The following are among the most significant current public policy issues for our company:
- Ethanol: Smithfield favors development of alternative energy sources, but not a flawed corn-based ethanol policy that results in higher food prices for the American consumer and limited net benefit on greenhouse gas (GHG) emissions. In October 2010, the U.S. Environmental Protection Agency (EPA) granted a partial waiver to allow higher percentages of ethanol in motor fuel. Smithfield and many other food producers remain concerned about ethanol policies that have already driven nearly 40 percent of the annual corn crop into ethanol production, directly and substantially driving up feed costs for livestock and jeopardizing the economic viability of hog producers across the country. On November 9, 2010, a coalition of farm and food trade associations that included Smithfield joined with the American Petroleum Institute to file a lawsuit seeking to overturn the EPA’s waiver. Other trade associations, including automotive and engine manufacturers, outdoor equipment manufacturers, and refiners, have subsequently challenged the EPA 2010 decision. Smithfield has opposed continued tax subsidies of ethanol. The Volumetric Ethanol Excise Tax Credit has been in place in one form or another for more than three decades and now provides billions in support to a mature industry. As consumption grows with the Renewable Fuels Standard, so does the cost of the tax credit. Corn-based ethanol is the only product that is supported three ways by the government: with a 45-cent per gallon tax subsidy, a 54-cent per gallon tariff on imported ethanol, and a mandate that forces the public to buy the product.
- Free Trade Agreements: In 2011, the U.S. Congress passed free trade agreements with South Korea, Panama, and Colombia. These agreements will offer U.S. companies, including Smithfield, vastly expanded access to consumers in these countries. As one of the largest economies in the world, South Korea provides a great opportunity for U.S. meat industries to expand exports and create a level playing-field with our competitors. Smithfield is confident these trade agreements will boost U.S. exports and create more jobs here in the United States.
- GIPSA: In June 2010, the U.S. Department of Agriculture's Grain Inspection, Packers and Stockyards Administration (GIPSA) issued a proposed rule regarding the marketing of livestock and poultry. Concerns have been raised by members of Congress and stakeholder groups that the proposed rule went far beyond what Congress had intended in the 2008 Farm Bill and did not include a thorough economic analysis. Of particular concern to Smithfield are provisions that would cause use of marketing agreements between producers and packers to be severely reduced or disappear, and provisions that would prohibit packers who own livestock from selling those animals to another packer. Smithfield believes that the rule should be significantly altered so it follows the intent of Congress in the 2008 Farm Bill.
- Farm Bill: In 2011, the U.S. Congress was set to begin work on a new Farm Bill. As we have done in the past, we will take an active role in the debate. Of particular concern to our company is any effort to ban meatpackers from owning livestock. Many in our industry, Smithfield included, choose to own or contract for livestock because it is the most efficient way to deliver consistent, high-quality, affordable meat products. Given our business strategy of vertical integration, we will continue to strongly oppose any such provision.
