Cost of Food Monopolies

7/31/2019 Cost of Food Monopolies

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Food MonopoliesThe Economic Cost of


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Food & Water Watch works to ensure the ood, waterand fsh we consume is sae, accessible and sustainable

So we can all enjoy and trust in what we eat and drink,

we help people take charge o where their ood comes

rom, keep clean, aordable, public tap water owing

reely to our homes, protect the environmental quality

o oceans, orce government to do its job protecting

citizens, and educate about the importance o keeping

shared resources under public control.

Food & Water Watch Caliornia Ofce

1616 P St. NW, Ste. 300 25 Stillman St., Ste. 200

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www.oodandwaterwatch.org

Copyright November 2012 by Food & Water Watch.

All rights reserved.

This report can be viewed or downloaded

at www.oodandwaterwatch.org.

About Food & Water Watch


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Execuive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Inroducion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Consolidaion in Iowas Hog Secor Erodes Rural Economies . . . . . . . . . . . . . . . . . . . . . . . 8

Consolidaion and Collusion in he New York Dairy Indusry . . . . . . . . . . . . . . . . . . . . . 22

Corporae Capure o Marylands Easern Shore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Monopoly Conrol o Organic Soymilk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

Consolidaion and Globalizaion inCaliornias Processed Frui & Vegeable Indusry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Mehodology and Daa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

Appendix I. Agriculural Policy Analysis Cener

a Universiy o Tennessee Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42

Appendix II. Esimaing Ne Gain From Shifing o Increased

Frui & Vegeable Producion on Marylands Easern Shore . . . . . . . . . . . . 44

Endnoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46


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2 Food & Water Watch tXXXGPPEBOEXBUFSXBUDIPSH

Executive Summary

The agriculure and ood secor is unusually concenraed,

wih jus a ew companies dominaing he marke in

each link o he ood chain. In mos secors o he U.S.

economy, he our larges irms conrol beween 40 and

45 percen o he marke, and many economiss mainain

ha higher levels o concenraion can sar o erode

compeiiveness.1 Ye according o daa compiled by he

Universiy o Missouri-Columbia in 2012, in he agriculure

and ood secor, he our larges companies conrolled 82percen o he bee packing indusry, 85 percen o soybean

processing, 63 percen o pork packing, and 53 percen o

broiler chicken processing.2

Consolidaion is no isolaed o arms and processing. In

1998, he our bigges ood reailers sold abou one-ifh

(22 percen) o groceries.3 By 2010, reail concenraion had

more han doubled and over hal o grocery sales wen o

he our larges companies.4 Walmar became he naions

larges ood reailer wihin a dozen years o opening is irs

supercener in he lae 1990s.5

The concenraion o economic power in every segmen

o ood and agriculure can harm boh armers and

consumers. Farmers can pay more or supplies when only

a ew irms sell seeds, erilizer and racors. They also

sell ino a highly consolidaed marke, and he ew irms

bidding or crops and livesock can drive down he prices

ha armers receive. Consumers have ewer choices a he

supermarke, and ood processors and reailers are quick

o raise prices when arm prices rise (as is anicipaed as a

resul o he 2012 drough) bu are slow o pass savings on

o consumers when arm prices all.

Rural communiies ofen bear he brun o agribusiness

consolidaion. For nearly 80 years, academic sudies have

documened he negaive impac o agriculures consolida-

ion and indusrializaion, which aligns arms more closely

wih ood manuacurers han heir local communiies.

The rising economic concenraion has conribued o he

decline in he number o arms and he increased size in he

arms ha remain. Communiies wih more medium- andsmaller-sized arms have more shared prosperiy, including

higher incomes, lower unemploymen and lower income

inequaliy, han communiies wih larger arms ied o

ofen-disan agribusinesses.

Agribusiness concenraion works in many ways, all wih

same objecive: o move income rom armers and rural

economies o Wall Sree. In his repor, we examine ive

case sudies o agribusiness concenraion.

Pork Producion in Iowa:Food & Waer Wach ound

ha over he pas hree decades, he Iowa counies hasold he mos hogs and had he larges arms had declining

couny-wide incomes, slower growh in median house-

hold income and declining numbers o local businesses

compared o he saewide average. Iowa armers sold

wice as many hogs in 2007 (47.3 million) as in 1982 (23.8

million), bu he oal real value o Iowas hog sales was 12

percen lower in 2007. As pork packing consolidaed and

hog arms in Iowa became larger and more inegraed wih


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The Economic Cost o Food Monopolies 3

he pork processing companies, he value o hogs o he

local economy declined. These rends were conirmed by

an economeric analysis by he Universiy o Tennessees

Agriculural Policy Analysis Cener.

Dairy Farming in New York:Milk processors and

handlers in New York have come under such concenraed

and coordinaed ownership ha he prices armers receive

or heir milk have been pushed lower han wha heywould have received in a compeiive economic sysem wih

more independen buyers. Food & Waer Wach compared

wo New York dairy counies ha experienced dieren

rends in he size and srucure o heir dairy secor. S.

Lawrence Couny has ranked among he counies wih he

mos dairy arms in New York or 30 years bu has shifed

o ewer, larger arms.Yaes Couny sared wih very ew

dairy arms bu was he only dairy couny in New York o

have an increase in he number o arms. Yaes Couny had

sronger economic perormance han S. Lawrence Couny,

despie S. Lawrences saus as a dairy leader.Poulry Producion on Marylands Easern Shore:

The rise o he indusrialized poulry indusry evenually

ransormed he enire Easern Shore region rom a diverse

agriculural mix o one dominaed by verically inegraed

chicken producion. Food & Waer Wach esimaes ha

i he arms on Marylands Easern Shore culivaed he

same proporion o ruis and vegeables in 2007 as 1940,

oal arm sales would have been $137 million higher 65

percen more han wha conrac poulry growers received

or raising chickens in 2007.6

The Organic Soybean Marke: In 2009, he company

ha owns Silk-brand soymilk, Dean Foods, shifed he

ormerly organic produc o a naural label ha required

no organic soybeans. The impac o his change rom

organic o convenional soybeans is magniied because o

Deans marke dominance in soymilk producion, and had

subsanial ramiicaions or armers. The change rom

organic o naural reduced he marke or organic soybean

armers by 1.2 million bushels o ood-grade soybeans in

he irs year.

Frui and Vegeable Producion in Californias Cenral

Valley: The global reach o ransnaional agribusiness

gians can serve o drain wealh rom rural economies,

as seen in he case o rui and vegeable producion in

Caliornias Cenral Valley. Food & Waer Wach ound ha

beween 1992 and 2007, as impors rose, one ou o eigh

(12.7 percen) o he large reezing and canning plans in

Caliornia closed.7 Fewer plans mean ewer workers bu

also ewer oules or Caliornia armers o sell heir crops.

Conclusions

For decades, he U.S. Deparmen o Jusice and he U.S.

Deparmen o Agriculure (USDA) have aken a hands-

o approach o consolidaion in he ood sysem. The

economic harm caused by he concenraion o he ood

sysem is real, bu ofen negleced. Federal regulaors

mus srenghen he oversigh o his highly consolidaed

secor ha aecs every member o sociey every day. Fair

markes will require new rules and beter oversigh ha:

Collecs and disseminaes informaion abou

concenraion hroughou he food chain: The

ederal governmen should deermine he levels o

concenraion in he various secors o he ood sysem

rom arm inpus, ood processing, markeing and

reailing.

Coordinaes compeiion and anirus policy

for he enire food and farm secor: The USDA

should have a special counsels oice on agriculural

consolidaion in he ood and arm secor o eecivelycoordinae beween he agencies wih jurisdicion over

compeiion policy.

Remedies and prevens disorions in he hog and

catle markes: Currenly, several common pracices

allow meapackers o avoid buying hogs and catle

on public markes, which reduce compeiion and

lower he price ha armers receive. These pracices,

including meapackers ha buy catle and hogs wih

opaque conracs ha do no give armers irm prices

when he conracs are negoiaed (known as capive

supplies) or meapackers ha own heir own livesock

o avoid aucion markes when prices are higher, should

be prohibied.

Prevens unfair and decepive pracices in agri-

culural conracing: Many armers raise livesock

or crops under conrac wih large agribusinesses,

bu because he ew irms have remendous leverage,

armers are ofen orced ino ake-i-or-leave-i

conracs ha can be unair or abusive. Fair conrac

pracices should be spelled ou in regulaion and law.

Fuure arm policy should ocus on access o air and open

markes ha benei armers, workers, consumers and he

markeplace. A every poin in he ood chain, here are

a handul o companies squeezing prois ou o armers,

wages ou o workers and choices ou o eaers. A more

vibran markeplace wih more choices or armers and

consumers is essenial, bu i canno happen wihou

breaking up he agribusiness carels.


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Introduction

Consolidaion in he ood and arm secor can sap he

economic vialiy o rural communiies. Fewer naional

companies selling arm inpus and buying crops and

livesock means ha here are ewer small agriculural

businesses providing producs and services o armers.

Independen agriculural producers and he eed and

equipmen dealers, locally owned grain elevaors, small

slaugherhouses and medium-sized ood processing irms

ha hey do business wih are he economic engine ha

drives economic sabiliy in rural communiies. Consolida-

ion has disabled ha engine, draining wealh and people

ou o rural communiies.

In a reely uncioning marke sysem, a balance will be

sruck beween he incomes o armers, rural economies

and disan invesors who urnish echnologies no easily

provided in rural areas. Agribusiness concenraion works

o change ha balance in avor o Wall Sree. As global

agribusiness ineress grow and become more powerul, heincome o rural arm and non-arm residens declines.

