The Price We Pay
What does it mean to get big or get out? As CAFOs began to take over livestock production in the U.S. through the 1990s, the consequences of this corporate-controlled, vertically-integrated system rippled throughout rural economies, putting smaller independent farmers and their suppliers out of business, and trapping others in debt and dependence on exploitative meat companies. In this episode, hear from Missouri Rural Crisis Center’s Rhonda Perry and Tim Gibbons and Iowa CCI’s Barb Kalbach and Hugh Espey on the price we pay for factory farms.
Missed Episode One? Find the rest of the series here.
Listen and subscribe to the series on Spotify, Apple Podcasts or wherever you get your podcasts.
How to Fight a Factory Farm is produced by the Institute for Agriculture and Trade Policy, a member of the Campaign for Family Farms and the Environment. Thank you to our intern, Anna Karns, for her assistance producing this series, and to Noah Earle for the use of his song “Fry an Egg” for our theme music. Learn more about the Campaign for Family Farms and the Environment at fightfactoryfarms.org.
Transcript
00:00:00 Barb Kalbach
And they're paying that price. Smithfield Foods isn't paying it or Tyson or anyone else. The consumer is paying it. You know, that's what vertical integration does. Right now, we've got our eggs, our poultry, our hogs, all vertically integrated very nicely, and we're working on the cattle and the dairy.
That's getting under control, too, by big money interests.
Yeah, get big or get out. Who said that?
00:00:27 Hugh Espey
Was that Earl Butz?
00:00:28 Barb
Yeah, Earl Butz.
00:00:30 Hugh
Secretary of Ag. Plant fence row to fence row, fellas, the world is our market. Yeah, it's not our market. It's ADM’s market. That's who it is. It's not ours. It's ADM, the grocery store to the world. Yeah, yeah. What are we then?
00:00:44 Barb
I don't know. Chopped liver.
00:00:46 Hugh
Ha. Chopped liver. Ha.
00:01:03 Lilly Richard
From the Institute for Agriculture and Trade Policy, I'm Lilly Richard and this is Part 2 of a four-part podcast series “How to Fight a Factory Farm.”
00:01:24 Lilly
Since the 1980s, animal agriculture in the U.S. has undergone a major transformation, with the majority of livestock rearing moving from smaller, diversified family farms across the countryside into much larger concentrated animal feeding operations, or CAFOs, AKA factory farms.
In our first episode, we talked about what a factory farm is and touched on just a few of the immediate harms of these facilities. Unsurprisingly, packing thousands of animals and their millions of gallons of waste into confined and minimally regulated facilities has been a disaster for water and air pollution, animal welfare and a threat to human health. But these devastating impacts are considered externalities, meaning they’re costs that don't show up on the balance sheets of the big meat companies that benefit from the CAFO model.
00:02:19 Lilly
For these companies, the argument for CAFOs is their so-called efficiency. And it's true that factory farms have allowed more animals to be raised in less space and with less labor for the big meat and dairy companies, that means lower costs and more profit to be captured. But for the people who live in farming communities, it means the loss of jobs, farms and small businesses that were vital to once functional, vibrant rural economies. In this episode, we'll cover some of the history and economics of the CAFO system and the price we pay for factory farms.
00:03:00 Rhonda
My name is Rhonda Perry. I'm a livestock and grain farmer in Howard County, Missouri, and the executive director of the Missouri Rural Crisis Center. I'm a fifth-generation farmer, actually, from Missouri, and all of the generations of the Perry live in one county. I live three counties over, so I made the big move to Howard County from Livingston County.
I currently live on an 830-acre farm. We raised corn, soybeans, wheat and cattle. We are in the process of sort of transitioning some of that production to our nephew, who's a young farmer with a young family just getting started in agriculture.
00:03:47 Rhonda
We're really, let me let me step back and just say, you know, farming is an incredible livelihood, and farmers have to be so many things. So, we are the caretakers of the animals. We have to be veterinarians. We have to be economists. We have to be soil scientists. We have to predict the weather, which of course, no one really can do. And in some ways we have to be big risk takers. We have to, you know, it is not for the faint of heart.
Obviously, we need to be able to survive and make money, and I want to talk a bit about some of the policies that we think would help us do that.
But also, it's about the passion. It's about being part of our local communities. It's about what we contribute to our farm and to the environment and, really, to the families that will come after us.
00:04:40 Lilly
Like IATP and several other organizations in the campaign for Family Farms and the Environment, Missouri Rural Crisis Center was founded in response to the farm crisis of the 1980s.
