Date: September 19, 2006
Lincoln, Nebraska
Contact Information:
Fred Stokes – 662-476-5568

Lincoln, NE, Sept. 19, 2006 ~ The U.S Department of Justice must closely examine Smithfield Foods Inc. Sept. 18 announced purchase of Premium Standard Farms Inc. to ensure both producers and consumers have access to open and competitive farm and food markets, notes Keith Mudd, president of the Organization for Competitive Markets (OCM).

“For too long the Justice Department has simply winked at the corporate takeover of hog production and slaughter in this nation,” explained Mudd, a Missouri farmer. “This latest deal virtually guarantees consumers, not just farmers, will see their marketplace choices narrowed.”

On Sept. 18 Smithfield Foods, the nation’s largest pork producer and slaughterer with an estimated 800,000 sows and $11 billion in annual sales, announced it had reached an agreement to purchase Missouri-based Premium Standard Farms, the nation’s second largest hog producer and sixth largest pork packer, for $810 million.

If the deal passes DOJ review, the combined company will own nearly 1.1 million sows and have annual sales upwards of $12 billion, easily making Smithfield the largest pork producer and packer in the world.

“Smithfield’s present and future size should press the Justice Department to look at this buyout from every angle,” urges Mudd. “If the buyout is approved, the cash hog market on the East Coast virtually disappears. That would be an anti-competitive consequence for producers or consumers alike.”

Hog production and slaughter is one of the most vertically integrated sectors of U.S. agriculture. Recent university research shows that nine out of every 10 hogs grown in America are sold to meatpackers under some contract arrangement. That concentration of market power limits--and has virtually wiped out--independent production, says Dan Hodges, pork producer and OCM director.

Should DOJ approve the deal, Smithfield would increase its hog slaughter capacity from 26 percent of the nation’s total to over 31 percent, and increase its production marketshare to 17 percent, notes Hodges.

“This continued uncontested concentration of market assets and market power in agriculture has enormous economic consequences in rural America,” adds Mudd.

“In 1988, there were 322,000 hog farms in the U.S. In 2004--the last time the U.S. Department of Agriculture bothered to count pork producers--there were just 73,000.

“All those former assets, all that cash flow, all the economic benefits of a strong, vibrant and diversified American agriculture are quickly being acquired by global giants who view rural America more as a factory than place to live, work and raise families. The Department of Justice needs to examine this latest takeover more closely than ever,” says Hodges.