Consolidation in the Food System

The agriculure and ood secor is unusually concenraed,

wih jus a ew companies dominaing he marke in each

link o he ood chain. In mos secors o he U.S. economy,

he our larges irms conrol beween 40 and 45 percen

o he marke, and many economiss mainain ha higher

levels o concenraion can sar o erode compeiive-

ness.8 Ye according o daa compiled by he Universiy

o Missouri-Columbia in 2012, in he agriculure and ood

secor, he our larges companies in agriculure and ood

conrolled 82 percen o he bee packing indusry, 85

percen o soybean processing, 63 percen o pork packing

and 53 percen o broiler chicken processing.9 These

naional concenraion measuremens can conceal even

higher levels o concenraion a he regional or local level.

Consolidaion is no isolaed o arms and processing. In

1998, he our bigges ood reailers sold abou one-ifh

(22 percen) o groceries.10 By 2010, reail concenraion had

more han doubled, and over hal (53 percen) o grocerysales wen o he our larges companies.11 Walmar became

he naions larges ood reailer wihin a dozen years o

opening is irs supercener in he lae 1990s.12

Large reailers now have so much buying power ha hey

have considerable inluence over which oods are available

o he public, he mehods in which he oods are produced

and he prices paid o heir suppliers. Walmar is now

he bigges cusomer or many o he op ood producers

and processors in he counry, including dairy gian Dean

Foods, General Mills, Kraf Foods and Tyson Foods,13 which

can creae uneven power dynamics even or hese large

companies.

The Impact of Consolidation

on Rural Economies

For nearly 80 years, academic sudies have documened he

negaive impac o agriculures consolidaion and indusri-

alizaion, which aligns arms more closely wih ood manu-

acurers han heir local communiies. Communiies wih

more medium- and smaller-sized arms have more shared

prosperiy, including higher incomes, lower unemploymen

and lower income inequaliy, han communiies wih larger

arms ied o ofen-disan agribusinesses.

Economically viable independen arms are he lieblood o

rural communiies,14 and arms have a greaer impac on

local economies han he reail or service secors.15 Hisori-

cally, rural economies have resed on a oundaion o manymid-sized arms and local agriculural processing.16 The

earnings rom locally owned and locally conrolled arms

generae an economic muliplier eec when armers

buy heir supplies locally and he money says wihin he

communiy.17 Larger, indusrialized arms are more likely o

purchase arm supplies rom ouside he local communiy,

and non-local arm owners siphon o a larger share o he

prois rom hese operaions.18

Among he irs sudies o examine he impac o larger,

indusrialized arms on local communiies was a compar-ison o wo rural owns in Caliornia in he 1940s. Rural

anhropologis Waler Goldschmid ound ha he own

wih more small and moderae-sized arms had higher


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overall income and educaion levels and more civic and

social organizaions.19 In conras, he communiy wih

a higher prevalence o larger arms had worse economic

oucomes and a lower sandard o living han when he

agriculural economy was spread ou among many smaller

arms.20 The U.S. Deparmen o Agriculure originally

suppressed he indings o Goldschmids research, and he

sudy was even burned in public in Caliornia.21

Mos sudies esing he Goldschmid hypohesis since he

Depression ound ha large, indusrialized arms had a

derimenal eec on economic, social and environmenal

communiy oucomes. A 2007 analysis o 51 sudies ound

ha 82 percen showed some derimenal impacs o indus-

rialized agriculure in local communiies, and more han

hal (57 percen) had predominanly negaive indings.22

Only 6 percen o sudies had largely posiive indings rom

he impac o indusrialized agriculure.23

Household income, poverty and inequality

Larger-scale indusrialized arms ended o reduce he

economic well-being o neighboring amilies, reduce house-

hold incomes, increase povery and exacerbae economic

inequaliy. A 2001 sudy ound ha counies wih more

large arms had lower median amily incomes, whereas

counies wih a sronger arming middle class had lower

povery raes, lower levels o unemploymen, less violen

crime and ewer low-weigh birhs.24

Several sudies have shown rising income inequaliy in

communiies wih larger, indusrialized arms.25 A 2004

sudy ound ha he concenraion o armland ownershipwas associaed wih higher levels o income inequaliy.26 A

1990 sudy ound ha areas wih more moderaely sized

arms had lower povery and unemploymen raes, higher

household income and a more sable and large middle

class.27 In conras, he sudy ound ha communiies

where larger, indusrial arms predominaed had higher

income inequaliy and conribued o he long-erm decline

o household incomes and rising povery raes.28

Local spending

A more vibran arming middle class pumps money inorural economies and Main Sree businesses. Small arms

spend more locally han large arms, boh or arm supplies

and household purchases ha have a muliplier eec on

local economies.29 A 1994 deailed examinaion o line-iem

expendiures by Minnesoa arms ound ha smaller arms

spen wice as much locally as large arms (based on he

share o heir purchases).30 Smaller livesock operaions (less

han $400,000 in income) spen beween 60 and 90 percen

o heir purchases locally compared o less han 50 percen

o he purchases by arms wih income over $600,000.31 The

erosion o arm numbers may have he larges eec on

communiies ha rely on arms and he rural populaion

o suppor local businesses in small owns.32 Many rural

communiies worry ha he growing size o arms hreaens

he survival o small owns and heir small businesses. 33

Negative non-economic impactsConsolidaion in he arm secor and igh agribusiness

linkages can also ray he civic abric o rural communiies,

derimenally impac he healh and educaional well-being

o rural residens and pollue he local environmen. As

mid-sized amily arms disappear, so do people who ill

church pews, atend schools, join civic organizaions and

provide local governmen leadership.34 Indusrial arming

can increase communiy sress, crime, eenage birh raes

and in-migraion o low-wage workers, while overburdening

local schools, worsening healh oucomes and reducing

civic paricipaion and voing.35 Many communiies aceincreased environmenal impacs rom manure spills,

declining air qualiy and reduced qualiy o lie rom odors

rom large livesock operaions.36

Food & Water Watchs Analysis

Agribusiness concenraion works in many ways, all wih

he same objecive: ha o moving income rom armers

and rural economies o Wall Sree. In his repor, we

examine ive case sudies o agribusiness concenraion.

Pork Production in IowaIn Iowa, over he las hree decades, massive amouns

o ouside money creaed processing plans ha became

so large ha many smaller plans have been orced ou

o business. Gradually, enormous processing plans were

mached by super-sized acory arms avored by ouside

agribusiness ineress. Food & Waer Wach has ound ha

over he pas hree decades, he Iowa counies ha sold he

mos hogs and had he larges arms had declining couny-

wide incomes, slower growh in median household income

and alling numbers o local businesses compared o he

saewide average.

Iowa armers sold wice as many hogs in 2007 (47.3 million)

as in 1982 (23.8 million), bu he oal real value o Iowas

hog sales was 12 percen lower in 2007. As pork packing

consolidaed and hog arms in Iowa became larger and

more inegraed wih he pork processing companies, he

value o hogs o he local economy declined. These rends

were conirmed by an economeric analysis by he Univer-

siy o Tennessees Agriculural Policy Analysis Cener.


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Dairy Farming in New York

This case sudy examines a exbook case o marke iner-

erence. Milk processors and handlers in New York have

come under such concenraed and coordinaed ownership

ha he prices armers receive or heir milk have been

pushed lower han wha hey would have received in a

compeiive economic sysem wih more independen

buyers. In 2009, dairy armers in New York and oher

Norheas saes iled an anirus sui alleging ha hebigges milk processor and bigges milk handling coopera-

ive worked in concer o eecively lower he prices ha

armers receive.

Food & Waer Wach compared wo New York dairy coun-

ies wih dieren rends in heir dairy arms. S. Lawrence

Couny has ranked among he counies wih he mos

dairy arms in New York or 30 years bu has shifed o

ewer, larger arms.Alhough S. Lawrence los 77 percen

o is dairy arms beween 1982 and 2007, i remained ied

or he couny wih he mos dairy arms in he sae in2007. Yaes Couny sared wih very ew dairy arms bu

during he period we sudied, many small-scale Mennonie

dairy armers migraed o he couny.37Yaes Couny was

he only dairy couny in New York o have an increase in

he number o arms and had sronger economic peror-

mance han S. Lawrence Couny, despie S. Lawrences

saus as a dairy leader.

The Yaes Couny experience is more a cauionary ale han

a model or mos armers o emulae. Mennonie armers

use ewer inpus and expensive equipmen, rely on pleny

o low-cos amily labor and ypically have litle arm deb.

These are pre-condiions ha mos armers and communi-

ies will be unable o replicae, and i is sriking ha he

only couny o have growh in he number o dairy arms

had hese unusual characerisics.

Poultry Production on

Marylands Eastern Shore

Someimes a paricular agribusiness ineres can ake over

an enire economy beore any compeiors can ener. The

resuling siuaion is one o such economic dominance ha

large regions can become, essenially, company sores inwhich all economic aciviy is guided by a single ineres.

On he Easern Shore o Maryland, he rise o he indusri-

alized poulry indusry evenually ransormed he enire

region rom a diverse agriculural mix ha primarily grew

vegeables and ruis o sell o Philadelphia, Balimore and

Washingon, D.C., ino a region ha raised more han 300

million chickens ha produce over hal a million pounds o

chicken manure per square mile every year.38

Food & Waer Wach esimaes ha i he arms on

Marylands Easern Shore culivaed he same propor-

ion o ruis and vegeables in 2007 as in 1940, oal arm

sales would have been $137 million higher 65 percen

more han he esimaed $83 million ha conrac poulry

growers received or raising chickens or he poulry compa-

nies in 2007.39

The Organic Soybean MarketSome cases o agribusiness consolidaion are quie simple:

he power ha comes wih concenraion can be used o

change he rules in such a way as o eliminae arming

opporuniies alogeher. In 2009, he company ha owns

Silk-brand soymilk, Dean Foods, shifed he ormerly

organic produc o a naural label ha required no

organic soybeans. The impac o his change rom organic

o convenional soybeans is magniied because o Deans

marke dominance in soymilk producion and had subsan-

ial ramiicaions or armers. The change rom organic o

naural reduced he marke or organic soybean armers byover 1.2 million bushels o ood-grade soybeans in he irs

year.