00:04:52 Rhonda
But one of the things that happened just after we were coming out of sort of that crisis, which we never fully recovered from and you can see that from the rural communities that, that we look at today. But one of the things that started happening very soon in the late 80s in Missouri was really the beginning of the corporatization of the hog industry in particular; which from Missouri started to hit around 1989 when Premium Standard Farms came to Missouri.
00:05:24 Lilly
When Rhonda refers to corporatization, it's because the CAFO system isn't just about factory farms. It's about integrators, usually meat packing companies, controlling as much of the supply chain as possible. Vertical integration is key to why it's so hard for independent farmers to compete in today's marketplace and why producers who switch to the CAFO model end up trapped in it. And why the destructiveness of factory farms goes well beyond their immediate impact.
The roots of the problem go way back. In the 1800s, as railroads and refrigeration made it possible for meat to be transported beyond local markets and more Americans began moving into cities, meat packing companies who controlled the growing slaughterhouses and packing facilities began to play a larger role in the livestock and poultry industries.
00:06:19 Lilly
These companies were a problem from the beginning, attempting to reduce their costs through famously exploitative and abusive labor conditions in their meat packing plants, but also by things like price fixing and fraud, taking advantage of both consumers and farmers in their supply chains.
These issues resulted in the Packers and Stockyards Act being passed in 1921, an attempt to regulate the big meatpackers and prevent anti-competitive behavior.
But over the years, as meatpackers and other large food and agriculture companies grew and exerted pressure on policymakers, enforcement of antitrust laws and other regulation went out of fashion. In the 1970s, U.S. farm policy began explicitly favoring the production model favored by big agribusiness, including incentivizing specialization and the overproduction of commodities, which would lead to a glut of cheap corn and soy that could be used for below cost animal feed. It also led to the farm crisis of the 1980s, but we're getting ahead of ourselves.
00:07:27 Lilly
CAFOs and the vertical integration that comes along with them started with chickens. In the 1920s and 30s, the discovery of vitamin D and other advances in animal husbandry technology allowed chicken farmers to move production indoors and start squeezing larger and larger flocks into their barns.
Big poultry companies like Tyson began to buy up businesses all along the supply chain so they could profit from the farmers sourcing chicks, buying feed and processing their birds.
Soon they were placing farmers under strict contracts, dictating the breed feed and price paid for grown chickens. By the mid 1960s, according to nationalchickencouncil.org, 90% of broiler chickens in the U.S. came from integrated operations. But until the 1990s, most hogs, cattle and dairy still came from independent producers supported by a relatively functional competitive marketplace.
Here's Rhonda again.
00:08:32 Rhonda
Throughout my childhood we raised hogs my whole childhood. That's what we did, and hogs have been considered mortgage lifters because if you stayed in hogs, you could make money. You didn't have to own hundreds of acres or thousands of acres like with cattle.
You didn't have to have huge buildings and equipment. You didn't even have to have transportation, really. There were entire jobs that were made-up of the hauling feeder, pig haulers and fat hog haulers like all along the economic system of the pork industry; where people who were able to make money from the people who were the purebred breeders, to the people who were raising feeder pigs, to the people who were actually buying feeder pigs and feeding them out, to the people who were driving the trucks and the transportation, to the folks who were running all of the marketplaces, that there were tons of them all around the Midwest.
I would say we probably had like five or six markets within just maybe 20 miles of us, maybe even 15 miles of us. So, it was a competitive functioning marketplace.
00:09:47 Rhonda
Every day my dad would come in and call the different buying stations and the auctions to find out what the price was. We could choose whoever was offering the highest price. We would set up a delivery date and we could make delivery. And that's what thousands of hog farmers did here in Missouri and throughout the Midwest, where there was competition.
And what that meant was you need to be a really good hog producer because you could get benefits. You could get higher prices for higher quality hogs. We had a vested interest in having healthy quality animals that we could deliver in a timely way.
00:10:24 Rhonda
We knew how we took care of them. We knew how fast they would gain weight. We knew we can't control everything. We can't control the weather, but we can definitely control the inputs, how we take care of our animals, the veterinarian supplies we're going to need. And I mean independent family farm hog producers, they were the best at what they did.
And the ones who did it great got premiums, and therefore we were able to keep that money circulating in our local economies and in our communities.
