How the meat industry thrives, even as costs rise
Note: This is the second installment of a two-column series on global trends in agriculture. The first was on U.S. fruit and vegetable farming.
When corn prices spiked last fall, things looked dire for industrial meat processors.
These enormous companies thrive by confining (or contracting with farmers to confine) livestock into tightly packed quarters and stuffing them with corn. Pricier corn — in this case, pushed up by the government-backed surge in ethanol production — seemed to translate to lower profits for the industrial meat giants. On cue, Big Meat executives like Tyson’s Richard Bond complained bitterly about the end of cheap corn.
I, for one, looked forward to a slowdown in one of the globe’s most environmentally destructive industries. (As the U.N.’s Food and Agriculture Organization pointed out last fall, feedlot meat production spews more greenhouse gases even than automobile use.)
If nothing else useful came out of the ethanol boom, I thought to myself, at least industrial meat would take a hard hit. But a funny thing has happened on the way to my industrial-meat schadenfreude: the meat titans are shaking off higher corn prices and thriving. And now I’m the one complaining bitterly.
Smithfield Foods, the world’s largest pork processor and among the largest beef and poultry producers, recently reported that its earnings for the May to July 2007 quarter more than doubled over the same period a year ago.
Its rival Tyson — the world’s largest chicken producer, and a leader in pork and beef — also reported what analysts hailed as a “stellar” quarter, handily exceeding Wall Street’s performance expectations.
No Bones About It
For one thing, Smithfield and Tyson have managed to raise meat prices, forcing consumers to carry the costs of pricier corn. As the investment site Motley Fool put it, “It’s been relatively easy for Tyson to push price increases through to its customers [i.e., large food retailers like Wal-Mart], who in turn have pushed through food inflation to consumers.”
The second factor propping up the meat giants is that they have entered what seems like the early stages of a long-term export boom: They’re swamping Eastern Europe and parts of Asia with U.S.-raised meat. In the most recent quarter, Tyson increased its export sales by nearly a third. Smithfield, meanwhile, reported a jump in operating profit for its international unit — and promptly announced a sizable sale of U.S.-grown pork to China.
Note the contrast to the plight of large-scale U.S. vegetable farmers, which I laid out in the previous Victual Reality. Like meat processors, vegetable farmers have also seen the price of a key input rise: in their case, labor costs are up because of a crackdown on undocumented workers.
But unlike meat processors, vegetable growers can’t easily pass higher costs onto the big buyers like Wal-Mart and other food retailing giants. Those buyers can simply reject pricier U.S.-grown goods and buy produce from other countries where labor costs are lower, such as Mexico and China.
Meat is a different story. Whereas thousands of U.S. vegetable farmers compete among themselves and foreign rivals for space in Wal-Mart’s produce section, a precious few companies control the meat trade. Just two companies — Smithfield and Tyson — process 43 percent of pork consumed in the U.S. Their three largest competitors, Swift, Cargill, and Hormel, have together sewn up another 27 percent of the pork market. When players this big experience higher costs, not even a giant like Wal-Mart can say no to higher prices.
Moreover, while U.S. vegetable farmers rightly fear cheap imports from foreign competitors, the opposite holds true with meat. The U.N.’s Food and Agriculture Organization projects that U.S. producers will “dominate” the growing global pork market over the next decade. By 2016, the FAO predicts, nearly one of every three pounds of pork traded globally will originate in the U.S. The FAO also expects the nation’s beef and poultry production to thrive in the global market.
The lowly state of the U.S. dollar — widely projected to remain weak over the next decade — explains part of the power of the U.S. meat-exporting machine. A weaker dollar makes our exports cheaper, and thus more competitive, overseas.
But an even more important factor, I think, is that our huge and highly consolidated meat giants have managed to establish classic “Third World” labor and environmental conditions right here in the United States.
Have You Seen the Little Piggies?
In Iowa, the nation’s leading pork-producing state, confined-hog operations churn out 50 million tons of excrement each year, the great bulk of which festers in massive lagoons, belching putrid fumes into surrounding communities and leaking into groundwater. In Hardin County, where I visited this summer, 18,000 residents live amid more than a million confined hogs and hundreds of manure lagoons. The county’s once-teeming creeks and waterways have become dead zones, and an eye-stinging stench hangs in the air. It reminds you who benefits from the arrangement — not the remaining residents or the hogs, but rather the confinement owners and the companies they work for under contract: Smithfield and its few meat-packing peers.
In North Carolina, the No. 2 hog-producing state, similar conditions hold sway. And there, just as in the “Third World,” the poor pay dearest for highly profitable environmental banditry. According to a University of North Carolina study, “There are 18.9 times as many hog operations in the highest quintile of poverty as compared to the lowest.” People of color get it worst of all: “The excess of hog operations is greatest in areas with both high poverty and high percentage non-whites.”
Labor conditions, too, resemble those that might hold sway under a miserable dictatorship run by blinkered elites in thrall to foreign investors. In 2005, Human Rights Watch issued a blistering report on labor issues in U.S. slaughterhouses. “Meat-packing is the most dangerous factory job in America,” the report declared. “Dangerous conditions are cheaper for companies — and the government does next to nothing.” The report also documents meat-packers’ heroic efforts to squash unions.
Indeed, in its anti-unionism, the meat industry takes a hint from practices used during the 1980s-era heyday of death squads in Central America. Speaking of a Smithfield plant in North Carolina, one Salvadoran worker told Human Rights Watch that, “The company has armed police walking around the plant to intimidate us … It’s especially frightening for those of us from Central America. Where we come from, the police shoot trade unionists.”
Thus, it turns out, it will take much more than pricy corn to cut down the U.S. industrial-meat behemoth. Global demand for meat is rising, and U.S. producers are well positioned to dominate the market. But why let the U.S. become manure lagoon to the world?
Without access to exploitable labor and comically lax environmental codes, the industrial-meat complex would surely wither away — and the world would be a better place. What can ordinary citizens do? Rejecting industrial meat is a necessary but insufficient step. Efforts to organize meat-packing workers deserve broad public support, as does the movement to force the industry to take responsibility for the extraordinary environmental costs now being borne by people who live near its feedlots.