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Fruit and Vegetable Production

in Californias Central Valley

The global reach o ransnaional agribusiness gians can

serve o drain wealh rom rural economies, as seen in

he case o rui and vegeable producion in Caliornias

Cenral Valley. Food & Waer Wach ound ha beween

1992 and 2007, as impors rose, one ou o eigh (12.7

percen) o he large reezing and canning plans in Cali-

ornia closed.40 Fewer plans mean ewer workers bualso ewer oules or Caliornia armers o sell heir crops.

Consolidaion and globalizaion in he canned and rozen

rui and vegeable indusries allowed he ewer irms o

reduce he prices hey paid o armers and shif producion

overseas o ake advanage o lower wages and weaker

environmenal proecions.

Conclusions

For decades, he U.S. Deparmen o Jusice and he USDA

have aken a hands-o approach o ood sysem consoli-

daion, on he grounds ha increased concenraion has

no direcly harmed consumers. Agribusiness companies

conend ha hrough mergers and acquisiions, hey can

provide eiciencies o scale ha benei consumers. Bu in

realiy, consumers rarely see a decrease in wha hey pay

or ood a he grocery sore.

The economic harm caused by he concenraion o he

ood sysem is real, bu is ofen negleced. The larges

players in agribusiness have been providing mos o he

daa, allowing hem o perpeuae he myh ha he

economy has beneied rom he eiciency oered by heindusrialized agriculure sysem. Meanwhile, independen,

small and mid-sized producers oer irs-hand examples o

he sorely needed compeiion-relaed reorms.

Fair markes will require new rules and beter oversigh

ha:

Collecs and disseminaes informaion abou

concenraion hroughou he food chain: The

ederal governmen should deermine he levels o

concenraion in he various secors o he ood sysem

rom arm inpus (including seeds, agrochemicals,equipmen and credi), o ood processing (grain

handling, slaugher and processing o livesock and

poulry as well as ood manuacuring), o markeing

and reailing (rom disribuion o grocery sores).

Coordinaes compeiion and anirus policy for

he enire food and farm secor:Currenly, several

agencies have overlapping anirus jurisdicion over

dieren elemens o he agriculure and ood indusry,

which has hampered eecive enorcemen. The USDA

should have a special counsels oice on agriculural

consolidaion in he ood and arm secor o eecively

coordinae beween he agencies wih jurisdicion over

compeiion policy.

Remedies and prevens disorions in he hog and

catle markes: Currenly, several common pracices

allow meapackers o avoid buying hogs and catle on

public markes, which reduce compeiion and lower

he price armers receive. Some companies own heir

own livesock or long periods prior o slaugher, which

allows hem o slaugher heir own livesock when

aucion prices are high and buy on public markes

when prices are low, which drives down he prices

armers receive over he long erm. Some meapackers

press armers o sell heir livesock hrough opaque

conracs ha do no disclose he price armers will

receive (armers only learn wha hey will ge or heir

hogs or catle when hey are delivered o he mea-

packer). The conracs ypically are based on aucion

prices (known as ormula pricing), and since mea-

packers have considerable livesock secured hrough

hese capive supply conracs and packer-owned

livesock, he cash aucion prices ha are he basis or

ormula prices are ofen very low. These sraegies ha

reduce he number o publicly raded livesock makes

he markeplace subjec o disorion or manipulaion

ha harms all armers. The capive supply arrange-

mens and packer-ownership o livesock should be

prohibied.

Prevens unfair and decepive pracices in agri-

culural conracing: Many armers raise livesock

or crops under conrac wih large agribusinesses,

bu because he ew irms have remendous leverage,

armers are ofen orced ino ake-i-or-leave-i

conracs ha can be unair or abusive. Fair conrac

pracices should be spelled ou in regulaion and law.

Fuure arm policy should ocus on access o air and open

markes ha benei armers, workers, consumers and he

markeplace. The goal should be policy ha allows here o

be enough buyers o he crops and livesock and sellers oagriculural inpus ha he compeiive beneis o markes

can work or armers.

A every poin in he ood chain, here are a handul o

companies squeezing prois ou o armers, wages ou

o workers and choices ou o eaers. A more vibran

markeplace wih more choices or armers and consumers

is essenial, bu i canno happen wihou breaking up he

agribusiness carels.


10/55


Consolidation in Iowas Hog Sector

Erodes Rural Economies

Since he 1980s, he U.S. pork packing and processing

indusry has gained a dominan posiion over hog armers

hrough mergers, acquisiions and he emergence o

conracual relaionships beween packers and producers.

The hog producion secor is concenraed horizonally

(only a ew companies buy, slaugher and process hemajoriy o hogs) and verically inegraed (hog packers

have igh conracual relaionships wih hog producers

hroughou he sages o producion).

Iowa has long been a major player in U.S. hog and pork

producion. Since here are ewer buyers or hogs and many

packers procure hogs primarily hrough conracs wih large

hog producers, independen armers ofen canno ge air or

compeiive prices or heir hogs. The long-erm downward

rend in real hog prices has orced some producers o heir

arms and oher armers o massively expand heir hog

operaions. Consolidaion in he pork packing indusry has

conribued o he 82 percen decline in he number o hog

arms in Iowa beween 1982 and 2007.41 The average-sized

Iowa hog arm ballooned more han 10-old beween 1982

and 2007. The shif o larger hog arms ighly inegraed

wih he pork processing indusry has caused a concenra-

ion o economic beneis o ewer armers and irms in

rural communiies.42

The debae over wheher large hog arms are a benei

or a curse o communiies is conroversial. Proponens

conend ha very large, indusrial-syle hog operaionsare more eicien and producive and generae wealh and

prosperiy.43 Indusrial-scale hog producion is purpored

o creae jobs, srenghen local ax bases and provide a

muliplier eec hrough local economies.44 A 1998 sudy

ound ha larger hog arms are associaed wih higher

income and employmen levels.45 Iowa Sae Universiy

esimaed ha he Iowa hog indusrys $4.3 billion in gross

sales generaed $2.2 billion in personal income, 60,500 jobs

and $3.86 billion in gross sae produc in 2005.46

I is indispuable ha hog producion has a signiicanimpac on Iowas economy. Hog arms provide arm jobs,

hog sales supply he meapacking secor ha employs addi-

ional workers, and he arms hemselves generae income.

These hog-relaed workers in urn induce addiional aciviy

by spending heir earnings on goods and services, heorei-

cally muliplying economic aciviy in he local communiy.

Hog producion also drives demand or Iowas corn and

soybean producion, which beneis armers and drives

employmen and income hroughou he communiy.

Bu Food & Waer Wach has ound ha as pork packing

consolidaed and hog arms became larger and more

inegraed wih he pork processing companies, he value

o hogs o he local economy declined. Over he pas hree

decades, he number o hogs sold by Iowa armers doubled

o 47.3 million in 2007, bu he oal real value o Iowas

hog sales was 12 percen lower in 2007 han in 1982, even

hough Iowa armers sold 23.5 million more hogs. (See

Figure 1.) As he value o hogs reverberaes hrough he

economy, he economic ripples o hog producion in Iowaare becoming smaller and less valuable.

Description of Study

Food & Waer Wach analyzed he impac o consolidaion

in he pork packing secor on Iowa hog arms and rural

economies rom 1982 o 2007. The hog secor exempliies

he indusrializaion o arming, wih he rapid decline in

he number o hog producers, he sharp increase in he

size o hog operaions and igher ies beween arms and

speciic pork processors.47

Iowa is he larges hog-producing sae in he counry48

and has abou one-quarer o he naions hog slaugher

capaciy.49 (See Table 1 on page 9.) The ransormaion o

he Iowa hog secor is represenaive o changes in he

hog secor hroughou he Unied Saes. Hisorically,

independen hog producers were a oundaion o Iowas

agriculure secor.50 Bu over he pas hree decades, hog

producion changed signiicanly. Insead o being based on

independen amily arm, small-scale producion, larger hog

Figure 1.Value of Real Hog Sales Fallsas Total Number of Hogs Sold Doubles

SOURCE: USDA

Real Hog Sales(in Billions of 2010 Dollars)

Number of Hogs Sold(in Millions)

$5.8

$4.8

$3.9

$4.1

$3.7

$5.1

1982 1987 1992 1997 2002 2007

23.8 23.5

26.8 27.5

41.2

47.3


11/55


irms ha are closely inegraed wih pork producion and

disribuion chains became dominan in hog producion.51

Food & Waer Wach analyzed couny-level hog arm,

economic and demographic daa beween 1982 and 2007 in

he ive-year inervals corresponding wih he USDA Census

o Agriculure. The analysis builds on years o academic

research and provides a more exensive longiudinal exami-

naion o he impac o larger arms on he local economyspanning he rise o indusrial-scale hog arms and conrac

inegraion wih pork packers. We analyzed he economic

rends in he counies wih he mos hogs, he larges hog

arms and he mos rural areas. Food & Waer Wach also

commissioned he Agriculural Policy Analysis Cener a he

Universiy o Tennessee o perorm a mulivariae regression

analysis o measure he impac o agribusiness concenra-

ion in hog producion on he Iowa economy.

