesterday’s industries”—and to see internet merchandising and mutual fund management as the valuable activities in the new economy.  Misinterpreting their situation, and unable to understand why they have no local money for investment, they go looking for outside investment as a salvation. 

The mantra in rural Canada is that towns and villages need to attract outside investment in order to create jobs and save the community.  To this end, well-meaning mayors, rural councilors, county officials, and citizens work to attract barley malting plants, pasta plants, and hog mega-barns.  This strategy is supported by nearly every level of Canadian government.

Not only is the search for outside investment unnecessary and misguided, it often fails to produce the promised results.  Mega-barns proponents promise three benefits: jobs, community investment, and local markets for feed grains.  These claims are deceiving because they compare the jobs, investment, and feed grains markets created by mega-barns to a false alternative: no hog production at all.  It is true that producing 150,000 hogs per year in a mega-barn complex will create more jobs, investment, and feed grains markets than producing no hogs at all, but it will produce substantially fewer of these benefits than the real and existing alternative: producing the same number of hogs on family farms.  Family farms employ more people per pig, retain profit in the community, and buy more supplies locally. 

Family farm hog production slows the extraction of wealth from rural areas outlined above.  Unlike corporate producers, when families produce hogs on farms they own, they receive the profits and they spend them in their local communities.  When corporations produce hogs, the profits are quickly extracted from the area.

Family farm production supports the local economy in other ways.  Raising hogs requires feed, building materials, veterinary drugs, machinery, and other supplies.  Small producers buy most of their supplies locally while large producers tend to stock many barns in many communities with supplies purchased in one location—usually a large and distant city.

A Minnesota study found that smaller producers (<$400,000[U.S.$] in annual sales) made 79% of their business expenditures within 20 miles of their farms versus just 47.5% for large producers (>$400,000). [3]   A 1997 study found that 49.1% and 46.6%, respectively, of small and medium-sized producers bought their building supplies within 10 miles of their farms versus 27.6% of large producers.  And two to three times as many small and medium-sized producers buy their hog equipment within 10 miles of their farms as do large producers. [4]  

Mega-barn proponents claim that their barns create markets for feed grains.  This claim is suspect for two reasons.  First, it fails to take into account that the family farm hog producers that the mega-barn will displace are already using feed grains.  Second, it is highly unlikely that mega-barn operator will pay a cent over “market price.”  Market price is determined by world price—it is simply world price less freight costs to port.  It is unlikely that mega-barns will significantly increase the quantity consumed or the price paid.

Nor will hog mega-barns create a significant number of jobs in the communities which are their hosts.  A 7200-sow complex will create about 50 jobs.  However, such a mega-barn will drive approximately 150 traditional small farmers out of the hog business.  Many of these 150 farmers will have to take off-farm jobs to make ends meet. 

A University of Missouri study by John Ikerd showed that smaller, independent producers employ three times as many people as mega-barns producing an equal number of hogs. “If new contract hog units were to replace independent operations producing the same number of hogs, approximately two hog farmers would be left without jobs for each new job created.” [5]

Mega-barn proponents admit that their profits come largely from lower labour costs per pig.  They accomplish this by substituting technology and capital for labour.  This is not the same, however, as saying that large producers are more efficient or have a lower cost of production.  It simply means that they choose to invest in computers and machinery rather than people.

Mega-barn operators also centralize management.  They use mass-production technologies—large production units, standardized genetics, automated feeding, and central marketing and accounting—to  transfer management functions to managers at corporate headquarters.  If managers do not live or work in the community, their salaries will not be spent there.

The main benefit claimed by mega-barn proponents—job creation—is false.  Quality employment opportunities for farmers and others rural citizens continue to disappear.  Replacing family farms with corporate mega-barns will accelerate, not reverse, that trend.

Further, the jobs that the mega-barns create will be relatively low quality.  High levels of animal dander and fecal dust combined with high levels of ammonia can cause unsafe working conditions.  The American Lung Association has found that nearly 70% of swine confinement workers experience one or more symptoms of respiratory illness.  58% suffer chronic bronchitis. [6]   On a family farm, hog production is usually one part of a mixed operation.  The farmer works in the barn for part of the day, but he or she also works in the field growing crops and in the home office managing the business.  In contrast, workers in mega-barns work almost exclusively, and for long hours, inside the hog barn.  This prolonged exposure greatly increases the potential of health damage.

Compared to the family farms that corporate mega-barns drive out of hog production, these mega-barns lead to a net decrease in jobs and rural wealth.  While these mega-barns offer few economic benefits, they bring the potential for serious environmental costs.

Environmental issues

Hogs produce large quantities of manure that must be moved out of the barns.  Most mega-barns liquefy manure to move it.  Feces and urine are washed through the floor slots with water and pumped into earthen manure pits.  A  common size of these pits is seven million gallons but they can range much higher. 

A 150,000 hog per year barn complex creates as much effluent as a 135,000-person city.  Although hogs and people share much the same physiology and many of the same diseases, hog manure is not treated.  Manure, highly concentrated and in huge quantities, becomes a potential toxin.  As it is handled in most mega-barn complexes—liquified and put in earthen pits with neither liners nor covers—the manure gives off terrible odours, lowers the quality of life for miles around, lowers property values, and threatens to poison surface and ground water.  Liquefying manure greatly increases its tendency to move—both horizontally and vertically.

