Midwest Center for Investigative Reporting

Scaling up: 4 ways hog farms changed since the 1990s

The pork industry shifted dramatically over the past three decades. A USDA report tracks how the industry moved away from small operations to CAFOs, production contracts and specialization.

By Madison McVan

Editor's note: The following story is a compilation of the five-part series "Scaling Up" by Madison McVan published in September and October. This story examines changes in the pork industry over the last few decades.

More contracts. More specialization. More pork production, resulting in decreasing costs. 
 
A report issued in August by the U.S. Department of Agriculture’s Environmental Research Service documents these trends in the industry, all since the 1990s.

The pork industry shifted dramatically over the past three decades. The report tracks how the industry moved away from small operations where farmers raised hogs from birth to slaughter and toward large operations focusing on only one or two stages of the hog’s life cycle. 
 
“(Hog farms) are large, and because they're large, they are able to take advantage of economies of scale,” said economist Carolyn Dimitri, associate professor of nutrition and food studies at New York University and one of the authors of the report. “That seems to be what the industry looks like now.”

The larger the farm, the lower the production cost is per hog. This economic principle has resulted in the industry’s shift towards concentrated animal feeding operations, or CAFOs, which have proliferated across the Midwest. 
 
In addition to examining farm size and specialization, the report also outlines changes in farm production contracts, input costs and regional differences.

The report cites technological innovation as a driving cause of change.

Ben Lilliston, director of climate and rural strategies at the Institute for Agriculture and Trade Policy, said corporate consolidation and policy decisions, such as subsidies in the Farm Bills of 1990 and 1996 that lowered the cost of feed, also contributed to the sector’s transformation. 
 
The pork industry’s move towards bigger, more specialized operations also have had negative consequences for air and water quality in CAFO-dense areas.

Here are four of the top findings:

1. The doubling of large farms and CAFOs

While nearly half of all small and medium hog operations closed in recent decades, the number of large farms almost doubled. 
 
In 1997, large farms accounted for nearly 40% of the swine produced in the U.S. Twenty years later, these operations produced more than 72% of U.S. hogs, according to the report.

CAFOs are an economically efficient way of growing hogs, as bigger farms have lower production costs per animal, the report found.

CAFOs are subject to more regulations and permit requirements than smaller operations, though information about them is sparse. These extra-large farms can produce more than 1 million gallons of waste per year, often leading to air and water pollution. 
 
The USDA considers a hog farm to be a CAFO if more than 2,500 hogs weighing more than 55 pounds are confined at the facility for at least 45 days out of the year.

2. Fewer farrow-to-finish operations

The days of breeding, weaning and raising hogs on the same farm for the animal’s entire lifetime are waning. 
 
So-called farrow-to-finish operations have become a smaller and smaller share of the hog industry as more specialized operations have taken over, according to the USDA report.

Now, most hog operations focus on only one or two stages of a hog’s life cycle. Farrowers handle the breeding, birthing and weaning of hogs. The weanlings either stay on the farrowing farm until they are “feeder pig” size — 30 to 80 pounds — or move to another farm that handles the weanling-to-feeder stage of life. 
 
Feeder pig-to-finish farms, often called “finishers,” take the feeder pigs and grow them until they reach slaughter weight, 225 to 300 pounds. 
 
Finished, fully-grown hogs require several times the space needed for piglets. That’s why feeder-to-finish operations vastly outnumber other kinds of farms that focus on earlier stages of the production cycle.

Specialized operations are more efficient than farrow-to-finish, said economist Dimitri, associate professor of nutrition and food studies at New York Universityt. Farmers running feeder-to-finish operations don’t need to have the equipment or knowledge to breed and birth hogs, or spend time separating weanlings from their mothers. 
 
“If you can specialize … it’s easier to manage your operation,” Dimitri said. “You don't have to have varying levels of knowledge. You just have one feed for that animal and then you just pass it on to the next farm.”

That leads to a lower cost of production per head of hog, Dimitri added.

3. More production contracts

A majority of hogs produced in the U.S. are sold under production contracts, according to the report.