Food & Waer Wach ound ha each hog sold was making

a smaller conribuion o he economy in 2007 han in 1982,

measured by boh couny real oal personal income andreal median household income. Moreover, growing hog

producion appears o increase income inequaliy, as he

number o hogs sold has a bigger negaive impac on real

household median income over ime han on real per capia

income. Finally, he decline in he number o hog arms

and rising average number o hogs sold per arm has a

negaive impac on he number o reail sores, as here are

ewer independen amily arms o paronize Main Sree

businesses. Food & Waer Wachs indings are in line wih

he Federal Reserve Bank o Kansas Ciys 1993 predicion

ha, Many rural communiies will ace a decline in local

economic aciviy as he number o small, independen hog

armers erodes.52 (See mehodology and daa secion, page

41, and Appendix I, page 42, or descripion o variables,

economic model and regression analysis.)

Meatpacker Consolidation,

Control and Market PowerPork packers and processors are he gaekeepers o he hog

and pork secor. Naionally, more han 70,000 hog armers

sold mos o heir hogs o only a handul o irms in 2007.53

The limied marke opporuniy orces armers o ake

whaever prices meapackers oer or heir hogs.

Over he pas ew decades, he bigges irms also have

pushed armers o become more closely aligned wih

packers hrough markeing agreemens and producion

conracs. These arrangemens beween producers and

packers, known as verical inegraion, have encouragedarmers o increase in size.

Consolidaion in he hog slaugher indusry has nearly

doubled over he pas hree decades as mergers signii-

canly reduced he number o compeiors and increased

marke concenraion. In 1982, he our larges irms

slaughered one ou o hree hogs (35.8 percen) naion-

ally, bu by 2007, he our bigges companies slaughered

wo ou o hree hogs (65.0 percen).54 (See Figure 2 on

page 10.) Mergers in he Iowa hog processing secor have

Table 1. Iowa Hog Slaughter Facility Capacity, 20052011 (HEAD PER DAY)

SOURCE: National Pork Board 200920012

PLANT LOCATION 2005 2007 2009 2011

IOWA TOTAL 117,800 117,050 124,950 112,050

0RUUHOO6PLWKHOG Sioux City 14,500 11,200 14,000 Closed

)DUPODQG6PLWKHOG Denison 9,200 9,200 9,300 9,400

Tyson Foods/IBP Waterloo 19,200 19,350 19,350 19,350

Tyson Foods/IBP Storm Lake 15,000 15,500 15,500 16,500

Tyson Foods/IBP Colorado Junction 9,800 9,500 10,000 9,850

Tyson Foods/IBP Perry 6,800 7,400 7,400 7,750

Swift ( JBS) Marshalltown 18,500 18,500 18,500 18,500

Excel (Cargill) Ottumwa 18,000 18,000 18,500 18,400

Sioux-Preme Packing Sioux Center 3,500 3,500 4,200 4,200

Pine Ridge Farms Des Moines 2,500 2,500 2,850 3,200

Premium Iowa Pork Hospers 1,600 2,400 2,500

Dakota Pork Esthersville 1,500 1,200

Vershoor Meats Sioux City 800 800 1,200 1,200

VanDeRose Farms Wellsburg 250 Closed


12/55


reduced he number o buyers. Since he 1990s, Smihieldabsorbed compeiors including John Morrell and Farm-

land, which had aciliies in Iowa.55 In 2001, Tyson Foods

bough IBP, which has our hog packing plans in Iowa. 56

Naional concenraion measuremens can conceal much

higher marke concenraion ha armers ace a he

regional or local level.57 Beween 2004 and 2011, he plans

owned by he op our pork packing irms slaughered nine

ou o 10 hogs in Iowa.58 (See Figure 3.) Iowa armers may

sell heir hogs over he sae line, bu even including he

packing plans in Minnesoa, Nebraska, norhern Missouriand wesern Illinois, Iowa armers sold heir hogs ino a

marke where he our larges irms slaughered our ou o

ive hogs (79 percen on average beween 2004 and 2011). 59

The rise of contracting and vertical integration

Mergers have concenraed he marke power o pork

packers, bu hey also exer considerable power hrough

verical inegraion. Pork packers ofen secure livesock

hrough conrac markeing arrangemens wih armers.

Farmers agree o deliver a cerain number o hogs a a

uure dae (ypically, he price is o be deermined adelivery). These conracs give armers a guaraneed marke

or heir hogs, bu large conrac buyers can exrac lower

prices and disor and conceal prices. (In anoher ype o

conrac arrangemen, known as a producion conrac,

pork packers own he hogs and hire armers o raise hem.

Producion conracs are more common in he Souheas,

such as in hog-powerhouse Norh Carolina, and can ofen

impose exploiaive conrac erms on armers.)

Pork packers can use markeing conracs o secure live-

sock wihou having o bid agains oher packers o buy

hogs a aucion.60 Conracs also reduce ransacion coss

or packers because conrac hog arms end o be much

larger. Pork packers would preer o have ewer, larger

purchases insead o many ransacions necessary o buy

smaller volumes o hogs rom more, independen armers.61

Conracs have been commonplace in some agriculuralsecors, such as poulry, or decades bu have been a rela-

ively new phenomenon in he hog secor. Beween 1991

and 1993, here were oo ew hog conracs or he USDA

o coun; by 2008, wo-hirds o hogs were delivered under

conrac.62 (See Figure 4 on page 11.) This indusrializaion

larger arms wih igher markeing relaionships wih

processors weakens he economic links beween arms

and local communiies.63

Vertical integration and contracts

encourage larger hog farms

Larger pork processors end o conrac wih he larges

arms, and, over ime, his drives all armers o increase he

number o hogs hey raise and marke. The USDA ound

ha larger meapackers reliance on conracing [m]ay

also encourage larger arms.64 The Federal Reserve Bank o

Kansas Ciy repored, The shif oward a more inegraed

indusry works hand-in-hand wih he rend oward ewer

and larger hog arms. 65

Figure 2.National Market Shareof Top Four Hog Packers

SOURCE: USDA GIPSA

35.8%

1982 1987 1992 1997 2002 2007

36.6%

43.8%

54.3% 55.0%

65.0%

Figure 3.Market Share of Top Four Hog

Packers in Iowa and Surrounding States

SOURCE: Food & Water Watch analysis of National Pork Board 2009-2012 data

2004 2005 2006 2007 2009 2011

Iowa and Surrounding StatesIowa

94.2% 94.2% 92.8%90.1% 89.0%

81.2%78.7% 77.8% 76.8%

84.6%

75.6%

94.2%


13/55


Consolidaed meapackers primarily do business wih

he larges operaions and are relucan o deal wih

medium-sized or smaller producers.66 The resuls o a 1993

survey o hog armers and processors suggesed ha he

larges packers conrac almos enirely wih he larges

hog producers and may no even oer conracs o small

producers.67 Hal o he pork packers ha used markeing

conracs in 1994 required hog producers o deliver a

minimum supply o hogs.68

Ofen meapackers oer sweehear deals wih higherprices o larger, avored irms, irrespecive o he number o

hogs ha are delivered o he slaugherhouse. Theoreically,

meapackers pay armers based on qualiy using a carcass

meri pricing sysem (known as a grid), bu his sysem

gives meapackers he discreion o pay premiums and

discouns ha can provide wide variaions in paymen

more han 25 percen or hogs o he same qualiy.69 As

Chris Peerson, Presiden o he Iowa Farmers Union and

a hog producer, repored a a 2010 livesock compeiion

workshop held by he U.S. Deparmen o Jusice and he

USDA:

The packers routinely pay $0.05 to $0.06 more per

pound or more in volume-based premiums to the

largest hog producers simply because theyre large.

$0.06 may not sound like much of a discount. But I

tell you what, for an independent producer, the guy

with 150 sows, farrow-to-finish operation, trying

to market on a yearly basis, that equals $56,000 of

income.70

Lower Hog Prices, Farm Losses

and Increasing Farm Size

Buyer power

Consolidaion gives he bigges irms more bargaining

power over he many arms hey buy rom and can have

a signiican impac on armers marke access.71 This

anicompeiive buyer power is known as monopsony.

The decline in he number o hog buyers has lef ewerselling opions or hog producers, which pus hem under

increased pressure o ake whaever price hey can ge,

even i i does no cover heir coss. When here are only a

ew buyers, here are no enough compeing buyers o bid

up prices.72

A 1999 economic model by Purdue Universiy esimaed

ha a markeplace wih 20 equally sized pork packers (akin

o he naional marke in he lae 1980s) would pay abou

5 percen less han a perecly compeiive markeplace;

a markeplace wih eigh irms would pay 18 percen

less, and i here were only our irms, hey would pay 28

percen less han a perecly compeiive marke.73 The

auhors concluded, We have shown ha greaer consolida-

ion in he mea packing and processing indusry creaes

a markdown eec on he prices armers receive or live

animals.74

Thinning the market

Conracing can urher depress hog prices.Conracs

shor-circui he price discovery uncions o he marke-

place by securing supplies ouside o he public aucions or

spo markes where hogs (or oher commodiies) are soldor cash or immediae delivery.75 The price or conrac

hogs is ypically ied o he spo or uures marke prices, so

meapackers benei when uures and spo prices decline.

