More hogs, less $ for rural Iowa

The Gazette Opinion Staff
Published: January 19 2013 | 12:01 am - Updated: 28 March 2014 | 10:17 am in
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By Matt Ohloff and Chris Petersen

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Imagine you had a thriving business in your county, one that was growing by leaps and bounds. You’d expect to be enjoying a stronger overall economy and welcoming the proverbial rising tide that floats all the boats.

Unfortunately, things aren’t working out that way in Iowa. Those counties most dependent on hog production as an engine of economic growth are losing out.

That’s the finding from a recent study by Food & Water Watch called “The Economic Cost of Food Monopolies.”

The study compared county income indicators for two groups of Iowa counties. The first was all counties in Iowa combined. The second was the top half of counties that sold the most hogs.

In 1982, Iowa’s total real personal income was $73.3 billion. The figure for the top half of counties that sold the most hogs was $39.6 billion. Half the counties had half the income, so hogs were making an important contribution to the state’s economy. That’s what you would expect.

The picture changed dramatically. Statewide, income steadily climbed and was $112.9 billion by 2007. The counties relying most on hog production, however, showed lower total income in 2007. At $38.9 billion, they were not only lower in total dollars, their fraction of the state income had fallen from 54 percent to 34 percent.

The kicker: This happened as hog production in Iowa more than doubled.

A statistical analysis done by the Agricultural Policy Analysis Center at the University of Tennessee found the same thing: “The 1992 contribution was 91 percent lower than it was in 1982-1987. By 1997-2007, the contribution to real total personal income was negative.”

You read that right. The Iowa hog industry changed so much in 25 years that expanding hog production actually reduced total personal income in the county.

How can this be?

For one thing, hog farms in Iowa are much bigger now than they were in 1982. Iowa lost 40,000 hog farms (80 percent) as farm size grew 10-fold. Academic studies generally agree that fewer, larger farmers aren’t as good for local economies. There are fewer people involved and larger farmers more often buy supplies outside of the local economy.

But there is more to the story. These were also the years in which union-scale packinghouse wages were traded for much lower non-union wages. Hog farmers, too, were seeing lower prices for the hogs they sold.

Larger farms, lower wages, lower prices — they all take their toll on county income. What do these negative factors have in common?

The most important common denominator is declining competition in the hog industry. In 1982, the top four corporations slaughtered one of every three pigs produced in the United States. Today, that number is twice that level. In Iowa, the story is even starker: nine out 10 hogs processed in the state are destined for plants owned by the top four corporations.

In many cases, meatpackers control and feed their own livestock. The companies can buy cattle and hogs when prices are low and slaughter their own livestock when bidding prices rise. This puts long-term, downward pressure on hog prices and effectively allows the meatpackers to manipulate prices.

As every Economics 101 text will tell you, when competition declines certain players get stronger and others get weaker. In Iowa, the processors have gotten stronger and the local economies have gotten weaker.

The Agricultural Policy and Analysis Center summed the situation up like this: “Growth in the hog industry became a mechanism for draining value from, and not adding to, Iowa’s rural economies.”

Pork production remains an important part of Iowa’s economy. But its contribution to future prosperity has been eroded by mergers and acquisitions in that industry. Restoring competition — by prohibiting packer owned livestock and other livestock marketing reforms — will be an important part of revitalizing rural Iowa.

Matt Ohloff, of Des Moines, is an Iowa-based organizer with Food & Water Watch and Chris Petersen, of Clear Lake, is past president of Iowa Farmers Union. Comments: mohloff@fwwatch.org or cpetersn@netins.net

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