Pork Buyers May Pay Price for McDonald’s Sow-Pen Demands

(Corrects spelling of Mankato in ninth paragraph of story that was published yesterday.)

Pork producers say U.S. consumers will pay more for the meat if the industry abandons the practice of confining sows to single stalls to appease food companies including McDonald’s Corp. (MCD) demanding open pens.

The majority of sows in the U.S. spend time in solitary gestation pens, the National Pork Producers Council said yesterday in a statement. The industry moved to individual stalls to cut costs, so changing back will be expensive, said Ron Plain, a University of Missouri economist who surveyed producers that hold 63 percent of the nation’s sows.

“It costs more to make these changes and operate this way, and the question is, who’s going to cover these costs?” Plain said in an interview at the World Pork Expo in Des Moines, Iowa. “As an economist, I can tell you, ultimately the consumer is covering the cost of what they buy.”

McDonald’s, the world’s largest restaurant chain, and Kroger Co. (KR), the biggest U.S. grocery store chain, have urged suppliers to phase out gestation crates that animal-rights advocates contend are cruel. Producers say the method is more efficient and protects the sows. Pork council President R.C. Hunt, a North Carolina hog farmer, said that the changes would be “extremely difficult and costly.”

Only 17 percent of sows spend a portion of gestation in open pens, according to Plain’s survey of 70 hog operations that owned about 3.6 million of the nation’s 5.7 million sows. Only producers with 1,000 or more sows were surveyed. The pork council said that the results confirmed that a return to open pens would mean wide-scale changes in the industry.

Pen Ban

McDonald’s, based in Oak Brook, Illinois, said in February that it will require its suppliers to provide pork for its U.S. business from producers that do not house pregnant sows in gestation stalls. The company, which buys about 1 percent of the U.S. pork supply, last week set a 10-year time line for suppliers to comply. Cincinnati-based Kroger said June 4 that that it’s encouraging suppliers to “accelerate” the transition away from gestation crates.

“Americans just don’t agree with confining animals so restrictively,” Matthew Prescott, a food policy director for the Humane Society of the U.S., said in an e-mail. “They spend their lives unable even to turn around. Anyone who says gestation crates are the best farmers can do for pigs is selling farmers short and selling animals out.”

Tracking System

Additional costs would be incurred to create a tracking system for the animals. McDonald’s serves sausage that is made of ground-pork trimmings from a variety of animals, and there’s no system to knowing which ones were raised in open pens, Plain said.

Mark Greenwood, a vice president at AgStar Financial Services Inc., a hog-industry lender in Mankato, Minnesota, said at the pork expo today that it may cost $200 to $300 per sow to change the way animals are housed.

McDonald’s decision may put “significant pressure” on smaller farmers who use gestation stalls, according to Everett Forkner, the former president of the National Pork Board and a farmer from Richards, Missouri. Forkner said in a statement that he moved his hogs from open pens to stalls many years ago to protect sows from being injured or to ensure they don’t lose feed rations to aggressive sows in the same pen.

Company Decisions

“I just don’t want any farmers to go out of business because they don’t have the financial capital to transition away from their current production practices due to decisions made by food companies that don’t fully understand the issue or ramifications of a decision like that,” Jarrod Sutton, an assistant vice president at the National Pork Board, said in an interview at the expo. “They don’t understand why our industry uses gestation stalls.”

Individual stalls allow producers to control the feeding of each animal, keep animals from fighting, and to more efficiently inspect the animals, Plain said. Any time sows “co-mingle,” there will be fighting, he said. Sows are social animals that will “establish a pecking order” by fighting.

“You don’t want to stress a sow shortly after she’s bred because you tend to get fewer pigs born,” Plain said. “If fewer pigs are born per sow, then the cost per pig goes up.”

The costs of having to make the changes may push older producers of the business, said Sam Carney, a past president of the pork council and a meat producer in Adair, Iowa.

‘Just Retire’

“If there’s an older guy that doesn’t have family members in his operation, he’s not going to do it,” Carney said in an interview at the expo. “He’ll just retire.”

While the industry will incur costs to make the switch, the impact on productivity doesn’t appear as large as estimated, and the changes seem manageable, Steve Meyer, the president of Paragon Economics, an industry consultant, said in an interview at the expo. In the end, the consumer will pay for that increased cost, he said.

“Anything that a consumer or somebody delivering to them does to raise costs will be paid for by the consumer,” Meyer said. “So if consumers don’t want to pay more, they need to tell McDonald’s and others that they’re on the wrong path.”

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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