As I've written so many times before, a very few companies essentially control U.S. meat production.
Their business model is crude, but for years has been effective: You place lots of animals in a tight space (or "contract" with farmers to do so), stuff them with corn and soy (made cheap chronic overproduction mandated by U.S. farm policy), boost their growth with all manner of hormones and antibiotics, and move these unhappy creatures to vast factory-like slaughterhouses, to be done in by some of the lowest-paid, least-protected workers in the U.S.
All down the line, the model relies on the genius of deregulation: lax oversight of the titanic waste generated at factory animal farms, feeble enforcement of labor code, bungling responses to the food-safety crises generated by Big Meat.
I've learned recently that the industry relies on another jewel of deregulation: the cheap and easy credit that has been sloshing through our financial system for years now. Turns out that running massive meat empires -- and gobbling up competitors in an endless race to get bigger -- requires lots of loans.
Guess what? Wall Street has imploded, and its battered survivors aren't keen on loaning. As a result, at least two gigantic meat companies look in danger of collapse.
Actually, Big Meat has been staggering since 2006, when U.S. farm policy underwent a sudden shift.
For more than 30 years before then, policy had focused on encouraging dirt-cheap corn and soy. The meat industry fattened in those years. According to a report [PDF] from Tufts researchers Elanor Starmer and Tim Wise, federal crop subsidies saved the meat industry $35 billion between 1997 and 2005 alone
But then, in 2006, President Bush and the Congress dramatically ramped up ethanol mandates while holding already-generous subsidies and protective measures in place. The policy caused a surge in feed prices -- and dealt a major blow to the profits of Big Meat.
Now, with their profits razor-thin, the industry finds itself squeezed by the credit crunch. On Friday, Smithfield Foods -- the world's largest hog producer and pork processor -- had to "reassure investors ... that it was in compliance with its debt covenants and had adequate liquidity," Reuters reports.
Observers of the financial meltdown will remember that Lehman Brothers, Fannie Mae, Freddie Mac, and Bear Stearns all made similar reassurances -- before plunging into an abyss.
Investors seem less than sanguine about Smithfield's prospects. As of late Monday morning, Smithfield shares were down 15 percent.
Chicken giant Pilgrim's Pride finds itself in even worse shape. That company has fallen behind on loan payments, avoiding bankruptcy only by negotiating temporary relief from creditors. More ominously, it has "retained advisers to review its operations and refinancing strategy." That's code for "somebody please buy us at a fire-sale price soon, or we're going belly up."
Investors are betting on the worst-case scenario. In late Monday-morning trading, Pilgrim's Pride shares had surrendered 20 percent of their value. The company's shares closed at $18.50 as recently as last Tuesday. Today, they're fetching about $2.80.
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Comments
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sindark Posted 7:28 am
29 Sep 2008
These firms will just find the next financial mechanism for optimizing profits, with no real concerns for health, animal welfare, or the environment.
a sibilant intake of breath
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caniscandida Posted 2:52 am
30 Sep 2008
Chickens deserve our true friendship! So do fish! So do other sentient beings! Let us learn to be kind.
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Tom Philpott Posted 7:31 am
30 Sep 2008
To get real reform, this potential meat-industry meltdown will need to be accompanied by a serious tightening and enforcing of labor, animal welfare, and pollution code, along with a public effort to reinvest in infrastructure for small-scale, pasture-based meat production.
Btw, Pilgrim's Pride -- largest U.S. chicken producer -- saw its shares fall another 10 percent today. Looks like it really might go under. Smithfield rebounded, jumping 10 percent, but is still down significantly over the past five trading days.
As with Wall Street, it would be damned weird to start losing Big Meat firms, I wouldn't be surprised to hear bailout chatter around meat companies soon. Surreal times.
Victual Reality
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MAD MAC Posted 3:50 pm
05 Oct 2008
But don't make the mistake of attacking "Big" farming or trying to make a supposition that big farms have to be bad farms. You want to get at the specific practices that should be illegal, not the scale of farming.
On of the things I have noticed here in provincial Thailand is that while meat is consumed, it is consumed in much smaller quantities - mostly due to expense. So if you get something like "Gai Pad Prick" - a spicy chicken dish, it's mostly rice and vegetables. I have found that eating here has cut way down on my meat consumption - and I don't even like most vegetables.
Victory in Pattani
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bea elliott Posted 1:07 pm
01 Nov 2008
Yes, I want to get at the specific practice that should be illegal - the growing/confining/transporting/slaughtering and butchering of sentient beings. Nothing justifies these practices. Man lives much better on a plant based diet - go Vegan.
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