Industrial Farming’s Food for Thought

2808207783_340fd5250b_zBy Matthew Prescott

On a cold night last January, a cadre of investors, auditors and accountants filed into the Richard L. Knowlton Auditorium at Austin High School, in Austin, Minnesota — a small town of about 25,000 residents that sits just north of the Iowa border, about 100 miles south of Minneapolis. From their offices across the nation, they’d made the trek to Austin, through the upper Midwest’s sub-freezing temperatures, for the annual shareholder meeting of Hormel Foods — one of the world’s largest meat processors, perhaps best-known as the maker of Spam.

Among the issues to be voted on that night was a shareholder proposal submitted by the Humane Society of the United States and Calvert Asset Management — an investment group with over $13 billion in assets under management — asking Hormel to disclose the risks associated with allowing producers in its supply system to lock breeding pigs in tiny cages called gestation crates. The cages, which are so small the animals confined inside them can’t even turn around, have been widely criticized as representing cruel and unusual pig punishment. As far back as 2002, Florida legislated on the issue, becoming the first of now nine U.S. states to outlaw gestation crates.

But the issue has been brewing for decades. In 1950, the total number of farm animals in the U.S. was around 100 million; by 2007, that number had exploded to 9.5 billion. To accommodate that growth, the vast majority of farm animals have been moved off of farms and into factories. According to the USDA, during the same period over which the farm animal population increased by 9,400 percent, the number of farmers producing that population decreased by 60 percent.

So, many more animals being reared by so few farmers has come with consequences; and not many species have seen those consequences more than the pig.

“Forget the pig is an animal — treat him just like a machine in a factory,” recommended Hog Farm Management in 1976. Two years later, National Hog Farmer advised: “The breeding sow should be thought of, and treated as, a valuable piece of machinery whose function is to pump out baby pigs like a sausage machine.”

And so it was: Between the 1970s and 1990s, the majority of breeding pigs were moved into gestation crates, where they linger for months and years on end, virtually immobilized by the extreme confinement.

Unsurprisingly, the confinement has been met with substantial hue and cry. “Is That Sausage Worth This?” asked the headline of a recent New York Times piece by columnist Nicholas Kristof. “It’s like a life sentence of solitary confinement in a coffin, punctuated by artificial insemination and birth.”

The outcry has come not just from mainstream media, but from major pork-buying companies as well. More than 60 of them — from McDonald’s and Burger King to Safeway and Oscar Mayer —are in the process of freeing their supply chains of pork from gestation crate operations. Some of them, like Target and Kroger, regularly feature their policies on this issue in their corporate responsibility reports.

And for good reason. Industry data shows that consumers favor policies to improve farming conditions. Citigroup reports that “concerns over animal cruelty” can present “headline risks” to food companies. And the World Bank’s International Finance Corp. concludes that, “In the case of animal welfare, failure to keep pace with changing consumer expectations and market opportunities could put companies and their investors at a competitive disadvantage.”

And top pork producers — including the industry’s largest, like Smithfield Foods and Cargill — are responding, by eliminating gestation crates from their supply systems in favor of open pens in which the animals can move and engage in more of their normal behaviors.

But not Hormel.

So, on that cold night last January, it was the risks associated with such a position — the risks of lagging behind competition and of ignoring consumer demand, among others — that Hormel’s shareholders were being asked to vote on. The vote could either validate or give a discounting shrug toward the concerns associated with gestation crates and the animal abuse they represent.

In the meeting’s lead-up, financial experts weighed in. Institutional Shareholder Services and Glass Lewis — which provide analysis to major banks and investment firms regarding the economic merits of voting for or against such proposals — issued recommendations supporting the proposal. As ISS summarized, a vote in its favor was “warranted, as the company does not provide information about how it is evaluating and managing potential risks related to evolving regulatory and industry trends to shift away from the use of gestation crates.”

And Northern Trust, a trillion-dollar investment firm and Hormel’s eighth-largest shareholder, amended its “proxy voting guidelines” to stipulate that the firm will generally vote in favor of “proposals requesting increased disclosure or reporting regarding animal treatment issues that may impact a company’s operations and products, especially in relation to food production.”

It seemed pigs might finally have their day — and in a very real sense, they did.

The auditorium filled that night, and shareholders cast their ballots. Technically, the proposal didn’t pass; Hormel and its corporate foundation control so much company stock that it gives the company a dangerously-large amount of control over how votes like this go. That was both unavoidable and expected going into the fight.

However, excluding those shares directly controlled by Hormel, more shares were cast in favor of the proposal than against it. It was the first time a shareholder proposal on an issue related to animal cruelty received majority support from (non-company-controlled) shares.

That night, investors affirmed that, with regard to its views about animals, industrial farming’s trajectory may be at odds with that of civil society’s, and that those divergent views present tangible economic risks that companies at least ought to disclose. The proposal may not have passed, but that so many analysts urged its passage, that so many investors voted in its favor, and that such a groundswell of support from within the financial industry emerged, ought to, if nothing else, give Hormel, its shareholders, and others involved or invested in industrial farming food for thought.

Image credit: Flickr/Nick Saltmarsh

Matthew Prescott is senior food policy director for The Humane Society of the United States. He is reachable at mprescott@humanesociety.org or on Twitter at @MatthewPrescott.

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