00:10:56 Lilly
But in the 1980s, throughout the farm crisis, CAFOs and vertical integration started making their way into the hog industry, starting with Smithfield in the southeast and moving into the Midwest. In Missouri, that was led by Premium Standard Farms in 1989, backed by $800 million from Morgan Stanley.
00:11:18 Rhonda
Which meant they had to change the anti-corporate farming law in Missouri, which they did in the middle of the night, on the last day of legislative session. And what happened was, the way that the hog industry was always historically stabilized was people who were jumping in and out. But Premium Standard Farms came in. They started with zero sows. They ended up with 105,000 sows, but this put two and a half million hogs on the marketplace nationally.
Which totally flooded the market and ultimately drove prices down for them as well, but also for the thousands of independent hog farmers who were out here producing. But that system of production, you can't jump in and out. You've just spent millions of dollars that you got from Wall Street creating this entire building and lagoon system, and literally a factory system of production, so you can't just be well, got to get out. There's too many hogs on the market. What you know is that you have to be the last one standing.
00:12:28 Lilly
As we know, the factory farm situation just to the north in Iowa was also heating up around this time. Here's Barb Kalbach from Iowa Citizens for Community Improvement, who we heard from in episode one.
00:12:41 Barb
In the late 90s, this guy came to our house and he wanted to talk to us about putting up a confined animal feeding operation.
So he's talking to me. He's describing, you know, what they would do. They would build the built right? No. I'd build the building. Yeah, I get to build the building. Well, how much is that going to cost me? And they'd bring the hogs out and we'd get to raise them. And I said, well, when they go to market, then how much do we get per hog?
And he said, $5. Real cheerfully he said that, real cheerful. $5.
And I go, $5, in my head. I'm going $5.
00:13:20 Lilly
Barb turned down the offer, but not everyone did.
Meat and dairy companies will often tout that they source from so-called family farms. And it's true that while some CAFOs are directly owned by the company, many are technically owned by farmers who choose to get big rather than get out. But while farmers take on all of the risks and costs of running a factory farm, the integrators are really in control, dictating exactly how the animals will be raised and how much they can be sold for. Here's Tim Gibbons, also from the Missouri Rural Crisis Center, or MRCC.
00:13:57 Tim
Yeah, you know the CAFO model, specifically the production contract model, and that's one in which the farmer operator owns everything except for the livestock. And the livestock, let's say hogs, are owned by the corporation. This really, it's called chicken-ization because this is how the chicken industry does it. It's a brilliant system for the corporations because all the liability is pushed off of them.
So, the operator, the operator and the taxpayer, has the loan and the debt. They own the waste. They own the dead hogs. They own the possible nuisance lawsuits from, you know, farmer neighbors who have been there for generations. And you just put up a, you know, 10,000 head sow operation next to them.
00:14:43 Tim
Hog farmers used to be called inners and outers. Hog farmers would jump in the market when the price was high and the supply was low, and they would jump out of the market when prices were low because the supply was high.
Because hogs flipped pretty quickly and that was a self-regulating marketplace and hogs were called mortgage lifters. You didn't need a lot of land. Hogs flipped fast. You can make money off them and you could pay off your farm.
What happened in the 90s, with industrialization and vertical integration, was they started producing huge factory farms, concentrated animal feeding operations.
What that did was the entities and the individuals that started the factory farm system, they had huge amount of debt. They build big buildings, they put hogs in these buildings. Oftentimes the corporation owns the hogs through production contracts. But what that, what happened was that created overproduction, because you couldn't get in and out because you had to pay off that loan.
00:15:38 Tim
And when you have overproduction that drives the price down, and you when you drive it below the cost of production, that kicked all the independent producers out of the business because they couldn't make money on hogs anymore. So, for example, in the mid-1980s, we had 23,000 hog producers in Missouri.
90% of those were put out of business in one generation. But it's not just over 20,000 hog producers that were put out of business, it's a lot of small, independent businesses on rural main streets that supported independent hog production that were also negatively impacted and put out of business. And one example is small meat packing plants.
00:16:20 Lilly
Now the options for most hog farmers have been narrowed down to a handful of large processing facilities owned by the biggest meat companies: Tyson, Smithfield, JBS, who give preference to their own contract factory farmers.
And as main street businesses and well-paying rural jobs dry up, these corporate meat packing facilities aren't exactly providing community sustaining jobs. Workers at meat processing plants are underpaid and work in some of the country's most dangerous working conditions. Meatpackers often hire immigrants or refugees for these jobs, whose vulnerable legal status makes it more difficult for them to organize labor unions or access other protections.
