Glickman Officially Asks for Justice Probe

September 29, 1999

Agriculture Secretary Dan Glickman has asked Attorney General Janet Reno to investigate Smithfield Foods' acquisition of Murphy Family Farms "for any detrimental effects on hog producers, competitive conditions in hog markets and the nation's rural communities."

Even though the acquisition would double Smithfield's size to nearly 700,000 sows, four times more than its nearest competitor, Continental Grain Co., Smithfield would control only about 11-14% of the nation's sows and Continental about 2-3%.

In making his request, Glickman noted that a significant portion of Murphy's hogs are in North Carolina and Iowa. "Iowa prohibits packer ownership of livestock, and, therefore, Smithfield may be forced to divest the Murphy Iowa operations."

Glickman included a list of issues Justice could examine:

--The acquisition's effect on price paid to growers due to reduced opportunities to bargain with different contractors;

--The acquisition's effect on the quantity of hogs traded on the spot market and the effect of a thinner spot market on prices paid to growers;

--The likelihood that the acquisition will result in significantly increased market power for Smithfield with a concomitant increase in the potential for anti-competitive or predatory action;

--Whether the acquisition will lead to packer to packer sales. If Murphy continues to supply hogs to IBP, as it does now in the Midwest, these sales could result in an exchange of information between competitors, according to USDA;

--Whether the acquisition will effect producers adversely on a regional basis. "For example, if IBP will no longer slaughter the hogs it current purchases from Murphy, IBP may reduce its slaughter facilities in certain sections of the country. This reduction in slaughter capacity would adversely impact other pork producers who supply those plants," the letter stated.