The rise o verical inegraion and livesock conracing

hins he open-aucion marke or hogs.76 Since ewer

livesock are sold on he open marke, he number o public

ransacions and reporable sales prices ha are he basis

or many livesock conracs declines.77 This creaes he

poenial or pork packers and processors o manipulae hog

prices across he indusry. For example, he basis price orhog conracs is ypically he prevailing mid-morning upper

Midwes marke price, which allows pork-processor buyers

o wihhold heir purchases unil he afernoon o drive

down prices paid under conrac.78

Smaller arms ace ewer opions o marke heir hogs and

can become he suppliers o las resor when large packers

need exra hogs or heir slaugher aciliies.79 Since mos

hogs are delivered o packers under conrac arrangemens,

Figure 4.Percent of HogsDelivered Under Marketing

or Production Contracts

SOURCE: USDA

1991-1993 1996-1997 2001-2002 2005 2008

N/A

34.2%

62.5%

76.2%

68.1%


14/55


he hogs sold by independen armers eecively are sold on

markes ha have he characerisics o a salvage marke,

as economiss rom Purdue Universiy noed.80

Fewer public ransacions leave he markes suscepible

o volailiy, disorion and manipulaion, since even a

ew sales can have a signiican impac on he prices ha

armers receive. The rise o hog conracing can conribue

o he long-erm downward pressure on price and increase

price volailiy.81 The hog marke was wice as volaile in

he 1990s han in he previous wo decades.82 Over he pas

25 years, real hog prices ell by 55 percen, rom $241 per

head in 1982 o $109 in 2007, in real inlaion-adjused 2010

dollars.83 (See Figure 5.) Afer he hog marke crashed in

1998, he price has coninued o lucuae by as much as a

hird every ew monhs.84 (See Figure 6.)

Hog farm loss and increase in hog farm sizeFarmers receiving lower prices or hogs ofen ace he sark

choice o going ou o business or selling more hogs o earn

he same income. These pressures o low prices combined

wih conracs ha encouraged larger-scale hog producion

conribued o he decline in he number o hog arms in

Iowa and he growh in he size o he remaining arms.

Naionally, he number o arms selling hogs has plum-

meed 76 percen rom 315,000 in 1982 o 74,800 in 2007. 85 I

Iowa, he number o arms markeing hogs dropped aser,

alling 82 percen rom 49,000 in 1982 o 8,760 in 2007. (See

Figure 7.)

Fewer arms did no mean ewer hogs. In ac, he oal

number o hogs markeed annually in Iowa doubled beween

1982 and 2007, meaning ha he size o he remaining

hog arms expanded dramaically. Naionally, he average

number o hogs sold by each arm has ballooned over

he pas hree decades, growing nineold o an average o

2,765 hogs in 2007.86 In Iowa, he number o hogs sold rom

average hog arms surged more han 10-old over he pas

Figure 5.Real Iowa Hog Priceand Market Share of Top Four Firms

SOURCE: USDA; GIPSA

$241

35.8%

Iowa Real Hog Price(Per Hog, in 2010 Dollars)

Top Four NationalMarket Share

1982 1987 1992 1997 2002 2007

$204

$145 $151

$100$109

36.6%

43.8%

54.3% 55.0%

65.0%

Figure 6.National Real Farmgate Hog Prices(IN 2010 DOLLARS PER HUNDREDWEIGHT)

SOURCE: USDA NASS

Jan-90 Jan-95 Jan-00 Jan-05 Jan-10

$120

$100

$80

$60

$40

$20

Figure 7.Number of Iowa Hog Farms

SOURCE: USDA Census of Agriculture

1982 1987 1992 1997 2002 2007

49,012

38,638

34,058

18,370

11,2758,758


15/55


hree decades, and by 2007 he average Iowa hog arm

sold nearly wice as many hogs as he naional average. In

1982, he average Iowa arm sold 470 hogs, bu by 2007 he

average arm markeed more han 5,000 hogs. (SeeFigure 8.)

In he las wo decades, hog producion has become

concenraed ino arms ha specialize in a single sage

o producion (arrowing, nursery pigs and inishing hogs)

ha are linked ogeher by pork processing inegraorshrough conacs.87 In 1992, more han hal (54 percen) o

hog operaions were arrow-o-inish arms ha sold he

hogs ha were born on heir arms; by 2004, less han a

hird (31 percen) were arrow-o-inish.88 Feeder-o-inish

operaions ha aten hogs or slaugher provided a ifh

(22 percen) o marke hogs in 1992, bu hree-quarers (77

percen) in 2004.89

Many academic, governmen and indusry observers

sugges ha bigger arms are more eicien because o

economies o scale. However, hese advanages are signii-

canly oversaed. Mos o he economies-o-scale eiciencygains occur when small arms grow o be mid-sized, bu

hese gains aper o rapidly as he arms ge larger, so

increased size provides a diminishing eiciency and cos

advanage. Hog arms wih he lowes cos o producion

per hog marke abou 1,000 hogs a year.90

Eiciency gains rom increasing size beyond a cerain poin

are modes. An analysis o hog producion in Iowa ound

ha large hog arms had only small labor advanages over

medium-sized arms. Whereas i ook hree workers o

marke 10,000 hogs on medium-sized arms (wih invenorybeween 2,000 and 5,000 hogs), i ook only slighly ewer

workers (2.88) on arms wih more han 5,000 head.91

The Declining Impact of Large-scale

Hog Farms on Iowas Economy

Alhough he number o hogs sold in Iowa has doubled over

he pas hree decades (see Figure 9), Food & Waer Wach

has ound ha hogs are providing a diminished benei o

Iowas economy. These indings suppor nearly a cenury

o academic and public policy sudies ha have ound ha

larger, indusrial arms have lowered he economic andsocial vialiy o local communiies.

The lieraure on he impac o large, indusrial arms on

economic growh, household economic well-being, jobs and

unemploymen, local purchases by arms as well as non-

economic indicaors including healh, educaional and pollu-

ion oucomes includes several sudies ha examine he hog

secor in paricular. These sudies generally suppor Food

& Waer Wachs indings ha more hogs are providing a

diminishing benei o Iowas economy. For example, a 1996

sudy o Iowa hog producion ound ha he number o

hogs is no as imporan as he number o hog arms o he

economic well-being o local communiies.92

Economic growth and inequality

Several academic sudies have documened ha economic

growh is more sluggish in communiies wih a higherprevalence o large, indusrialized arms. A 2003 sudy o

nearly 2,250 rural counies naionwide ound ha counies

wih larger arms had lower levels o economic growh,

suggesing ha larger arms make smaller conribuions o

local economies.93 The counies ha were mos economi-

cally relian on agriculure and he counies wih he larges

arms had slower per capia income growh.94

A 2000 Illinois Sae Universiy sudy o 1,100 Illinois

owns ound ha larger hog arms did no conribue

Figure 8.Average Number

of Hogs Sold per Iowa Farm

SOURCE: USDA Census of Agriculture

1982 1987 1992 1997 2002 2007

470 584747

1,454

3,582

5,068

Figure 9.Total Hogs Sold by Iowa Farmers(IN MILLIONS)

SOURCE: USDA

1982 1987 1992 1997 2002 2007

27.5

41.2

47.3

26.823.523.8


16/55


The Statistical Story

of Hog ConcentrationA statistical analysis conducted by the Agricultural Policy

Analysis Center (APAC) at the University of Tennessee

FRQUPHGZKDWHFRQRPLFWKHRU\FRPPRQVHQVHDQGWKH

graphs from this report all say: agribusiness concentration

drains value from rural economies. (SeeAppendix I, page 42.)

What Was Analyzed

7KH$3$&VWXG\DQDO\]HGWKHVHYHYDULDEOHVIRUDOORZD

counties for 1982, 1987, 1992, 1997, 2002, and 2007:

1. Real county-level total personal income

2. Real county-level median household income

3. Percent of county residents with a B.A. degree or higher

4. Percent of county residents in the prime working age

range of 2564

5. The number of hogs sold in each county

What Was Done

(DFKRIWKHODVWWKUHHYDULDEOHVDERYHHGXFDWLRQDJHDQGKRJSURGXFWLRQVKRXOGDHFWWKHUVWWZRYDULDEOHVRQWKH

list. Econometrics is a powerful statistical technique that allowed APAC to analyze the hundreds of data observations

LQWKLVVWXG\DQGJDLQLQVLJKWLQWRWKHTXDQWLWDWLYHHHFWWKDWHDFKRIWKHODVWWKUHHYDULDEOHVKDGRQWKHUVWWZR

7KH$3$&DQDO\VLVZDVGRQHLQWZRVWDJHV7KHUVWVWDJHLQYHVWLJDWHGWKHGHJUHHWRZKLFKHGXFDWLRQDJHDQGKRJ

SURGXFWLRQDHFWHGUHDOFRXQW\OHYHOWRWDOSHUVRQDOLQFRPHDQGUHDOFRXQW\OHYHOPHGLDQKRXVHKROGLQFRPH7KH

second stage examined how the contribution of hog production to the two income variables had shifted over time to

GHWHUPLQHZKHWKHUSURGXFLQJDGGLWLRQDOKRJVLQKDGWKHVDPHHHFWRQORFDOLQFRPHYDULDEOHVDVLWGLGLQ

Snapshot of Results

As expected, education and age played important positive roles in explaining local income in every year. But the

VWRU\ZLWKKRJSURGXFWLRQZDVPXFKGLHUHQWQDQGDGGLQJPRUHKRJSURGXFWLRQWRDORFDOHFRQRP\

KDGDVWURQJSRVLWLYHHHFW%XWEHJLQQLQJLQWKHORFDOHFRQRPLFEHQHWVRIDGGLWLRQDOKRJSURGXFWLRQEHJDQ

to decline. For 1997, 2002 and 2007, local economies gained far less value from additional hog production than they

had gained in 1982 and 1987. In fact, the results of the analysis strongly suggest that adding more hogs to rural Iowa

counties loweredreal county-level personal income in 1997, 2002 and 2007.

$GGLWLRQDOKRJSURGXFWLRQKDGDSRVLWLYHHHFWRQUHDOPHGLDQKRXVHKROGLQFRPHIRURZDFRXQWLHVEXWWKHPDJQL-

tude of the contribution declined over time. The contribution of a given level of additional hog production in 1992

was 59 percent lower than it was in 19821987. The contribution of additional hog production further declined during

19972007 and was 76 percent lower than it was in 19821987.

