Court Ruling Undermines U.S. Pork Industry Competition

A federal district court ruling striking down pork harvest facility line speeds allowed under the USDA’s New Swine Inspection System (NSIS) will lead to increased U.S. pork industry market concentration. The ruling, set to go into effect on June 29, will undermine what is currently a healthy level of industry competition as described in a paper recently prepared by two industry economists. To preserve industry competition, the National Pork Producers Council (NPPC) is calling for a longer stay of the court order or waivers that allow the six impacted plants to continue operating at NSIS line speeds until a long-term solution acceptable to all industry stakeholders can be established.

Competition, which has fostered innovation, job growth and industry expansion, has made the United States a global leader in pork production.  In their paper, found here, economists Dr. Steve Meyer of Partners for Production Agriculture and Dr. Barry Goodwin of North Carolina State University provide an overview of the current competitive dynamics of the U.S. pork industry.

Meyer describes the impact of the court ruling on pork industry competition as follows:

“The district court ruling reduces competition because the impacted plants will process fewer hogs, leaving more pigs available to other packers. Some of these hogs were purchased through negotiated trades, but others were procured through contract arrangements that may be altered or canceled in the face of lower capacity. Producers whose contracts are affected will likely have to accept lower values for their animals. Prices received by all producers may be reduced due to decreased competition. Impacted producers may also incur additional freight costs to move hogs to distant plants with available capacity. The situation will get significantly worse in the fourth quarter when the hog supply reaches its seasonal high.”

The court ruling will result in a 2.5 percent loss in pork packing plant capacity nationwide, and more than $80 million in reduced income for small U.S. hog farmers this year, according to an analysis by Iowa State University Economist Dr. Dermot Hayes. The NSIS, initiated during the Clinton administration and evaluated at five pilot plants over 20 years, was approved for industry-wide adoption in 2019. NSIS modernized an inspection system that had remained unchanged for more than 50 years. At a time when the United States needs more pork harvest capacity, the court order will reduce plant capacity at six plants running at NSIS line speeds by as much as 25 percent. The five original NSIS plants have been safely operating for more than 20 years.

“Time is running out for the U.S. pork industry,” said NPPC President Jen Sorenson. “We ask the administration to seek a longer stay or waivers to preserve U.S. pork industry competition – which is always good for workers and consumers – and prevent harm to small hog farmers while we work constructively with all stakeholders toward a longer-term solution.”