BY TIM MAILHOT
DES MOINES, Iowa - "Free Butcher Hogs. To pick up at my
farm. I would rather give them away free than take $14.82 per
hundredweight," read an ad placed in an eastern Iowa newspaper
by hog farmer Ron Mohr November 25. Within a few days, 38 hogs
were trucked off.
In central Iowa, a small businessman bought 50 hogs from a neighbor at an above-market price and on November 28 gave them away in a raffle at his store. Tickets cost nothing and the hogs were butchered at no cost.
These offers aren't being made for fun, or because hog farmers in Iowa have money to burn. This is how two farmers have tried to draw attention to the dire situation caused by a complete collapse in the price for hogs for slaughter. The price Mohr was offered is the lowest in 27 years. When adjusted for inflation, this is the lowest price ever. Hog prices hit a peak in July 1997 at $60.31 per hundred weight. The current price means farmers lose between $50 and $75 for each hog. A farmer in St. Ansgar, Iowa, recently shot a sow rather than pay for a routine $50 medical procedure. "I hated to do that but she just wasn't worth it at these prices," said Mike Borcherding.
This crisis isn't limited to working farmers who raise smaller numbers of hogs. Contract farmers - those who sign agreements to raise hogs for a larger contractor - face some potentially big problems. These farmers supply the labor and buildings that produce thousands of hogs a year with livestock and feed supplied by the contractor. Currently, at least 40 percent of the pork industry is based on contract arrangements. As prices have fallen, the possibility has increased that a contractor may declare bankruptcy, leaving the farmer holding thousands of dollars of debt for the buildings and operating expenses.
U.S. agriculture secretary Daniel Glickman announced that the government will respond by purchasing up to $50 million worth of pork from processors, which he says will shrink the supply and hopefully boost prices. This meat would be made available to people receiving food assistance from the government.
Pork price is high, farmers get nothing
Over the last year and a half, while hog prices have gone
down regularly, the number of hogs being slaughtered has
continued to swell. The Wall Street Journal reported that a
record 2.2 million hogs are being shipped to slaughterhouses
weekly. The total hog slaughter for the year in early November
was 84.6 million, an 11 percent increase over 1997.
This drop in prices paid to farmers hasn't been reflected in pork prices at local grocery stores or restaurants. The U.S. Department of Agriculture reports that in October, the price of a composite of pork cuts was $2.302, just pennies under the record high. At that rate only 18 percent of the consumer dollar spent on pork goes to the farmer. Some elected officials have begun calling for federal or state investigations of pork prices. Patty Judge, newly elected secretary of agriculture in Iowa, has also spoken of investigating the processing capacity of the packinghouses, and U.S. senator Charles Grassley of Iowa has asked U.S. meatpackers to do all they can to increase slaughter capacity at their plants. Hog slaughter capacity in the United States has dropped by 35,000 per day in the last two years, according to Steve Meyer, an economist for the National Pork Producers. He placed some of the responsibility for this on big packers like Smithfield Foods, who have bought slaughterhouses only to close them.
The big pork processors have been quick to cash in, buying up as many hogs as they can. At the Swift and Co. plant in Marshalltown, Iowa, six-day work weeks are common and line speeds have been ratcheted up. IBP, Inc., the Dakota City, Nebraska-based meatpacker, reported its profits doubled in the third quarter this year over last. Processor Smithfield Foods and restaurant chain Evans Farms, Inc. also reported significantly increased profits for the most recent quarter.
Another major processor, Hormel Foods Corp., hasn't seen the large increase in its margins because it has long-term contracts with its suppliers that set prices at a level about twice what others farmers are currently getting.
These so-called ledger contracts contain a built-in debt trap for farmers if the market price remains below what they are paid for an extended period of time. The difference between the market price and what they are paid is recorded as a loan by Hormel, which is offset only when market prices rise above the price set by the ledger contract. Some farmers could end up owing hundreds of thousands in debt to Hormel if prices remain low into next year. It isn't clear how many farmers are tied to these contracts.
Discussion over how to respond
Raymond Parsons, Socialist Workers candidate for Iowa
secretary of agriculture in the recent election, said in an
interview, "What working farmers need today is a fight for a
living income and an end to farm foreclosures. The collapse of
prices for farm products is part of the normal workings of the
capitalist market system as it slides deeper into depression
conditions around the world."
He pointed to the importance of building solidarity between farmers facing this squeeze and workers on strike at Titan Tire and Freeman United Coal. "Workers can be won to support our fellow toilers on the land. Our bosses use the same justification for pushing for lower wages, longer hours, and worse working conditions. We need price committees made up of farmers and workers to open the books of the meatpackers and agribusiness enterprises and expose their `business secrets,' which result in rigged prices paid to farmers, high supermarket prices, low wages for workers, and the willful destruction of the environment."
The traditional organizations of farmers have been slow to organize any protests of the crisis. The Iowa Farm Bureau Federation was present at the hog raffle, which was organized by a store owner in Indianola, Iowa. About 1,000 people showed up during the four hours the raffle tickets were given out. A number of farmers who had already been forced out of raising hogs were present.
The hogs were purchased from Craig Hill, a district director of the Iowa Farm Bureau. The Farm Bureau also arranged for the processing of the pork. Hill, who operates a 250-sow farrow-to- finish farm, noted that fewer and fewer farmers in Iowa are able to afford to farm full-time. "Out of 98,000 farmers in Iowa, only 15,000 survive doing it full-time," he said. As a short term solution to the pork glut, Hill said, "Let's ship it to Honduras. The government could buy it for schools and foreign aid. But we need to organize farmers, industry, and the government to find a solution." He opposed any sort of deficiency payment system, which would be similar to what grain growers receive. "We have too much product and that's driving the price down," Hill argued. "What we need is better growth management to control prices."
As the pressure on family farmers increases, discussion on what action needs to be taken is spreading. A debate on government assistance versus its traditional free-market policy broke out at the Iowa Farm Bureau Federation's (IFBF) 80th policy meeting held in Des Moines on December 1. On December 4 a projected three-hour public hearing hosted by the U.S. Environmental Protection Agency and the Department of Agriculture stretched to five hours as speakers debated the social and environmental impact of large livestock confinements and the latest drop in hog prices.
In Illinois, the Illinois Farm Bureau and the Illinois Pork Producers Association are establishing a retail pork price reporting network to the Chicago area. It will monitor and publicize the gap between the price farmers get and the average retail price.
At the IFBF meeting, a number of pork producers pointed out the difficulty in competing against large scale confinement operations. In the last two or three years, about 9,000 hog farmers in Iowa went out of business. Others pinned the blame for the drop in prices on the increasing power the processors have. Over the last 10 years, there has been a shake out in the meatpacking industry, with a larger share of the industry dominated by a few packers. Five processors control about 60 percent of pork processing in the United States.
Delegates to the IFBF meeting rejected a proposal for a one- time $40-per-head payment to small and medium hog farmers for hogs marketed between Sept. 1, 1998 and March 31, 1999. The final resolution adopted by the IFBF called on boosting the capacity of packinghouses "by any and all means available to the government," building foreign trade and reducing trade barriers, establishing mandatory price reporting of all sales to the major packers, providing more training to farmers in risk management, and government assistance in the creation of producer-owned packing plants.
Doug Sorenson, who supported the payment proposal, said that without it, "We're going to lose so many producers its not even going to be funny.... People are losing their butts, and this won't help people in the short-term. All we're going to have left are the big guys."
Tim Mailhot is a member of United Steelworkers of America Local 310.