Buying a Pig in a Poke

Just as sure as winter comes to the forty-ninth parallel, North Dakota’s law which prohibits farming by corporate entities comes under attack by the state legislature. This year, a bill has been introduced into the senate which would allow corporations to own or lease up to 640 acres of land if it was used for a dairy or a hog production facility.

The pretext given for this change to our Century Code is that dairies in North Dakota are disappearing and the number of pigs is falling off. In 2000 there were 350 dairies in North Dakota and now there are 91. Pigs have gone from a statewide population of 18,000 to 13,000. According to Agriculture Commissioner, Doug Goehring, these numbers indicate it’s time to give these two industries a boost. That boost is proposed to be in the form of giving corporations the opportunity to own or lease land on which to build dairies and hog barns.

It seems a bit of a leap to conclude that the problems with the dairy and hog industries in North Dakota is a lack of legal corporate investment. The world has a surplus of milk and just as other farmers, North Dakota dairies compete in a world market. Economic analysts don’t expect milk prices to improve for at least the next five years. To compete and make profits in a surplus market, a business needs to be the least cost producer of it’s product. Land in North Dakota is cheaper than in many parts of this country, but there is a reason for that. Nine months of winter mean that far larger inputs of energy are needed to keep milk cows comfortable. Feed and transportation costs are high. Even before the boom in the oilfields, dairies in the state had a hard time finding labor to milk their cows and needed to bring workers from all over the world to staff their facilities.

Out of state corporations have been involved in hog production in the state for years. They just have not owned or rented the land. They own the hogs and through debt and contracts, they own the farmers. They have not needed to make the capital investment of owning land. Hog prices, too, are currently facing a rapid decline as production increases.

Perhaps the hog and dairy industries are facing a crisis of low prices and lack of profit, not a lack of investment.

Senate Bill 2351, introduced by Senators Wanzek, O’Connell and our own District 10 Senator Miller along with Representatives Headland, D. Johnson, Trottier, vaguely creates new exemptions to the state’s law prohibiting corporate ownership and leasing of farmland. The law, as proposed, would allow an exemption for domestic corporations and LLC’s to own or lease land for the operation of a dairy or a hog production facility as long as the total does not exceed 640 acres. It only allows exemptions for dairy and hog production.

Why only two minor segments of our state’s agricultural sector? Why not include exemptions for chicken and turkey production and sheep and llama farms? The numbers for those sectors have also decreased in recent years.

What would including an exemption for two types of farming operations from the restrictions of our anti-corporate farming law have on the constitutionality of the law in its entirety?

In the 2009 court decision which upheld the constitutionality of North Dakota’s law, Southeast District Judge James Bekken, wrote, “The court agrees with the state’s analysis that North Dakota’s prohibition on corporate land ownership is essentially all-encompassing, not selective, and not discriminatory.”  The validity of the law was argued by Attorney General Wayne Stenehjem in the case against a nonprofit foundation, Crossroads, Inc., in their efforts to maintain ownership of 1700 acres of wildlife habitat. If the law specifically exempts only two types of farming, does that not destroy the nondiscriminatory, all-encompassing nature of the law itself?

Only a few short months ago, the voters of North Dakota voted against an amendment to the Constitution of the state which would have earmarked a portion of the state’s oil revenues for funding future conservation projects. The initiated amendment was soundly defeated. Many of the reasons for the defeat were well-founded.

One of the major fears, raised by the amendment’s opponents was the impact such funding could possibly have on the price of farmland. Foes argued that wealthy, out-of-state, environmental organizations would buy up huge tracts of the state and drive the price of land out of the reach of working farmers. North Dakota Farmers Union even raised the possibility of conservation groups successfully attacking the state’s decades old law which prohibits farm ownership by corporations and nonprofits organizations.

Won’t the ability of corporations to buy farmland also drive the price up? A domestic corporation is one which is simply registered to do business in the state. Smithfield Farms, the world’s largest pork producer, has annual revenue of 13 billion dollars, 46,000 employees, facilities in 26 states, Mexico and 10 European countries. It produces 15 million pigs a year from “squeal to meal.” In 2013 Smithfield Farms was sold entirely to Shuanghui Group, a Chinese meat processing company. All Smithfield needs to do is to establish an in-state subsidiary, registered in the state. Will one shareholder need to work on the farm? Will this corporation need to meet the same restrictions as a family owned corporation now does? Will North Dakota farmers be able to compete with such companies for farmland? Will groups of farmers even be able to muster the resources to outbid Smithfield?

Our state’s anti-corporate farming bill has been found to be in compliance with the U.S. Constitution. It was passed by a majority of voters of the state as an initiated measure in 1932 to protect family farmers from the unfair competition by corporations for the purchase of farmland. It has served us well. Has the need for the prohibition changed?

Give your Senator a call or send him an email.

Copyright © 2015 Janet Jacobson and Sustaining the Northern Plains