Record High Packer Profits & Record Low Hog Prices Raise Questions --Calls for Producer Relief, Examination of Industry Concentration--

WASHINGTON--News of record profits by the world's largest pork and beef packer confirms the need to aid hog producers and investigate concentration in the industry, the National Farmers Union (NFU) said today.

IBP Inc. announced yesterday it expected fourth quarter earnings to be four times higher than last year's. The record profits are fueled by hog prices at 50-year lows.

Producers are currently receiving about $10 per hundredweight for hogs, while the average price in 1997 was $59 per hundredweight. The last time farmers received $10 per hundredweight was 1941. However, ten-dollar hogs in 1998 are comparable to 50-cent hogs in 1941 dollars. Most producers consider $40 per hundredweight a break-even price.

"It does not make sense that IBP is banking record high profits while hog producers are being paid Great Depression-era prices. These prices are driving thousands of producers into bankruptcy," said NFU President Leland Swenson. "This is clear evidence that something is seriously awry."

"Despite the sharp decline in hog prices over the past year, retail prices paid for pork have remained constant. That simply does not add up," Swenson added. "This raises serious questions about profit making at the expense of producers and consumers."

Hog farmers are currently receiving only 12 percent of the retail food dollar, compared to 30 percent a year ago.

Concentration in the livestock industry is a major contributor to low prices and the oversupply of hogs, Swenson said. Currently, four packers control roughly 87 percent of the cattle slaughter business and five firms control more than 60 percent of the pork packing industry. The lack of competition means that producers have few buyers for their product, hampering their ability to negotiate a fair price. In addition, packers continue to increase ownership and contract production of supplies needed for slaughter.

NFU has requested hearings to investigate the plunge in pork prices and has asked President Bill Clinton to form a presidential commission to examine concentration in the farm sector. NFU is pleased the Senate Agriculture Committee will hold a Jan. 26 hearing on concentration. NFU also supports targeted steps to revive competition in the market, such as making price reporting mandatory and requiring country-of-origin labeling on meat products.

In a meeting last week to discuss the hog crisis, Swenson urged Agriculture Secretary Dan Glickman to use the Trade Adjustment Assistance (TAA) program to provide payments to producers hurt by hog imports. The TAA program, administered by the Department of Labor, provides aid to U.S. workers who lose their jobs or whose hours of work or wages are reduced as a result of increased imports.

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