Over the past 25 years, the American pork industry has become highly concentrated and producers have lamented the lack of competition in the marketplace. While the move to a more concentrated livestock industry is a recent phenomenon, the threat monopolies pose to the market is anything but new. 85 years ago, Congress passed the Packers and Stockyards Act, or GIPSA to assure fair competition in the market. So when the nation's dominant pork producer, Smithfield Farms, announced plans this week to purchase rival Premium Standard Farms for $810 million, the deal raised a few eyebrows.
Smithfield Foods is the nation's leading processor and marketer of fresh pork and processed meats, and the largest producers of hogs. Premium Standard Farms is the second-largest pork producer in the U.S.
The proposed $810 million deal is raising concerns about the ability of the hog market to remain competitive. Farm state lawmakers already are speaking out against the deal. Senators Charles Grassley and Tom Harkin, both from Iowa, the nation's leading hog-producing state, have asked the Justice Department to take a close look at the proposed deal. And, the president of the National Farmers Union says it "all but guarantees independent producers will be left without a market."
Meanwhile, Smithfield Foods defends the proposal saying, 'We have strong expertise in both live hog production and in fresh pork processing. Strategically, this is a very good long-term fit and near-term, this combination should generate benefits for both organizations and our customers."
If approved, the deal is expected to close in the first quarter of 2007.