you also have to understand "vertical integration" - this is where the small producers get squeezed completely out of the picture and only the huge multinational corporations are left
http://www.consumersunion.org/other/animal/vertical.htmVertical Integration and Factory MeatFamily farming was once the bedrock of local economies across Texas. Family farms supported local businesses, bought grain and feed locally, and employed additional farm labor. In the High Plains, many families still work the land first opened up at the turn of the century by their great-grandparents.
But today most food is produced not by family farmers but by a handful of giant agribusinesses that bear little resemblance to the traditional family farm. In the large animal and dairy production facilities, a thousand animals may be confined in each of dozens of long barns. The farm manager trucks in massive quantities of grain purchased wherever it is cheapest and ready and stores massive quantities of waste in lagoons or dry heaps.
These animal factory farms are often part of a vertically integrated national or multinational commodities corporation that can provide its own feed and take the animals directly to its own slaughterhouse. First, the major agricultural conglomerates control most of the processing. Since the processors purchase animals from the farmer, this means there are relatively few markets for small meat producers. For example, in the markets for beef, chicken, and sheep, the largest four corporations in each industry control anywhere from 50 percent to 87 percent of the market and some firms such as Cargill and ConAgra are in the top four for multiple industries. (1) Currently only four packing houses process more than 60% of the federally inspected hogs sent to slaughter. (2) In the beef cattle industry, the four largest beef packers accounted for at least 71 percent of output in 1992 and as much as 87 percent by 1998. (3)
Vertical expansion by corporate farms allows them to control most or all aspects of production. Continental Grain processes and sells pork and poultry, operates feedlots, and sells nutritionally enhanced corn used as poultry and livestock feed. (4) Cargill, the largest private corporation in the US, maintains diversified operations in grain trading, food processing, cattle feedlots and contract hog production. (5) Koch Industries owns cattle ranches, feedlots, fertilizer and agricultural chemicals, and seed and feed processing plants-allowing it to control its inputs and send its cattle to its own feedlots. (6) ConAgra, an integrated beef, pork and poultry company, recently announced its intention to "source internally" an additional $1 billion in goods and services previously purchased from others. "Internal sourcing will keep more profit margin inside ConAgra," the company said. (7) This high level of consolidation makes it difficult for smaller producers to remain competitive, in part because corporations that control more than one industry "can afford to operate at a loss in one area in order to eliminate the competition." (8)
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http://www.smithfieldfoods.com/Understand/Vertical/In 1990, Smithfield Foods flew 2,000 sows specially bred by Britain's National Pig Development Company (NPD) to the United States. Armed with exclusive U.S. rights to their genetic lines, Smithfield envisioned that these NPD sows would form the nucleus of a herd that was significantly leaner than any other commercially raised hogs available.
Six years later, Smithfield Foods and hog raising partner Carroll's Foods had successfully produced enough NPD hogs to launch Smithfield Lean Generation Pork™, the first fresh pork to be certified by the American Heart Association for its low fat, sodium, and cholesterol content. In fiscal 2001, this product's sales volume topped 100 million pounds.
"Lean Generation is an outstanding example of why we began vertically integrating this company," says Smithfield Foods Chairman, President and Chief Executive Officer Joseph W. Luter, III. "It has allowed us to develop consistent, branded products that are truly different from anything else in the marketplace. As a result, we can command a premium for fresh pork, something that has historically been thought of as a commodity item."
Today, Smithfield Foods produces 12 million hogs and processes 20 million annually, making it the world's largest vertically integrated pork processor. Through its hog raising and pork processing subsidiaries, the company can exercise complete control over its products—from their genetic lines and nutritional regimen to how they are processed, packaged, and delivered to customers.
"We like to say that vertical integration gives us control over our pork products from squeal to meal," observes Lewis Little, president of The Smithfield Packing Company, Smithfield Foods' largest processing subsidiary.
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