My beef with Smithfield

I hate Smithfield Foods, that paragon of industrially raised, industrially processed meat.

I hate the flavorless garbage it sells. I hate its labor practices, so egregious that they inspired a blistering report from Human Rights Watch. (That report is the black book of industrial meat. All McDonalds eaters and Wal-Mart grocery shoppers should read it. It tells the story of how the meat-packing industry, with Smithfield helping lead the way, busted the unions, reversing 40 years of progress in wages and safety and returning conditions and pay to levels that would make Upton Sinclair seethe.)

I hate the way its stock chart stands essentially as a mirror image of the trajectory of wages and conditions in its plants, rising implacably as the lot of its workers declines. I despise its pioneering use of immigrant labor--since it can't take its plants overseas, it essentially recreates the miserable power relations prevalent in places like southern Mexico, importing people from there who've been kicked off the land over the past 20 years.

The HRW report states that:

When Smithfield opened its Tarheel plant in 1993 [a pork-processing plant in North Carolina], fewer than 10 percent of its hourly employees were immigrants. Today, an estimated half of the plants workers are Hispanic immigrants. African-Americans make up about 40 percent of the workforce.

I hate the way it pioneered a "vertical integration" strategy in pork production. It's both the biggest producer and processor of hogs (see this post). Its pork-production arm--it raises 825,000 sows per year--gives it what farmers call a formidable "captive supply." Thus it can manipulate the price of hogs on the open market to suit its own ends. Withhold hogs and the price rises, boosting its production arm. Add hogs to the market and the price declines, giving a break to its processing arm.

And I hate the feedlot style of raising animals, which maximizes cruelty and creates a huge waste problem, imbuing entire counties with the stench of shit and polluting rivers and streams.

Having vented all of that spleen, I can comment on Smithfield’s latest quarterly report. Bottom line: for the three months ending Jan. 30, the company netted about $97.5 million in profit. That's about twice what it made in the same period a year before.

The main driver was its hog-producing arm, which flourished as demand for pork rose amid panic about mad cow disease in beef. (Here's a nice take on the mad-cow scare from Richard Manning.)

Not surprisingly, its beef operations contributed nothing to its bottom line. The company has had a presence in the beef-processing and the beef feedlot businesses, but hasn't been a top-four player in either.

Until last Tuesday, that is. On the same day as it released its quarterly report, the company announced it was merging its beef-feedlot operations with those of ContiBeef, the nation's second-largest feedlot operator.

The as yet unnamed entity, a 50-50 venture, will operate as the world's largest cattle-feeding operation, according to an industry observer quoted in the article above.

The news barely made a ripple in the business press. The only substantial commentary on it I've found come from the Organization for Competitive Markets, a Naderite non-profit that bills itself as a coalition of "farmers, ranchers, academics, attorneys and policy makers dedicated to reclaiming the agricultural marketplace for independent farmers, ranchers and rural communities."

In its press release, the group declared that "“We are very worried about potential market impacts resulting from this merger ... Smithfield grew from meager beginnings in Virginia in the early 1980’s to become the major force integrating the hog industry and destroying market access for tens of thousands of independent hog producers in the Southeast and later the Midwest.”

It points out that the beef-packing firm that had been the industry leader before the merger, Cactus Feeders, has been using a captive-supply strategy similar to Smithfield's in pork. "We now have the pioneer of captive supply in hogs overtaking the pioneer of captive supply in cattle as the dominant feeding company in America," the release states.

It then speculates that Smithfield will next purchase a large beef packer, giving it dominant vertical integration in both beef and pork.