When It Was a Scandal if Packers Owned Pigs

When Jessie Scott, editor in chief at Successful Farming, asked me to write an editorial for the 30th anniversary of Pork Powerhouses®, my first instinct was to turn her down. Do I want to revisit those years of reporting? 

I retired from Successful Farming in 2021 after writing about the swine industry for 37 years and had seen the best and worst of that most maligned — yet fascinating — chunk of agriculture. During that time, the industry flipped from independent farrow-to-finish family farmers, like my father, to packers owning production. 

The late 1990s, especially, were a time of tremendous stress in the industry. Anyone in the pig business in 1998 and 1999 will never forget it. I will share one example from my reporting that shows the transition to vertical integration.

Does Hormel Own Sows? 

In August 1997, I was collecting data for the fourth annual ranking. The largest producer was Murphy Farms in Rose Hill, North Carolina, a family-owned company with 297,200 sows. The largest packer was Smithfield Foods, based in Smithfield, Virginia, which owned 120,000 sows. Vertical integration was legal in the East, but in the Midwest, most states prohibited packers from owning pigs. 

I got a call from one of my sources at a large feed company, saying packer Hormel Foods was “using Rich Bell to put 20,000 sows in Colorado.” That lead was seconded by a source at a breeding stock company. Bell Farms, based in Wahpeton, North Dakota, was already on my radar, but the tie to sow ownership by Hormel was news.

I called Hormel, located in Austin, Minnesota, and spoke to Ray Bjornson, then director of pork procurement. (Bjornson passed away in 2015.) He said Hormel had a marketing contract with Bell Farms but wouldn’t comment on whether Hormel owned the sows in Colorado, except to say, “We are prohibited from owning livestock or facilities in most Midwest states.”

I called the Bent County, Colorado, county assessor’s office. The Bell farm was incorporated as Mountain Prairie, LLC. There were two deeds for more than 4,000 acres sold to Mountain Prairie in late 1996. The managers were listed as Rich Bell, Gary Ray, and Raymond Bjornson. Gary Ray was an executive vice president of Hormel Foods and Bjornson’s boss. 

“Yes,” Ray confirmed, “we do have an investment in the Mountain Prairie sow operation with Bell Farms, but only for the purpose of securing our own hogs.” 

I asked if Hormel owned the land, the sows, or both. “We’ll leave it a little hazy on that,” he said. “Corporate farming laws in the Midwest limit us to contractual arrangements.”

I wrote the 1997 Pork Powerhouses report with a sidebar story about Hormel integrating into pig production in Colorado with Rich Bell, but I left Hormel off the official ranking of the 50 largest producers. I couldn’t confirm ownership of enough sows in production.

David Nelson, then a Credit Suisse strategist, called after publication to make sure I knew Hormel was watching my reporting closely. He said Hormel did not want to be on my ranking because it knew farmers scrutinized that list. “Joel Johnson [then CEO of Hormel] carries your list around,” Nelson said. “He was impressed with your digging to find out the connection to Bell Farms.” He said the sow operation in Colorado would generate 1 million pigs for Hormel when finished.

Hormel and Bell were not alone in expansion plans. By fall 1998, the industry was saturated with pigs, but not enough shackle space to process the pork. The hog market crashed. Producers were getting as little as $8 per hundredweight (cwt), the lowest price since the 1960s. Yet, on Nov. 25, Hormel Foods announced its best financial performance in its 107-year history, with record earnings. Because Hormel’s contracts were ledger-type, pork producers were accumulating large negative balances.

By the summer of 1999, many independent producers were belly-up. Smithfield Foods bought the two largest producers, Murphy Family Farms and Carroll’s Foods, and owned 675,000 sows.

Fundamentally Changing the Industry

When I made my calls to Midwest producers that summer, they were seething. “There is not one packer that hasn’t taken advantage of producers this year,” said Bruce Rastetter, then owner of Heartland Pork Enterprises, in Alden, Iowa. “The only future in this business is owning packing. You should write a story on what the packers have done to people by changing deals and canceling contracts. It’s fundamentally changing the industry. In the beginning, Hormel had contracts that were right for the industry, but they didn’t stick with them.”

In Minnesota, 150 people showed up at a grassroots meeting to discuss the Hormel long-term hog procurement contracts. Farmers were pressuring me to put Hormel on the ranking, especially since Bell Farms was expanding again, this time in South Dakota. 

“Hormel should be on your list,” said Brad Freking, then and now owner and CEO of New Fashion Pork in Jackson, Minnesota. “Bell doesn’t have the money to build those farms. Split out Hormel on your list.” Freking said Hormel used its leverage during the down market to change the matrix in its favor: “Hormel made a matrix change in October 1998. In September, we made $5 head premium. By October, it dropped to $1.85. By January, it was negative 58¢. I can’t walk away from this contract, or I would.”

I spoke to Ray about Hormel’s involvement in the new Bell farms in South Dakota. He denied it: “There are corporate farming laws that prohibit that.” He continued to insist that I not mention Hormel in the Pork Powerhouses ranking. “We are only an investor in the Colorado sow operation and Bell Farms manages it for us. It’s not really Hormel’s. It’s Mountain Prairie, which is a separate company.”

Hormel Makes the List

In the October 1999 issue, I listed Hormel on the Pork Powerhouses ranking for the first time, including them with Bell Farms in owning 42,000 sows.

A few weeks later, I received a letter from Ray, including Joel Johnson. “We have received numerous phone calls from producers since your article, ‘Pork Powerhouses 1999,’ appeared in the October issue,” it said. “In the article, you list Bell Farms/Hormel Foods as being ranked 17th among the 50 largest pork producers. It disturbs me to see that you have included us. What you are creating by your article is sensational journalism and misinformation directed to hog producers and the public, especially in light of all the changes that are currently going on around the country.”

In November, Hormel announced “a record-breaking financial performance” for its fiscal year. Credit was given to aggressive marketing decisions. 

By 2000, the swine industry had integrated so deeply that if a packer were not on the Pork Powerhouses ranking, investors wondered why. By 2003, Hormel owned all the sows outright at the former Bell unit in Colorado, and Ray was eager to talk about investments in production. 

By 2006, the Iowa ban on packers owning hogs was history. Ray said Hormel planned to “significantly expand our business operations in Iowa.” The Iowa Pork Producers Association (IPPA) had supported the law banning packer ownership since 1975, but it now “recognizes that the industry is evolving,” said IPPA attorney Eldon McAfee.

By 2007, 10 years after I was first alerted to Hormel’s involvement in sow ownership, the packer owned 63,000 sows in production.