Hog farming and pork product processing are major industries in North Carolina, especially for the eastern part of the state. In 2012, the industry employed nearly 13,000 people in North Carolina across all stages of the value chain. Smithfield Foods, a national leader in pork products, operates many facilities in North Carolina and is a major source of jobs and revenue.
In this section we introduce the key sections of the website, including the structure of the industry using a value chain framework, an overview of the industry from both the labor market and policy perspective, and the key trends and dynamics that are shaping this industry now and in the future. In each section the past and present trends in the industry are analyzed from the perspective of North Carolina, the United States and North Carolina’s footprint compared to other states.
Hog Farming Value Chain
Hog farming represents an integral part of the broader industry that entails the rearing, butchering, processing, and selling of hogs, known as the pork production industry. Pork production consists of six separate stages: research and development, hog farming, meat processing, finishing and packaging, product distribution, and retail. For North Carolina, hog farming itself is the most important of these value chain links. The farming stage also consists of six different areas, breeding, gestation, farrowing, weaning, nursery, and grow finishing. North Carolina firms participate in all of these links.
Overview of the Industry
The timeline below highlights the growth and changes within the hog farming industry since 1980, and the political and social steps government, labor and non-profit groups have implemented to affect change in the governance and regulation of the industry.
- 1980: North Carolina hog farms range between 10,000 and 25,000 hogs in size.
- 1985: North Carolina ranks 7th nationally in hog production.
- 1991: North Carolina Senator Wendell Murphy co-sponsors legislation that exempts large-scale hog farms from local zoning regulations.
- 1992: Smithfield Foods, Inc. opens the world's largest meat processing plant in Bladen County, North Carolina.
- 1995: North Carolina Senate passes Bill 1080, the Swine Farm Siting Act, requiring new swine houses or lagoons to be located at least 1,500 feet from an occupied residence, at least 2,500 feet from any school, hospital, or church and at least 100 feet from any property boundary (10).
- 1995 (June 21): The lagoon at Ocean View Farms in Onslow County, North Carolina overflows dumping over 20 million gallons of hog waste into the New River causing massive fish kills and spurs environmental debate.
- 1996: President Clinton signs the Freedom to Farm Act in an attempt to cut federal-farming subsidies.
- 1997: The Clean Water Responsibility Act, part of Bill 515, places a moratorium on the construction of farms with more than 250 hogs or the expansion of existing large farms in the state of North Carolina (11).
- 1998: North Carolina's hog population rises to 10 million from 2 million in 1992 (12).
- 1999: Hurricane Floyd hits North Carolina, flooding hog waste lagoons and contaminating the water supply (13).
- 1999: Renewed moratorium on "lagoon-farms"; there are no limits on farms using environmentally superior technologies.
- 2000: The Smithfield Agreement: Smithfield Foods and Premium Standard Farms (PSF) entered into an agreement with the Attorney General of North Carolina to fund environmentally superior technologies (ESTs) for hog waste management. Researchers at North Carolina State University are charged with the technology determinations.
- 2002: Frontline Farmers joins the Smithfield Agreement.
- 2003: North Carolina Governor Mike Easley successfully calls for a four-year extension of the moratorium on the construction of hog farms in eastern North Carolina (14).
- 2005: Environmental Defense and Frontline Farmers draft a plan, which calls for elimination of lagoons in North Carolina. The plan would gain sponsorship by Representative Carolyn Justice and becomes Bill 1532, the Clean Hog Farms Act of 2005.
- 2006: The Clean Hog Farms Act of 2005 is altered, becoming Bill 1730 the Clean Hog Farms Act of 2005-2, creating a cost-share program for farmers who volunteer to place ESTs on their farms. Despite this change, the bill does not make it through the General Assembly of North Carolina.
- 2006: The Smithfield Agreement concludes. Researchers determine that none of ESTs evaluated are economically feasible for existing farms. Five, though, would be economically feasible for new farms.
- 2006: North Carolina State University is awarded a $75,000 grant intended to spur the development of byproducts from two of the leading ESTs. The project will generate value-added products from hog waste and evaluate the economic potential of the products to generate new income for farmers.
- 2006 (May): Smithfield Foods and Premium Standard Farms agree to $810 million merger.
- 2006 (November): A two day walk-out by workers at Smithfield Foods' Tar Heel, North Carolina plant was met with the company meeting with a group of elected workers to negotiate a settlement to halt the wholesale firing of immigrant workers.
- 2006 (December 2): More than 600 protestors from various labor unions, religious organizations,and activist groups boycotted Smithfield Foods products at 11 North Carolina Harris Teeters, a North Carolina based company. The protest, entitled North Carolina Statewide Day of Action, was to show support for the workers at Smithfield's Tar Heel, North Carolina plant.