7KHVWRU\ZDVWKHVDPHIRUUHDOWRWDOSHUVRQDOLQFRPHZLWKRQHVLJQLFDQWH[FHSWLRQWKHFRQWULEXWLRQRIDGGLWLRQDO

hog production in 19972007 was negative. The contribution of additional hog production was positive in 19821987

and in 1992. The 1992 contribution, however, was 91 percent lower than it was in 19821987. By 19972007, thecontribution of additional hog production to real total personal income had turned negative. Adding an additional

1,000 hogs in a county reduced total personal income in that county by $592.

Conclusion

Hog production can contribute to, or detract from, the level of overall economic activity in a rural county. In 1982 and

1987, the contribution of hog production to Iowas rural economies was positive. But as time went on, and agribusi-

QHVVFRQFHQWUDWLRQLQFUHDVHGWKHRZRIHFRQRPLFEHQHWVUHYHUVHG*URZWKLQWKHFRQVROLGDWHGKRJLQGXVWU\

became a mechanism for draining value from, and not adding to, Iowas rural economies.


17/55


o he vialiy o local economies and insead ended o

hamper rural economic growh.95 The rural owns where

hog arms became signiicanly larger beween he 1980s

and 1990s appear o have had slower economic growh han

owns wih less-rapid hog producion increases.96 A 2000

Universiy o Minnesoa docoral hesis ound ha small

hog-inishing operaions conribued more o he value-

added income o local economies han large hog-inishing

operaions.97 The 1996 Iowa sudy ound ha he counieswih more hog producers had ewer people relying on ood

samps and ha counies wih more large-scale hog arms

(over 1,000 head) had higher levels o ood samp use.98

Local purchase

Large-scale livesock operaions are more likely han smaller

livesock arms o bypass local suppliers or inpus like eed

and equipmen. Alhough larger arms make a smaller share

o heir purchases locally, i could sill amoun o more local

spending since large arms have higher oal expendiures.

Bu he same number o hogs raised on a larger number osmall- and medium-sized arms would spend more locally

han a ew gian arms.

These rends have been conirmed by academic sudies. A

1993 survey o Iowa hog producers ound ha as arms go

larger, hey were less likely o buy eed wihin 10 miles o

heir arms. More han hree-ifhs o medium-sized and

small hog producers bough eed wihin 10 miles (62.0 and

68.8 percen, respecively), compared o 41.7 percen o large

arms.99 The newer, larger, specialized hog operaions are

mos likely o make purchases ouside he local area.100

A 1990 sudy ound ha larger Michigan hog operaions

spen less locally han smaller arms. Farms wih 500 hogs

spen $67 per head locally compared o $46 per head spen

by arms wih 5,000 hogs.101 Using hese values, a larger arm

would spend $230,000 locally compared o he $33,550 by he

smaller arm. Bu en 500-head arms would spend $100,000

more locally han a single 5,000-head arm. (SeeFigure 10.)

Income Lower in Counties With

Higher Hog Sales and Larger Hog Farms

Economic sudies o hog arming in Iowa ofen ocus only on

he arm impacs or only on he meapacking and processing

indusries. While valuable, such sudies miss an imporan

poin: agribusiness concenraion in Iowa is so widespread

ha i ripples hroughou he enire rural economy. Food &

Waer Wach ound ha he counies wih he highes levels

o hog sales (he op hal o counies based on he number

o hogs sold or each year) and he larges hog arms (he

op hal o counies based on he average number o hogs

sold per arm or each year) in Iowa had lower couny real

personal income, real median household income and real pe

capia income han he saes oal income measuremens.

Alhough he real oal personal income in Iowa grew

seadily over he pas hree decades, i declined in he coun-

ies where hog producion was he highes. Toal saewide

real personal income grew by hal (53.9 percen), rom $73.3

billion in 1982 o $112.9 billion in 2007, in inlaion-adjused2010 dollars.102 (SeeFigure 11.) In conras, oal couny real

personal income declined by 1.7 percen in he counies wih

he highes number o hog sales, rom $39.6 billion in 1982

$38.9 billion in 2007. Almos all o Iowas increase in oal rea

personal income occurred in he counies wih he lowes

level o hog sales; real oal personal income more han

Figure 10.Local Spending by Hog Farms

SOURCE: Albeles-Alison & Conner 1990

One 500-headhog operation

One 5,000-headhog operation

5,000 hogs on 10500-head farms

$33,550

$233,000

$335,500

SOURCE: Food & Water Watch analysis of USDA Census of Agricul-ture, Commerce Department Bureau of Economic Analysis data.

Figure 11.Total Real Personal Income,Statewide and Counties With High Hog Sales

(IN BILLIONS OF 2010 DOLLARS)

1982 1987 1992 1997 2002 2007

$73.3$78.6

$82.1

$93.4

$102.3

$112.9

$39.6

$47.0$42.3

$37.1$33.8

$38.9

High Hog Sales Counties

Statewide


18/55


doubled in he hal o he counies wih he lowes level o

hog sales.103

Alhough oal real personal income dropped slighly in

counies wih high hog sales, he decline was signiicanly

seeper in counies wih large hog arms. Since 1982, he

oal real personal income dropped 19.1 percen in large hog

arm counies, rom $34.4 billion o $27.8 billion in 2007. (See

Figure 12.) Hog arm size in he hal o counies wih he

larges arms increased 13-old rom an average o 561 hog

sales per arm in 1982 o 7,400 in 2007.

Real household median income shows a similar patern.

Median household income measures he economic well-

being o households a he midpoin o he earnings curve

and is a good represenaion o he economic success

o ordinary amilies. Saewide, he couny real median

household income rose 14.5 percen, rom $41,186 in 1982

o $47,177 in 2007, in 2010 inlaion-adjused dollars.104 (See

Figure 13.)

Counies wih he larges hog sales saw smaller increases

in real median income. Real median household income

Figure 12.Total Real Personal Income, Statewide and Counties With Large Hog Farms(IN BILLIONS OF 2010 DOLLARS)

SOURCE: Food & Water Watch analysis of USDA, Bureau of Economic Analysis data

1982 1987 1992 1997 2002 2007

$73.3

$78.6$82.1

$93.4

$102.3

$112.9

$34.4$37.8 $37.0

$32.3$27.1 $27.8

Statewide Large Hog Farm Counties

Average Hogs Sold Per Farm in Large Hog Farm Counties

$45,698

$42,588

$44,339

$48,697

$45,823

$46,852

Figure 13.Real Median Household Income, Statewide and Counties With High Hog Sales(IN 2010 DOLLARS)

SOURCE: Food & Water Watch analysis of USDA, BEA data

1982 1987 1992 1997 2002 2007

Statewide High Hog Sales Counties

Average Hogs Sold per Iowa Farm

$44,091

$41,186

$43,550

$47,838

$46,174

$47,172

470 584747

1,454

3,582

5,068

5,102

7,406

561 703906

1,978


19/55


increased only 10.0 percen or counies wih he highes

number o markeed hogs. There was a similar rend or

large hog arm counies, which had real median household

income increase only 8.7 percen beween 1982 and 2007.

The economic downurn in he early 2000s drove median

incomes down, bu he weak economic recovery beween

2002 and 2007 sill lef median household incomes lower

han in 1997. From 1982 o 1997, when he average-sizedarm sold ewer han 1,500 hogs a year, he real median

income was higher in he counies wih he highes hog

sales han he sae average. Bu afer he 1998 crash in

hog prices, he number o arms ell urher and he size

o arms swelled considerably. From 2002 o 2007, when

he average arm size opped 3,500 hogs sold annually,

he saewide real median income exceeded he larges

hog-producing counies. Saewide, real median household

incomes declined 3.5 percen beween 1997 and 2002, bu

he decline was nearly wice as seep (5.9 percen) in he

larges hog-producing counies.The real per capia earnings are growing in he coun-

ies wih he larges hog sales while he real household

median incomes are declining, which suggess ha income

inequaliy is growing in he counies selling he mos hogs.

(See Figure 14.) Income inequaliy can be demonsraed

when average income growh exceeds median income

growh.105 Beween 1982 and 2007, he real average house-

hold income (based on per capia income and household

size) rose by 33.0 percen rom $66,217 in 1982 o $88,068

in 2007, bu he real median household income rose by only

10.0 percen, abou a hird as as as he average household

income. The rise in real per capia income alongside a less

robus increase in median household income suggess ha

earnings are being capured by a smaller porion o more-

well-o people in counies wih high hog sales.

Retail and Small Businesses

Decline in Counties With Higher

Hog Sales and Larger Hog Farms

Food & Waer Wachs analysis o Iowa small business and

reail paterns and hog arms conirms ha larger armsand increased numbers o hog sales are associaed wih

declining numbers o small businesses, ewer reail esab-

lishmens and lower reail sales. High hog sales counies

and large hog arm counies had a sharp decline in small

businesses (based on he Census Bureaus couny business

survey number o non-arm esablishmens), reail sales

esablishmens (based on Iowa Deparmen o Revenue

sales ax records) and oal reail sales. (Seemehodology

and daa secion, page 41.)

Over he las hree decades, he oal number o small

businesses in Iowa (non-arm esablishmens) increased

by 29.7 percen, rom 64,000 in 1982 o 83,000 in 2007. In

conras, he number o small businesses in he counies

wih he op hal o hog sales ell by 10.8 percen. (See

Figure 15.) The decline also shows a saewide relocaion o

small businesses away rom areas wih he mos hog sales.

In 1982, more han hal o small businesses (54.6 percen)

were locaed in high hog sales counies, bu by 2007, only ahird (37.5 percen) o small businesses were locaed in he

op hog sales counies.

