The nation's only ban on hogs owned by meatpackers was expected to end after Nebraska lawmakers voted Friday to repeal a state law designed to keep large processors from exerting too much leverage over small farms.
Senators gave the measure final approval with a 34-14 vote, despite sharp divisions among the state's farm groups and rural senators. Republican Gov. Pete Ricketts' spokesman said the governor intends to sign the bill.
Supporters touted the measure as a way to help Nebraska's slowing hog industry. As of last year, Nebraska's hog production had matched the national growth rate at 14 percent over a decade, while South Dakota's increased by 53 percent, Iowa 30 percent, Minnesota 25 percent and Missouri's 22 percent, according to the U.S. Department of Agriculture.
But critics said the bill would give meatpackers too much leverage over farms by allowing them to own the animals from birth to slaughter. With their own captive supply, processors don't have to bid as often on the open market, leaving producers with fewer buyers for their hogs and driving down prices.
Sen. Ken Schilz of Ogallala said he introduced the bill to keep Nebraska's hog industry competitive. Schilz, a farmer and chairman of the Legislature's Agriculture Committee, said the 1998 ownership ban applies only to in-state meatpackers, which creates an incentive for them to leave Nebraska.
Schilz said the bill could help new farmers enter the market because contracts offered by meatpackers give lenders confidence that a producer will be able to service a loan.
"This will give opportunities for the folks who want to take advantage of that," Schilz said after Friday's vote. "I would guess that in the next two to three years, we will see an impact."
John Hansen, president of the Nebraska Farmers Union, said contracts offered by meatpackers impose tight controls on how the hogs are raised and place many of the risks and expenses onto producers, who are often saddled with debt to build their operations. Farmers who complain about a meatpacker's demands risk losing the contract on which their livelihoods depend, Hansen said.
"When you enter into a contractual relationship with these people, you learn to keep your eyes down and your mouth shut," Hansen said. "The last thing you want to do is be flagged as a troublemaker."
Hansen said his group fears that the repeal could open the door to similar action with cattle operations, one of the state's biggest industries.
Opponents have repeatedly leveled criticism at Smithfield Foods, a Chinese-owned pork processor that quietly lobbied for the bill. Smithfield Foods also donated money to the campaigns of at least 20 current state lawmakers, Ricketts and Attorney General Doug Peterson.
Even some of the Legislature's most conservative, business-friendly senators railed against the bill.
"I am getting email after email from small ranchers, small producers who are against this," said Sen. Mike Groene of North Platte. "But small doesn't count. The little guy doesn't have a voice."
Business groups said the bill would allow farmers to diversify their operations, enter into voluntary contracts and boost the state economy.
"This is a common sense measure that evens the playing field for Nebraska companies," said Barry Kennedy, president of the Nebraska State Chamber of Commerce and Industry.
But the bill divided Nebraska's leading farm groups. The Nebraska Pork Producers Association, the Nebraska Farm Bureau and the Nebraska Department of Agriculture endorsed the legislation, while opponents include the Independent Cattlemen of Nebraska, the Center for Rural Affairs and the Nebraska Farmers Union.
Sen. Lydia Brasch of Bancroft, a Nebraska Farm Bureau member, said the group's support doesn't mean all its members felt the same way. Brasch said she and others had serious concerns about Smithfield Foods' alleged ties to the Chinese government, which the company denies.
"This is a game changer, and this is not a game," Brasch said. "This is very serious."