Under most production contracts, a hog farmer and a buyer — often large pork companies like Smithfield, JBS or Triumph Foods — agree on a fixed price for the hogs before they’re ready to be sold.

The specifics of production contracts vary by farmer and by company, but in many cases, the company pays for the pigs, feed, veterinary care and transportation while the farmer provides equipment, housing and labor. Contract farmers also have to abide by certain production standards and regulations imposed by the buying company.

For independent producers — those operating without production or marketing contracts — the farmer controls and pays for all aspects of the farm’s operation.

Production contracts can provide farmers with stability by lowering the up-front costs of production and providing protection against unexpected drops in hog prices.

On the other hand, in the poultry industry where production contracts are the norm, federal authorities have accused executives of using contracts to drive down prices.

As the meat industry as a whole has become more concentrated and a handful of large companies have more control over the market, advocates are concerned that the dominance of production contracts will lead to lower prices for producers. 
 
A bill currently introduced  in the U.S. Senate is attempting to tackle the issue of producer exploitation by creating an Office of the Special Investigator for Competition Matters in the USDA. The investigator would be charged with enforcing the Packers and Stockyards Act, which includes protections for producers but is rarely enforced.

Steve Etka, policy director of the Campaign for Contract Agricultural Reform, a national alliance of nonprofit organizations working on providing a voice for contract farmers, told Investigate Midwest in August that contract farmers rarely speak out about poor treatment from meat companies out of fear of retaliation.

“(Farmers) are so vulnerable because of a lack of clear regulations to define the prohibitions in the (Packers and Stockyards Act),” Etka said. “The USDA just hasn’t been able to do much to provide the protections for them that were in the act.”

There’s been little action on the bill. Sponsors include lawmakers from agricultural powerhouse Midwest states such as Sens. Chuck Grassley of Iowa, John Hoeven of North Dakota, Cindy Hyde-Smith of Mississippi, Amy Klobuchar of Minnesota, Mike Rounds of South Dakota, Debbie Stabenow of Michigan, and John Thune of South Dakota.

North Carolina, Iowa and Minnesota are all important pork-producing states, but the economic models differ for each state’s pork industry, the study found. 
 
Altogether, the three states house nearly 60% of the hogs in the U.S. 
 
Hog operations in North Carolina also tend to be less diverse businesses, while hog farms in the Midwest are more likely to operate crop fields in addition to the livestock barns, according to the report. 
 
Production contracts are “nearly universal” in North Carolina, the study states. And while contract use has increased in Iowa and Minnesota, the Midwestern states are well below North Carolina’s rate of production contract usage. 
 
The study theorizes that since the pork industry in North Carolina rapidly expanded in the 1990s, new hog farmers may have been more open to contracting with large companies. Longtime hog farmers in the Midwest, however, may be more focused on staying independent, according to Dimitri.

“In North Carolina, it kind of became a hog state all at once,” Dimitri said. “So people haven't been growing, raising hogs there for 200 years like they have in these other states.”

The expansion of large hog operations in the two regions are connected. While Iowa has long been a large producer of pork, North Carolina’s hog industry grew rapidly from the mid-1980s until the mid-1990s. When a 1997 moratorium curtailed expansion of concentrated animal feeding operations, or CAFOs, in North Carolina, the number of large hog operations in Iowa and Minnesota increased.

4. Advances make growing hogs cheaper

As the average farm size has grown, the cost of raising hogs has decreased. 
 
Technological advances in hog genetics, feed, veterinary care and housing have made growing hogs more efficient, according to the USDA study. 
 
But public policy is an important part of the equation, said Lilliston. The farm bills passed in the 1990s contained provisions aimed at making feed cheaper for producers, Lilliston said. 
 
“This kind of below-cost feed really made these kinds of operations more economically viable,” Lilliston said. “This was a choice that was made in our farm policy to really produce a lot of feed.”

Also, CAFOs, which house hundreds or thousands of hogs under one roof, are associated with lower overhead costs.

And the number of hours of labor needed to produce a hundredweight gain — 100 pounds hog growth — also has sharply decreased, the study found.