00:17:04 Lilly
Another consequence of the inflexible consolidated factory farm model reared its head at the beginning of the COVID-19 pandemic, when workers at the corporate meat processing plants fell ill and the facilities had to be closed for a number of weeks. It created a massive bottleneck of hogs waiting to be slaughtered because there were almost no smaller processing facilities left to pick up the slack.
00:17:29 Barb
Well, the problem with that was they had 20,000 head of hogs coming out of CAFOs, ready to butcher every day, which is 100,000 head a week. Well, they're all ready to be butchered. Now, if that had happened and it was a whole bunch of farmers that supplied these in small groups, what a farmer would do would be to just slow their feed intake down a little bit and hang on to them until this crisis passed, but they couldn't do that. You want to know why? Because we're 20,000 baby pigs all born in that other big building down the street that are ready to step into the footprints of the 20,000 fat hogs that were going to slaughter. So, they couldn't, there was no flexibility whatsoever. So, what they did was kill the fat hogs by the 10s of thousands.
00:18:26 Barb
And they did that while people were standing in line clear across the United States for food because they didn't have any work, because we were all shut down. So, we're killing our meat production while everybody else is going without food. Now, who controls this? Smithfield does. Tyson does. So, who is making the decision about who eats and who doesn't? Because you can bet that the guy that runs Smithfield Food ate, and he probably had his pork chops.
00:18:58 Lilly
This situation was created by a consolidated meat industry and that situation was created by policy as a handful of meat companies gobbled up suppliers over the past few decades, the government largely stood by and watched.
00:19:15 Tim
So, in the 80s, let's go back to the 80s. There was a big change in antitrust policy. Antitrust historically has been reacting and being a referee in competition in markets. So, the goal of antitrust regulation is to ensure that there are open, fair and competitive markets.
00:19:35 Tim
What happened in the 80s was, specifically under Reagan, was to change the definition of antitrust from competition and markets to what's called the consumer welfare standard, and what that does is it allows corporations, when they're merging, to go to the regulators and pay for a study to be produced. Really, that says that mergers are going to be good for consumers, the consumer welfare standard, and then they allow the merger to go through. The hog industry is a perfect example of that and right now we have four corporations controlling over 70% of the U.S. hog industry.
00:20:12 Lilly
The consumer welfare standard allows mergers to go through on the condition that they will not increase prices for consumers, ignoring the inevitable consequences for farmers, workers, jobs, small businesses, local economies, animal welfare, the environment, the list goes on.
00:20:32 Lilly
As it turns out, this standard doesn't necessarily protect consumers either. As control over the food system has consolidated among a handful of powerful companies, prices have gone up and often quality has gone down.
00:20:46 Lilly
The difference is this translates to more profits captured directly by the large meat and dairy companies, rather than income for farmers and other workers distributed along the supply chain and throughout rural economies. And farmers and organizers who were around in the 80s and 90s when CAFOS began to proliferate saw all of this coming. In 1995. The Campaign for Family Farms and the Environment was formed and met with then Secretary of Agriculture Dan Glickman. MRCC's Rhonda Perry was there.
00:21:20 Rhonda
These were our demands to Secretary Glickman, among other demands: Stop mega-mergers in the food and agriculture industry; strengthen and enforce the antitrust laws, specifically the Packers and Stockyards Act, to stop unfair, deceptive, and discriminatory Packer practices; stop corporate meatpackers from paying more for the same quality of hog to their corporate allies; stop meatpackers from owning livestock; stop using taxpayer dollars to subsidize the industrialization of the livestock industry, including through guaranteed and direct loans; and require meatpackers to trade their contracts on an open, fair and competitive marketplace using asset prices versus formula-based prices.
00:22:10 Rhonda
Those were, those were the demands specifically related to USDA. Unfortunately, they are some the same demands that we are making today because they did not take the opportunity when they could have actually impacted the pork industry in a very meaningful way.
00:22:27 Lilly
The Secretary of Agriculture did not listen. In fact, the impacts of NAFTA in the 1996 Farm Bill pushed feed crop prices even lower, creating the conditions for factory farms to expand even more through the 90s and today, including into the beef and dairy industries.
00:22:46 Lilly
Even today, our Farm Bill and U.S. taxpayers continue to subsidize factory farms, both indirectly through the underpriced corn and soy used for feed, and directly through government backed loans and conservation programs that ironically are meant to improve the environmental sustainability of farming practices.
