Despite lean hog futures prices making seven-year highs this year, pork producers in the region are seeing a negative market impact from April’s federal court ruling against the New Swine Inspection System line speeds.
On April 9, 2021, a Minnesota federal court ruled that the U.S. Department of Agriculture’s Food Safety and Inspection Service violated the Administrative Procedures Act when it adopted NSIS, which eliminated line speed limits for pork processing. The lawsuit was brought against the USDA by the United Food and Commercial Workers Union and three of its local chapters in Minnesota, Iowa and Kansas and challenged the Trump administration’s 2019 rule change, arguing that faster slaughter speeds undermined worker safety.
National Pork Producers Council President Jen Sorenson said the court decision is reducing processing capacity by 2.5% nationally. However, pork producers in states like Minnesota and Nebraska, who deliver to the six processing plants affected by the ruling, are seeing processing speeds slow down as much as 25%. That’s leading to a backup of hogs in some areas and a negative impact on prices as smaller producers near the plants are forced to sell on the spot market. Analysis by Iowa State University shows about an $80 million impact to producers if those plants continue to see a slowdown in line speeds.
“And so now our daily capacity is more like 9,300 head a day. So that’s had a pretty big impact on us at this point,” he said. That equates to a 12% reduction in Wholestone’s harvest.
Webb said the problem besides the cost impact is that the capacity of the plant is set nearly two years in advance. For example, in January of 2020, Wholestone drafted all the pigs from their member owners for all of 2021.
In the meantime, Wholestone Farms is studying other options, such as adding a second evisceration line where the inspection points occur.
“And then bring them back into one after they get through the evisceration process, because that part of the line is where the actual inspection goes for NSIS line speed. That’s where the court case is all centered around that area,” he said.
“Oh, it’s a cost to us and ultimately to our producers due to more labor and more hours to harvest the same number of pigs,” he said.
The impact on the market has also been negative, according to Webb.
“We’ve seen what it’s done to the markets because everything has tightened up. Hog supplies are tight and now you have less capacity to harvest, so the primary outcome to this point is higher cost of food to the consumer,“ he said.
Webb said they have nearly 20 years of safety records to support the faster line speeds.
“The science behind it is that we add employees on the line, and company auditors and government inspectors inspect each carcass along with successful microbiological testing programs, and then, therefore, allowing you to run faster,” he said.
“If you put it into a chart, line speeds over that 20-year period as they steadily climb up, and you put on the same chart injury rate based on OSHA ( Occupational Safety and Health Administration) rate has steadily gone down,” he said.
He said there were likely similar outcomes at other packing plants.
“And so why we find ourselves in this position today, I’m not sure,” he said.
Food safety concerns, while not a part of the Minnesota case, have also been brought up by consumer groups. However, Webb says they have data showing there were some problems 20 years ago when the faster line speeds were implemented, but after they made critical adaptations, the trend changed. “From that point forward, the numbers have done nothing but improve, just like the safety. So, both the food safety and the people safety numbers have gotten better.”
It is unclear yet whether plants like Wholestone or others will end up taking legal action. Webb said it isn’t warranted at this point as they worked with the unions and USDA back in early June to ask for a waiver.
“We’ve submitted all the documentation we were asked to put together by FSIS and USDA as far as people safety, food safety, lines speeds, all of the stuff," he said. "We’ve submitted all that and everybody that’s involved has done the same thing and are awaiting a waiver.”
Dave Preisler, CEO of the Minnesota Pork Producers Association, said the slowdown at the six packing plants has a negative impact on the state’s producers.
He said capacity was fine early this summer because seasonally there aren’t as many hogs, but in the fall, those numbers pick up.
“And so that’s why it’s certainly important to try and have USDA and the federal government kind of solve this issue. Whether it’s through an expedited rule making or an administrative action,” he said.
USDA has been quiet and not taken action on the issue so far. Preisler said pork industry officials know there have been discussions going on and what they’ve heard has been promising, but there has been no resolution announced.
“It’s an important issue. We’ve been touching base with our members of the Senate and members of the House from Minnesota to make sure that they’re also communicating the same thing to the Administration,” he said.
Preisler also noted that federal regulation restricts plants from slaughtering more than 1,106 head of pigs per hour. However, the plants that were cooperating with USDA on the pilot program were allowed to exceed those levels by upwards of a few hundred hogs per hour. The federal court decision in the case says that Wholestone Farms Cooperative operated at an average line speed of 1,295 head per hour in 2020. The tradeoff is they had to take extra measures regarding food safety, while at the same time monitoring what was happening with employee injuries.
“And the reality is, those plants were doing a better job than the industry average,” Preisler said. “The real value proposition for everyone is being able to run a little more efficiently, make better use of the plant capacity, and that helps farmers.”
However, the federal court decision, citing affidavits from union members at the plants in the pilot project, said "union members on the evisceration line state that they are more likely to be injured by lacerations when working at faster speeds to keep pace with the line." Also noted in the decision were affidavits from workers saying they had been hit by falling carcasses, been "hooked" by carcass hooks, and suffered overuse injuries.
Preisler said USDA did not argue the worker safety issue.
“So, in the absence of having anyone argue that and really lay that information out, the judge basically said, 'well I don’t have any information to say that it isn’t better.' So, it was really kind of a lack of information with how that court case was presented that created a problem,” he said.
The court decision did cite data from pork producers about worker safety, though. At one plant, belonging to Clemens Food Group, "the (Occupational Safety and Health Administration) reportable incident rate for repetitive motion injuries has decreased from a rate of 18.1 per 100 employees in 2014 to 3.1 in May and June of 2020," the decision said. "The incident rate for lacerations has been more variable, from 2.9 in 2014, to a low of 1.3 in 2019, to a new high of 3.8 in 2020."
In the decision, U.S. District Judge Joan N. Ericksen indicated the problem was not that worker safety was never considered but that the USDA did not discuss worker safety in its final rule.
"But, as explained above, the agency gave no indication that it considered worker safety, let alone that it considered all the factors and determined that worker safety alone weighed in favor of maintaining line speed limits," she wrote.
In the absence of action by USDA, the pork industry is hoping the issue can be solved at an administrative level rather than through congressional action.
“Really it would end up being the Department of Justice and the Solicitor General that would actually have the authority to do that and ultimately the White House,” he said.
According to Preisler, the solicitor general could do an expedited rulemaking to fix some of the things that were shortcomings in that court decision. So, the industry continues to wait and hope for the best as the hog numbers seasonally increase into fall, which could put further pressure on prices.