- 2007: Smithfield finalized the purchase of Premium Standard Farms in an $800 million deal (15).
- 2007: North Carolina moratorium on construction of new hog farming becomes law.
- 2008: Smithfield sells biofuel plant in Utah citing the infeasibility of using hog waste for fuel (16).
- 2010: Maxwell food buys Smithfield’s 49% stake of Butterball Turkey
- 2013: Chinese firm ShuanghuiGroup announced a bid to acquire Smithfield Foods in May; the acquisition was finalized in September for $4.7 billion (17).
Employment, wages and establishments have increased steadily in the United States and North Carolina at the aggregate level of the hog farming value chain over the last two decades. In 1992, the U.S. hog farming industry employed 281,231 people in 7,838 establishments. By 2012 this number increased to 327,350 workers in 8,031 establishments, an increase of 14.1% and 2.5% respectively over the last two decades (1992-2012). In North Carolina, hog farming grew 89% between 1992 and 2002, but growth slowed between 2002 and 2012, only increasing 11.2%. One factor which slowed the growth of hog farms between 2002 and 2012 was a 1997 moratorium and subsequent law which limited the number of new farms that could be built in the state (8). Another force driving the reduction is the consolidation of operations by Smithfield, one of the nation’s largest hog processors (9).
North Carolina has the second most establishments at a 2012 total of 571, or a 7.1% of the national total. It is also the ninth largest overall employer, representing 4.1% of total U.S hog farming employment. In 1992, North Carolina was the 15th largest employer, and its relative share of national employment was slightly lower (2.6%) Similarly, its national share in number of establishments was also slightly lower in 1992 when it only had 252 hog farming establishments (3.7%). The only segment of North Carolina’s hog farming value chain experienced a decline over the period 1992 – 2012 has been the number of animal, except poultry, slaughtering establishments (falling from 61 establishments in 1992 to 46 in 2012).
Across the U.S. value chain, the components segment of the chain (specifically, the animal, except poultry, slaughtering) dominates employment numbers; as it does in North Carolina too. While the highest average annual wages across the U.S. are paid at the rendering and meat byproduct processing segment ($51,738 in 2012), in North Carolina, however, the animal, except poultry, slaughtering segment maintains the highest average annual wages at a 2012 average of $34,446. Although annual average wages across all segments in North Carolina have increased in the two decade period 1992 to 2012, its average growth rate of 40% has been slightly lower than the average national growth of 41.7%. North Carolina in particular maintains an 18.8% share of the U.S. total number of hog and pig farms, and with 427 in 2012 it was proportionally North Carolina’s largest share of total establishments (74.78%). However, across the U.S. the largest number of establishments resides in the distribution segment (meat and meat product merchant wholesalers), with a national total of 2,439 establishments.
Geographically, the hog farming value chain is concentrated in one cluster in the southeastern part of North Carolina. This regional cluster includes Duplin, Wayne, and Pender counties as well as part of Sampson County.
North Carolina remains an important site for hog farming for the United States. Smithfield is a major employer in hog farming in the state, with many of its largest processing plants within the state. Additionally, Smithfield controls an estimated 90 percent of all hog production in North Carolina (3). Other top firms, such as Prestage and Maxwell Foods, often partner with Smithfield in many operations. Other important firms, such as TDM Farms Inc. and The Pork Company, despite their smaller size, engage in multiple aspects of food value chains. For example, TDM Farms is part of the Hog Slat Corporation which operates research facilities to improve hog farm equipment. TDM Farms is an in-house facility to test and modify new product offerings. The Pork Company is part of the Villari Food Group which is active in all segments of the value chain. Despite the variety of corporations, the most crucial to the state is Smithfield, which also has the largest market share in the United States, 31% in 2008.
Government policies shape many trends in the industry, most notable the Smithfield Agreement established in 1997 and later formalized as a law in 2007 which provides a moratorium on any new hog farm constructions that will house over 250 sows (4). Designed to help curb environmental concerns around large hog farms, critics argue the policy change does little to help protect the state environment due to the large number of loopholes in the legislation. Additional shifts in policy include funding to find environmentally superior technologies to help with the industry and labeling programs. Programs designed to promote environmentally superior technologies gives funds to organizations and companies working to produce new technologies that will help reduce environmental costs associated with hog farming. On a national level, country of origin labeling laws requires processors to identify the country where a hog was grown and processed. These policies attempt to increase focus on environmental concerns in the industry and to highlight the origin of pork products.
Trends & Developments
U.S. Industry Consolidation
Over the last two decades, the U.S. pork production industry has seen a tremendous shift towards consolidation. In 1985, the top four pork-producing companies in the United States accounted for 32% of the market. In 2006, industry consolidation resulted in the top four pork-producing companies controlling 63% of the market (2). In 2008, this further increased to 69% after Smithfield acquired PSF in 2007 (1; 2).
|Company Name||Nationwide Market Share (2006)||Market Share (2008)|
|Top 4 Companies||63%||69%|
|Premium Standard Farms (PSF)*||6%||N/A|
Sources: 2006 (2); 2008 data (1); (*) PSF was acquired by Smithfield in 2007.