Those who claim that mega-barns do not leak and dump manure should look at the evidence.  A recent study [7] listed dozens of spills that occurred in 1999 at large, corporate livestock production facilities in ten U.S. states.  The worst of these included:

; In April 1999, a Murphy Family Farms (now Smithfield) facility in North Carolina spilled more than 1.5 million gallons of manure into a swamp adjoining a tributary of the Northeast Cape Fear River.  Investigators believe tree roots punctured the lagoon wall.

;  In October 1999, employees at a Seaboard Farms’ facility in Oklahoma over-applied manure to farmland until it ran off.  102,000 gallons of manure were recovered.

; In December, a Carroll’s Foods (now Smithfield) hog lagoon in North Carolina spilled 200,000 gallons of manure into the Turkey Creek and a nearby wetland.  The spill occurred when employees left a pump running overnight.

;  During 1999, facilities operated by Premium Standard Farms in Missouri had a series of twenty-five spills and discharges.  The spills totalled over 224,000 gallons.

;  In February 1999, employees at a Tyson-owned hog factory farm in Arkansas dumped between 30,000 and 120,000 gallons of manure into a ravine.

; Overall, in 1999, large-scale livestock producers spilled or dumped manure over 100 times in the ten states surveyed for a total of more than 4½ million gallons.  The report concluded: “Lagoons and other ‘technologies’ used at factory farms are not working and threaten public health, wildlife, and the quality of our rivers, lakes, and coastal waters.”

Smithfield Foods, who may soon be Canada’s largest producer/packer, is also a chronic polluter.  In August, 1997, a U.S. federal court fined Smithfield $18.5 million, the largest fine ever imposed in a Clean Water Act enforcement case.  Smithfield’s Virginia slaughterhouse had been dumping pollutants into the Pagan River for five years.

In addition to threatening surface and groundwater, huge concentrations of livestock and manure create other serious problems such as foul odours and increased numbers of flies.  Mega-barns also give off airborne particulates consisting of bacteria, insect particles, and other microscopic organic components which not only impair lung function, but may play an important role in triggering asthmas and other auto-immune disorders.  Together, these negative effects can devastate the quality of life of surrounding residents. 

Traditionally, farmers and rural residents have taken for granted that they would enjoy clean, fresh air and pleasant surroundings.  Small-scale, dispersed hog production did little to degrade the quality of life of rural residents.  The construction of hog mega-barns, however, brings industrial plants to rural areas.  Not only are these facilities industrial in scale and execution, they give off odours and create other nuisances (flies) and health risks to an extent that would never be tolerated in an urban-industrial setting. 

The smell, flies, danger of water contamination, and risk of health damage also lowers the property values of rural residents. [8]   Farm families and rural residents who have lived in their yards for generations and who have lavished care on those yards, homes, and buildings can suddenly find that hog odour and other problems makes it impossible for them to live in their homes and equally impossible to sell those homes and property to others.  The stress created by not being able to stay in your own home, and not being able to leave, can be excruciating for a family.

Rural residents have a right to a pleasant atmosphere and a high quality of life.  They have a right to enjoy their homes and properties.  And they have the right to maintain and improve the values of their properties.  Concentrations of tens-of-thousands of hogs deprive rural residents of these rights.  Such concentrations also threaten the water supplies and, thus, health and safety of rural residents.   There is no reason that rural residents should be asked, or forced, to accept these dangerous, negative, and costly impacts so that distant investors in distant corporations can reap large profits.  Canadians reject the notion that some people should be allowed to enrich their quality of life by destroying the quality of life of others.

Conclusion

A study published by the Center for Rural Affairs concluded:

      [A]n agricultural structure that was increasingly corporate and non-family owned tended to lead to population decline, lower incomes, fewer community services, less participation in democratic processes, less retail trade, environmental pollution, more unemployment, and an emerging rigid class structure. [9]

Federal and provincial and county governments have a choice: support family farms and rural communities through measures which protect farmers’ market access, the environment, and workers’ rights; or repeal such measures and clear the way for the transfer of control of (and economic benefits from) hog production to a handful of already wealthy and powerful corporations.  We must be clear however, this is the opposite of rural economic development.

The global economy—as structured by the World Trade Organization (WTO), International Monetary Fund (IMF), and the North American Free Trade Agreement (NAFTA)—works to extract wealth from the actual wealth producers and to transfer it to a shrinking number of wealthy investors who own the dominant corporations in each sector.  Drained of wealth and capital, rural communities go looking for outside investment such as corporate mega-barns.  The irony is that transferring hog production from local families to corporations such as Taiwan Sugar, Smithfield, and Maple Leaf facilitates and accelerates the extraction of wealth and capital.  The proposed solution will only exacerbate the problem.

If governments and citizens do not face the realities of the extractive nature of the corporate, global economy, they will be able to do little more than fashion palliative [10] strategies such as luring outside investment which will provide transition jobs that help manage the economic destruction of rural areas and the long-term decline of rural western Canada.

The National Farmers Union strongly recommends that Flagstaff County deny Taiwan Sugar Corporation permission to build its proposed hog barn.

Respectfully Submitted

by the

National Farmers Union