Figure 14.Real Median Household Incomeand Real Average Household Income,

Counties With High Hog Sales (IN 2010 DOLLARS)

SOURCE: USDA, BEA, Census Bureau; average household incomebased on per capita income and household size.

1982 1987 1992 1997 2002 2007

$66,217$72,383 $71,649

$80,049 $80,176$88,068

$42,588$45,698 $44,339

$48,697$45,823 $46,852

Real Median Household Income

Real Average Household Income

SOURCE: Food & Water Watch analysis of USDA, Census Bureau data

Figure 15.Average Number of Non-FarmEstablishments per Iowa County

Statewide High Hog SalesCounties

Large Hog FarmCounties

647

722 7

67 8

14

818

839

699

849

806

678

597

624

615

702

719

589

461

464

1982 1987 1992 1997 2002 2007


20/55


There is a similar patern or he counies wih he larges

average hog arm size, which conirms he indings rom

he academic lieraure ha smaller arms are more likely o

buy and shop locally and ha his local purchasing rever-

beraes hroughou Main Sree business communiies. The

large hog arm counies los a quarer (24.4 percen) o heir

small businesses over he pas hree decades (again, while

he number o small businesses saewide increased).

A similar patern holds rue or reail esablishmens

(businesses ha ile sae sales ax receips) and real reail

sales. Alhough he number o reailers in Iowa declined

by 2.7 percen beween 1982 and 2007, he high hog sales

and large hog arm counies had a much sharper decline

in reailers. High hog sales counies los 29.0 percen o

reail esablishmens, and large hog arm counies los 38.0

percen o reailers. (SeeFigure 16.)

Much o he decline in reailers may be he resul o super-

sores driving ou independen grocery, hardware and oher

independen reailers,106 bu heoreically he level o reailsales should coninue o grow wih he broader economy.

Iowa saewide real reail sales increased by 11.4 percen

rom $29.7 billion in 1982 o $33.0 billion in 2007, bu real

reail sales dropped by a hird (35.3 percen) in high hog

sales counies and by hal (53.5 percen) in large hog arm

counies. (SeeFigure 17.) By 2007, consumers were spending

$5.5 billion less in high hog sales counies and $7.3 billion

less in large arm counies han hey spen in 1982, in

inlaion-adjused 2010 dollars. This suppors he Illinois

Sae Universiy sudy ha ound ha owns surrounded by

larger hog arms had lower levels o reail spending.107

Total Employment and

Farm Jobs Decline in Hog Counties

The value o hog sales conribues o employmen on arms,

in meapacking plans and hroughou he economy. Bu

he levels o local employmen and he qualiy o he jobs

are inerrelaed wih he srengh o independen amily

arms in rural areas.108 More workers would be employed i

he same number o hogs were raised on smaller arms.109

Fewer, bu larger, arms reduce he number o arm jobopporuniies in rural communiies.110

Farm jobs in Iowa have declined seadily, and mos o

hese losses are likely on hog arms. In he Midwes, hog

arms (and dairy arms, a minor acor in Iowa) employ

he majoriy o arm workers because bee catle and crop

operaions require less labor.111 Saewide, Iowa los 41.6

percen o is arm jobs beween 1982 and 2007, shedding

almos 64,000 jobs. Mos o he arm job losses were in he

counies wih he highes levels o hog sales. (See Figure

18 on page 19.) High hog sales counies los 42,600 arm

jobs (46.0 percen), and large hog arm counies los almos

36,400 (44.3 percen).

Food & Waer Wach ound ha he rising number o hog

sales has no increased oal employmen. High hog sales

counies and large hog arm counies had declining numbers

o wage and salary jobs. Saewide, Iowa gained nearly hal

SOURCE: Food & Water Watch analysis of USDA, Iowa Departmentof Revenue data

Figure 16.Average Number of Retail

Establishments per Iowa County



3,4

80

3,5

65

3,5

64

3,6

48

3,4

43

3,3

85

3,7

76

4,1

96

3,8

03

3,2

12

2,7

46

2,6

81

3,3

77

3,5

87

3,4

47

2,8

35

2,1

95

2,0

95

1982 1987 1992 1997 2002 2007

Figure 17.Iowa Real Retail Sales(IN BILLIONS OF 2010 DOLLARS)

SOURCE: Food & Water Watch analysis of USDA, Iowa Departmentof Revenue data

1982 1987 1992 1997 2002 2007

Statewide High Hog Sales Counties

Large Hog Farm Counties

$29.7

$29.5

$29.9

$32.9

$33

.8

$33.0

$15.6

$17.1

$14.6

$11.5

$

9.7

$10.1

$13.6

$13.3

$12.7

$9.9

$7.2

$6.3


21/55


a million (460,000) wage and salary jobs beween 1982 and

2007, a 41.0 percen increase. Bu high hog sales counies

los 52,300 jobs (an 8.8 percen drop), and large hog arm

counies los 164,400 jobs (a 31.8 percen drop). (See Figure

19.) In conras, he mos-rural hal o counies wih he

lowes populaion densiy gained 40,700 jobs (a 21.6 percen

increase). The counies wih he mos hogs and larges hog

arms have lower or negaive job growh, even compared o

he mos rural counies wihou major hog producion.

Meatpacking

The meapacking and processing indusry provides jobs in

rural areas, including or arm amily members, and hese

workers spend heir earnings a local reailers and on local

services.112 Alhough Iowa Sae Universiy atribued a

considerable porion o he impac o he hog secor on

personal income o workers in he mea processing secor,113

he oal real earnings o meapacking and processing

workers declined 16 percen beween 1982 and 2007.114

The meapacking indusry has shifed o ewer, larger and

more remoe plans.115 The number o ederally inspeced

hog packing plans (ypically, he larges plans ha can

ship pork naionwide) in Iowa ell by abou a sixh (16

percen) beween 1982 and 2007.116 (See Figure 20.) In 2010,

Smihield closed a 14,000-hog per day John Morrell plan

in Sioux Ciy.117 The oal number o Iowa pork packing

and processing plans wih a leas 20 employees declined

slighly (by 4 percen) over he same period, according o

U.S. Census Bureau igures (which do no separae hog andbee plans).118 The modes decline conceals a sharp decline

in packing plans, which dropped 42 percen beween 1982

and 2007, while he number o processing plans grew.

(Packing plans handle and slaugher live animals and end

up wih a carcass. Processing plans urn carcasses ino

oher processed producs.)

A larger impac o he economies o rural communiies

has been he decline in real wages or meapacker and

processing workers. Mea manuacurers paid sharply lowerSOURCE: Food & Water Watch analysis of USDA and BEA data

Figure 18.Iowa Farm Jobs



153,7

52

137,6

53

125,6

52

115,9

19

96,3

40

89,8

63

92,7

19

83,9

48

75,5

82

64,7

15

51,7

16

50,1

14

82,0

32

7

6,3

44

66,8

45

56,5

67

49,6

35

45,6

56

1982 1987 1992 1997 2002 2007

Figure 19.Total Iowa Wageand Salary Jobs, Statewide, High Hog Sales,

Large Hog Farm and Most Rural Counties

SOURCE: Food & Water Watch analysis of USDA and BEA data

1982 1987 1992 1997 2002 2007

1,800,000

1,400,000

1,000,000

600,000

200,000

Statewide

High Hog Sales Counties

Large Hog Farm Counties

Most Rural Counties

Figure 20.Federally InspectedIowa Pork Packing Plants

SOURCE: USDA NASS

Number of Plants Average Plant Capacity(000 head/year)

25

23

20 20

18

21

1982 1987 1992 1997 2002 2007

743

917

1,471

1,239

1,593

1,425


22/55


wages as he secor consolidaed and ocused on larger

manuacuring plans in more rural areas.119 Wih declining

real wages, workers a meapacking plans provide less o a

boos o local economies.120

In Iowa, real meapacker and processor (boh bee and

pork) wages have allen seadily over he pas hree

decades. (See Figure 21.) Real, inlaion-adjused mea-

packer wages dropped 44 percen beween 1982 and 2007,and mea processing wages dropped by 24 percen (in real

2010 dollars).121 Even wih a rise in mea processing workers

and he sligh decline in packing plan workers, he oal

real earnings rom mea manuacuring workers dropped by

16 percen, rom $853.9 million in 1982 o $720.2 million in

2007 (in 2010 dollars). Some large meapackers had hosile

relaionships wih unions represening packing plan and

mea processing workers, and broke srikes and cracked

unions o drive down wages o 25 percen below average

manuacuring wages by 2002.122

Conclusion

A 2006 Iowa Sae Universiy repor described he changes

in Iowas hog producion secor over he pas decades as

dramaic and proound.135 The number o Iowa hog arms

plummeed, producion had shifed rom arms ha raised

hogs rom birh (arrow-o-inish operaions) o arms ha

atened hogs or slaugher (inishing operaions), and

conrac hog producion became more prevalen.136

Tax Revenue and Property ValuesLarger or more vertically integrated hog farms can

undermine property values and the local tax base.

Proponents of large-scale hog operations contend that

livestock operations can be associated with generally

higher property values in a region or county.123 Theo-

retically, the increased housing demand from addi-

tional hog farm workers helps to drive up property

values. But in Iowa, the counties with the highest hog

production lost almost half the farm workers between

1982 and 2007, which suggests a reduced demand for

housing.

Several studies have found that large hog operations

FDQKDYHVLJQLFDQWQHJDWLYHHHFWVRQORFDOSURSHUW\

values. A 1997 study of home sales in high hog-

producing North Carolina counties found that homes

sold for 9.5 percent less if there were 5,000 hogs

within half a mile (or 15,000 hogs within a mile) than

homes with only a few hogs within half a mile.124 A

1990 Michigan study found that home sales within 1.6

miles of hog operations would reduce home prices by

$1,740 for every 1,000 hogs.125 This might not seem like

a big impact, but a $1,700 drop in price is a 2 percent

decline in the average Michigan home price in 1990126

and that is for every 1,000 hogs.

