The Organization for Competitive Markets is extremely disappointed in the May 4, 2007 Department of Justice Antitrust Division approval of the Smithfield Foods acquisition of Premium Standard Farms.  The effect is that Southeast U.S. hog producers have one packer to buy hogs, and Midwest producers will see lower hog prices.  Wavering legislators should now be convinced that a Farm Bill Competition Title must be enacted.

“I am perplexed at the Department of Justice’s approval of a monopoly in the Southeast U.S. hog industry,” said Keith Mudd, OCM president.  “Smithfield and Premium Standard are the only major packing plants in Virginia, South Carolina and North Carolina.  Thousands of southern hog farmers now have no ability to seek any competing bids for market hog sales, or for hog production contracts.”

On October 18, 2006, Smithfield Foods announced an agreement to acquire Premium Standard Farms.  Smithfield is the number one hog producer and hog packer in the country.  Premium Standard is the number two hog producer and number five hog packer.  There are no major packing plants in the Southeast U.S. other than Smithfield and PSF.  In the Midwest, producers will have fewer marketing choices for hogs and hog contracts, as a result of the DOJ decision.

“The multi-decade failure to enforce antitrust laws has fallen to a new government low,” continued Mudd.  “The absurd proposition that concentration is good for consumers and farmers can no longer be maintained.  The need for a Competition Title in the Farm Bill has never been greater.  Government enforcement is clearly unsatisfactory to preserve independent agriculture.”

OCM supports these bills that will remedy the damage to hog farmers:

1. S. 786 Market Transparency Act, to require pork packers to buy 25% or more of their hogs on the open market, while allowing 75% of hogs to be contracted;
2. S. 305  Packer Ownership Prohibition, to prevent meat packers from owning livestock in competition with farmers and disrupting supply and demand signals;
3. S. 1017 Captive Supply Reform Act, to require open and public trading of contracts for future delivery of livestock, rather than allowing the current secretive, market disrupting contract system.