00:23:08 Tim
One thing we know is that the corporate model and the industrialization of the hog industry and the livestock industry and specific would not look the way it looks without huge taxpayer backing. So, we are paying for it. First off, we're paying for it through guaranteed loans, through FSA guaranteed loans, to put these hog farms up, or these livestock operations up. A lot of these operations go and get NRCS equip contracts, conservation contracts, that deal with CAFO waste. The NRCS is the conservation department within USDA. EQIP is the Environmental Quality Incentives program. We could go into, equip, you know, how that got changed from a real conservation program.
00:23:53 Tim
And it's still doing some good things. I mean, we work, we work on the State Technical Committee. We know what EQIP does, but they also help manage waste for factory farms, which isn't conservation. It's just trying to figure out how to, you know, have the taxpayer pay for factory farms.
00:24:12 Tim
The low cost of production grain not having supply management allowing these commodities to be oftentimes below cost of production is also then a giveaway to for the inputs for the factory farm system. We've got trade agreements that are being pushed and written by corporations at the expense of farmers and consumers in our environment and our economies.
00:24:32 Tim
Not only in our country, but around the world. You know the more power corporations get over our democratic process, the more power they can create for themselves over the market.
00:24:45 Tim
The more power they create for themselves over the market, the more power they can create within the democratic process. So, like builds upon itself and then all of a sudden they're the only ones talking.
00:24:56 Lilly
As the power of these big ag corporations has grown, rural economies have paid the price.
00:25:02 Lilly
Here's Barb again, along with Hugh Espey, another organizer with ICCI.
00:25:08 Barb
I just remember the little towns are always busy like some of those towns up there had a lot going on with businesses that supported the farmers who lived in the area. Well, now you don't need very many farmers because you have all that livestock being raised in confinement. And so you don't have the businesses and the bustle and the small towns that you used to have. And I was in near Iowa Falls not too long ago and I couldn't believe the change in that town. There was nothing there but the Veterans of Foreign Wars place.
00:25:42 Barb
So, I don't know if they even had a grocery store, for sure. That was in Alden.
00:25:45 Hugh
That you know when, when, when you have the hog industry controlled by just a few people—so rather than having like 30 or 35,000 independent family farm hog producers across the state doing it, you have like 7,000, but they're all controlled by corporations—when you have that kind of consolidation, then you don't have, you know, the vets, they go. The feed stores, all those businesses that feed into that, you know, family, farm, hog production system are gone. And like Barb says and so there's that hollowing out. People leave.
00:26:22 Barb
I like to give the example of a square mile and, well, in our square mile growing up, when Jim was growing up, there was six families on that square mile. And they all farmed and they all raised a few head of livestock of the hogs, the cattle, the chickens and the dairy cows.
00:26:41 Barb
And they all got their supplies in the nearby town. And if you had to fix something or something broke, you went to the store and got one in the small town. You got your feed there. You had your veterinarian there. You got your repairs there. And so, all those businesses were running to support all those farms on those square miles.
00:27:01 Barb
Well, now there is one farmer on our square mile and his name is Jim Kalbach.
00:27:09 Barb
He's related to me.
00:27:11 Barb
And we don't have livestock. So, that shows you where all the businesses went. Now you're talking, if you think about it, you're talking about revenue for those towns, tax revenue and spending that used to go on in those small towns isn't happening anymore and it shows in the small town.
00:27:33 Lilly
Without the jobs and tax revenue that these businesses once provided, you see even more ripple effects on rural towns, closing schools, hospitals, community centers, churches, rural Americans feel understandably abandoned. But their story isn't over.
00:27:52 Lilly
In many places, rural development and local food initiatives are doing the hard work of rebuilding rural economies and communities. And even as the push for CAFO expansion continues, the people living in factory farm country have not resigned themselves to polluted water, unbearable odors and economic exploitation. On the next episode of “How to Fight a Factory Farm,” a community fights back.
00:28:28 Lilly
“How to Fight a Factory Farm” is produced by the Institute for Agriculture and Trade Policy, a member of the Campaign for Family Farms and the Environment. Thank you to our intern Anna Karns for her assistance producing this series, and to Noah Earl for the use of his song “Fry an Egg” for our theme music.
00:28:46 Lilly
If you enjoyed this podcast, please rate and subscribe on your preferred podcast platform and share the show with a friend.
00:28:54 Lilly
Learn more about the campaign for family farms and the environment at fightfactoryfarms.org and support IATP's work at iatp.org/donate.
