Changes in consumer demand for pork products over the past 20 years have led to rapid changes in the way hogs are produced and marketed. While some opponents of reorganization in the pork industry have lobbied elected officials to intervene, a new report concludes legislative meddling is likely to do more harm than good.
"The pork industry is facing many of the same economic and organizational challenges as other industries," writes economist Ross Korves, author of the new report. "Farmers and ranchers have become specialized over the past 70 years, with pork producers developing core competencies enabling them to work with processors to keep quality high and costs low and deliver to consumers the products they want. Using legislative action to stop or slow these changes is likely to leave consumers and producers less well off."
Until earlier this year, Korves was an economist with the American Farm Bureau Federation, serving as chief economist for three years. Korves' other findings include:
Consumer demand for pork products is changing. More consumers insist on fresh food products year-round, purchase processed and pre-cooked foods that take less time to prepare, prefer branded to unbranded products, respond to perceptions about socially responsible production, and increasingly buy from major retail grocery and restaurant chains.
Pork producers are becoming increasingly specialized, enabling them to develop core competencies that make them more efficient than yesterday's farmers and ranchers.
The pork industry has become more vertically and "virtually" integrated in order to respond quickly to changing consumer demand and capture the benefits of producer specialization.
Integration benefits pork consumers by increasing the quality and lowering the price of pork products; integration benefits pork producers by creating new opportunities to specialize and to profit while reducing their risk.
Regulations that prohibit or curtail the use of production and marketing contracts would hurt all market participants, including and even especially consumers. Markets are working well, and policymakers should leave well enough alone.
"Regardless of how producers raise and market hogs, pork production will remain a risky business,” notes Korves. “Production and marketing contracts are helping many small and mid-sized producers better manage risk while gaining access to the capital and markets they need to remain competitive. It's a clear case of markets working well."
To read an executive summary of the study, go to: http://www.heartland.org/Article.cfm?artId=15814%20
Korves' report, "Opportunities and Benefits from Pork Industry Organization," was commissioned and released by The Heartland Institute, a national nonprofit public policy research organization headquartered in Chicago.
The Heartland Institute