The studies also found that the addition of new hog

operations reduced the property values of neigh-

boring homes. The North Carolina study found that

adding a new 2,400-head hog operation within half a

mile of a community without hog farms would reduce

property values by 8.4 percent.127 A 2003 Iowa State

University study found that a new, large livestockoperation could reduce nearby and downwind prop-

erty values by about 10 percent.128

$54,1

62

Figure 21.Average Real Iowa Meatpackerand Processor Annual Earnings (IN 2010 DOLLARS)

SOURCE: U.S. Census Bureau

1982 1987 1992 1997 2002 2007

Meatpacker Wages

$38,0

43

$36,8

15

$3

7,6

89

$29,6

29 $

37,8

59

$27,8

83

$33,9

16

$29,8

41

$34,578

$30,4

51

$28,9

39

Meat Processing Wages


23/55


Food & Waer Wach ound ha as consolidaion has risen,

he conribuion o he hog secor o overall economicaciviy in Iowa has declined. Counies wih more hog sales

and larger arms end o have lower oal incomes, slower

income growh, ewer Main Sree businesses and less reail

aciviy. General employmen levels have suered, wages

in meapacking have declined and arm job opporuniies

are more diicul o ind. In spie o wha Big Pork boosers

have said, here is litle evidence ha he rends in Iowa hog

producion have been good or Iowas rural economies.

The mos likely culpri or he decline in economic well-

being in he ace o seeply rising hog producion is hesigniican consolidaion in he pork packing indusry.

Today, he bigges our Iowa packers slaugher nine ou o

every 10 hogs produced. Iowas pork economy has devolved

rom one ha suppored rural communiies o one ha

exracs value and uels prois or irms ar rom he Iowa

counryside. Rebalancing he value o hog producion

back o arms and rural communiies will require resoring

genuine compeiion o he hog secor.

The Myth of&RQVXPHU%HQHW

Although pork packer consolidation

has pushed down the real prices

that farmers receive for their hogs,

few of these savings are passed

on to consumers; the meatpackers

and retailers are pocketing the

GLHUHQFH7KH86'$IRXQGWKDW

although large-scale hog farms and

SURFHVVRUHFLHQF\JDLQVPD\KDYH

reduced the cost of production

between 1992 and 2004, consumer

prices for retail pork nonetheless

increased substantially.129

Because pork is a small share of

food expenditures, even a 5 percent

reduction of production costs on

industrial-scale hog operationswould reduce total food expendi-

tures by only 0.2 percent.130

Although the price of hogs has been trending downward, the consumer price of pork products has been less

responsive to the declining hog prices. Some studies have found that increases in farmgate prices are passed on

to consumers completely and immediately, but when farmgate prices fall, the grocery store prices do not fall as

rapidly or completely.131

When the prices that farmers received for hogs plummeted in 1998, the prices that consumers paid at the

supermarket for pork products in 1998 and 1999 did not decline very much.132 Real hog prices dropped by about

two-thirds between June and December of 1998, but real pork chop prices fell by only 8 percent and bacon prices

actually rose by 5 percent.133 (See Figure 22.)

Increased consolidation in the pork industry nationwide means that consumers face not only rising prices but also

diminishing choices at the supermarket. Although consumers see a wide variety of brands at the meat counter,

PDQ\ODUJHPHDWSDFNHUVPDUNHWDUDQJHRIEUDQGVWKDWDOOFRPHIURPWKHVDPHFRPSDQ\)RUH[DPSOH6PLWKHOG

)RRGVVHOOVSRUNSURGXFWVXQGHUWKHEUDQGQDPHV6PLWKHOG)DUPODQG-RKQ0RUUHOO*ZDOWQH\$UPRXU(FNULFK

Margherita, Carando, Kretschmar, Cooks, Curlys and Healthy Ones, as well as under private-label brands.134

7KLVPDUNHWLQJHRUWWRPDLQWDLQPXOWLSOHEUDQGVDQGODEHOVREVFXUHVWKHUHDOLW\RIWKHLQFUHDVLQJFRQWURORIWKH

meat case by just a few players and makes it hard or impossible for consumers to understand the dramatic

structural changes that have taken place in the pork industry over the last three decades.

$0

$1

$2

$3

$4

$5

$6

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

Figure 22.Real Farmgate Hog and Retail Pork Prices(IN 2010 DOLLARS)

SOURCE: USDA, U.S. Bureau of Labor Statistics

$90

$80

$70

$60

$50

$40

$30

$20

$10

$6

$5

$4

$3

$2

$1

RetailPorkPrices

Farm

gateHogPrice

Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00

($/CW T Right Axis)

Retail Pork Chop ($/LB L eft Axis)

Retail Bacon ($/LB Left Axis)


24/55


Consolidation and Collusion

in the New York Dairy Industry

The U.S. dairy indusry has experienced increasing urmoil

or several decades. Farm numbers have allen dramaically;

new arms are ofen mega-dairies many imes larger han

radiional arms; and prices are requenly oo low and oo

unsable o suppor amily-sized operaions. Alhough he

number o arms has allen dramaically, because manyarms have grown o garganuan proporions, U.S. dairy

arms coninue o produce large volumes o milk.

Milk is sold ino a sysem ha is dominaed by ewer and

larger processors ha in urn sell milk o a highly consoli-

daed reail indusry. The U.S. General Accouning Oice

repored in 2001 ha, A each level o he markeing chain,

including dairy arms, cooperaives, wholesale milk proces-

sors, and reail grocery sores, here are ewer, bu larger,

players in he indusry.137

This agribusiness concenraion endangers he uure oindependen dairy armers naionwide, including in upsae

New York, he ocus o his analysis. New Yorks indepen-

den dairy armers have long been he oundaion o a dairy

indusry ha provided 6,000 jobs in he sae and generaed

$300 million in sales in he mid-2000s.138 Consolidaion was

acceleraed in he lae 1980s when New York eliminaed

New Deal-era rules designed o saeguard local milk

processors.139 The deregulaion brough new, ou-o-sae

milk processors ino New York supermarkes and spawned

a price war ha iniially reduced prices, bu consumer

savings evaporaed as big processors consolidaed heirmarke power and exraced more o he value beween

dairy armers and consumers.140

Individual irms pursuing marke power over compeiors,

cusomers, suppliers and armers have largely driven he

consolidaion hroughou he ood and arm secor. Bu in

some circumsances, compeiors work wih one anoher

o squeeze greaer prois rom he oher seps in he ood

chain. Federal anirus law prohibis he collusion beween

compeiors o subver he markeplace or suppress

compeiion, including price-ixing agreemens, dividing upgeographic or consumer markes, or coordinaed boycots

or blackliss agains suppliers or consumers.141

A lawsui brough in 2009 by Vermon and New York dairy

armers alleges jus such coordinaion beween some o

he larges players in he dairy indusry.142 The class-acion

anirus sui conended ha he naions larges milk

processor, Dean Foods; he larges co-operaive, Dairy

Farmers o America; and Dairy Markeing Services (a milk

markeing parnership beween DFA and New York-based

Dairylea Cooperaive) were colluding o conrol access o

milk processing hrough mergers, plan closings and eec-ively requiring armers o marke heir milk hrough DFA

and DMS.143 The allegaions mirror how Dean Foods Chie

Execuive Gregg Engles described he companys sraegy

in 2002: We acquire (rivals), we close smaller plans and

consolidae heir operaions ino our large, more eicien

aciliies.144

In Augus 2011, Dean setled is case wih many o he

dairy armers (a ew asked o be excluded rom he class)

or $30 million wihou admiting any wrongdoing.145

Alhough Dean iniially consened o buy 10 o 20 percen

o is milk rom non-DFA sources or 30 monhs, he inal

setlemen deleed his injuncive relie.146 (Similar claims

agains milk processor HP Hood were dismissed.147) Some

o he claims iled agains boh DFA and DMS were sill

pending as o summer 2012.

Consolidation and Concentration

In 2010, a hird o all milk produced in he Unied Saes

came rom indusrial dairies wih over 2,000 cows, abou

14 imes larger han he naional average herd size.148 The

number o arms wih over 2,000 cows more han doubledbeween 2000 and 2006,149 while smaller arms were los

a an alarming rae. Beween 2000 and 2010, an average o

3,850 U.S. dairy arms were los each year, or a oal loss o

over 42,500 dairies in jus a decade.150

In spie o hose losses, milk producion remained consan

because he scale o he arms increased signiicanly.151

From 1980 o 2010, he average size o a dairy arm more

han quadrupled, rom 32 o 146 cows.152 As lae as 1998,


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he majoriy o milk was produced on small arms wih

ewer han 200 cows; by 2007, he majoriy o milk was

produced on large dairies wih over 500 cows.153

The milk produced by dairy arms, wih very ew excep-

ions, is no sold direcly o consumers. I mus irs be

processed ino cheese, buter, ice cream and oher producs.

Even he luid milk on grocery sore shelves is processed

beore i is sold o consumers. Some armers sell heir milkdirecly o processors, bu i is more common or dairy

armers o join cooperaives ha handle (or deliver) heir

milk rom he arm o he milk processing plan. Some o

hese armer-owned cooperaives own processing plans,

some collec members milk and sell i o oher processors,

and some do boh.154

The number o dairy cooperaives has allen dramaically

over he las hal-cenury, rom 2,300 in he early 1940s o

155 in 2007.155 Hisorically, he so-called brick and morar

cooperaives ha owned processing plans and processed

mos o heir members milk were inended o give armersa share o processing prois. This worked well or decades,

bu now he cooperaives have in large par given way o

privaely owned processors.

Cost of Food Monopolies

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