OCM is embarking on a campaign to preserve a 25% spot market in the State of Iowa. Iowa has 25% of the nation’s 59.7 million hogs. For the past 30 years, the Iowa Southern Minnesota market has been the preeminent market for price discovery in the hog industry. The benefits will extend nationwide.

The Iowa Legislature has been more supportive of pro-competition, pro-producer fairness initiatives than any other state legislature. In 2000, Iowa tightened their corporate farming law
to prohibit packers from owning hogs. Smithfield Foods bought Murphy Farms that year and placed it in a sham corporation owned by one of its executives and financed by Smithfield. The Iowa Legislature responded by further tightening their corporate farming law to
disallow this sham corporation strategy to avoid the packer ownership prohibition statute.

In 2002 Smithfield sued to overturn the Iowa packer ownership law claiming it violated the U.S. Constitution’s Interstate Commerce Clause. The Interstate Commerce Clause prohibits states from regulating economic activities beyond their borders.

The U.S. District Court, District of Iowa in Des Moines struck down the Iowa packer ownership prohibition in 2003. The Iowa Attorney General appealed to the Eighth Circuit Court of Appeals which reversed.

On September 16, 2005, the Iowa Attorney General and Smithfield settled the case. Smithfield agreed, among other things, to buy at least 25% of its hogs from non-company sources for five years.

This is a good start, but packers should buy at least 25% of their hogs on the spot market. Producers need confidence in the prices reported each day. Increasing the volume of spot-market hogs to 25% of their daily slaughter, which is approximately double the current volume, increases confidence that prices are set by supply and demand conditions rather than manipulation. Increased volume reduces meat packers ability to use their market power
to push prices wrongfully downward.

The Organization for Competitive Markets is about capitalism, free enterprise, and competitive markets. OCM will be working with Iowa Farmers Union and other groups to educate Iowa policy makers that a 25% spot market procurement requirement by the major pork packers is pro-agriculture, pro-competition, and deserves enactment. We hope producers will support our efforts. OCM will be providing more information in the coming months. Our members should plan to make small contributions of time and money to support this effort. We are all in this together and we need to preserve independent agriculture in the upcoming years and decades.