Leading the way in the industry are vast corporations that utilize vertical integration to maintain quality and oversee all aspects of production. The leading pork packing companies own thousands of sows themselves, have contracts with other hog farmers to raise even more sows, and have direct contracts with most of the other hog packers. As a result of the consolidation within the hog farming industry, five major vertically integrated pork-producing companies have emerged as industry leaders.
Global Hog Farming & Pork Product Industry
The hog farming industry is highly globalized with high levels of trade occurring between nations and firms expanding operations on an international scale. On the whole, Canada, China and the United States are the leaders in hog farming and pork production, but many of the businesses within Canada and China are acquisitions, subsidiaries, and partners of some of the leading US companies. The United States is the second largest pork producer behind China and is one of the largest exporters (33% of global shares in 2009) alongside Canada (20 % of global exports in 2009) (5).
In 2012, pork exports from the United States equaled 23.15% of domestic pork production. The top three markets for hog exports from the United States are Japan, Mexico, and China, which all account for 59.1% of exports (6). Japan and Mexico combined consumed 10.9 % of all pork produced in the United States in 2012 (6). The combined value of pork exported to Japan and Mexico in 2012 was over 3 billion and total US exports were valued at $6.3 billion or 2.2 million hogs (7).
Pork is a major food product beyond the United States. Globally, pork represents 40% of meat consumption in 2012 (5). The highest consumption per capita in 2012 was in Montenegro, Belarus, and China, each consuming on average 89 pounds of pork or higher per capita per year (5).
- Lowe, M. & G. Gereffi. (2008). A Value Chain Analysis of the U.S. Pork Industry. Report for Environmental Defense Fund. Duke University, CGGC: Durham, NC.
- Food and Water Watch. (2011, March). Pork Processing Highly Concentrated, Hog Production Vertically Integrated. Retrieved March 10, 2014.
- Food and Water Watch. (2010, August). Factory Farmed Hogs in North Carolina. Retrieved January 17, 2014.
- “Agreement between the Attorney General of North Carolina and Smithfield Foods Inc.; Brown's of Carolina Inc.; Carrol's Foods Inc.; Murphy Farms Inc.; Carrol's Foods of Virginia Inc.; and Quarter M. Farms Inc." (2000, July 25). Retrieved on February 24, 2014 from www.cals.ncsu.edu/waste_mgt/smithfield_projects/agreement.pdf
- Pork Checkoff. (2011). Quick Facts: The Pork Industry at a Glance. Retrieved March 17, 2014.
- Plain, R. (2013). Economic Impact of U.S. Pork Trade, 1986-2012. University of Missouri-Columbia Dept. of Agricultural & Applied Economics Working Paper No. AEWP 2013-2. Retrieved March 17, 2014.
- National Pork Producers Council. (2014). Pork Facts. Retrieved March 18, 2014.
- Hardy, S. (2012, January 4). The Price of Pork. Endeavors. University of North Carolina at Chapel Hill. January 4, 2012. Retrieved February 12, 2014.
- “Smithfield Foods slashing 1,800 jobs, closing 6 plants.” (2009, February 17). Triangle Business Journal. Retrieved February 10, 2014.
- Oakley, D. & J. Longest, Jr. (1996, March 11). North Carolina Attorney General's Office, "Meaning and Applicability of the Swine Farm Siting Act," Letter to Arlie F. Culp, North Carolina State Representative. Retrieved on February 25, 2014.
- Environmental Defense. (2002, Nov). "Major North Carolina Laws Related to Hog Factory Farms". Retrieved on February 25, 2014.
- Democracy-NC, "The NC Hog Industry: The Smell of Money" Retrieved on February 25, 2014.
- Kilborn, P. (1999, Oct. 17). "Hurricane Reveals Flaws in Farm Law," New York Times. Retrieved on February 25, 2014.
- Pork Network. (2003, May 8). "N.C. Moratorium Extended to 4 Years." Pork Network. Retrieved on February 25, 2014.
- Smithfield. (2007, May 7). “Smithfield Foods Completes Acquisition of Premium Standard Farms, Inc.” Retrieved February 25, 2014.
- E-Feedlink. (2008, Feb. 14). “Smithfield Sells Utah Biofuels Plant.” E-Feedlink. Retrieved on February 24, 2014.
- Tadena, N. (2013, Sept. 24). “Smithfield Shareholders Approve Shuanghui Deal.” Wall Street Journal. Retrieved on February 25, 2014.