North Carolina is host to more than 9 million hogs. According to the North Carolina Pork Council, the industry generates about $11 billion a year and supports about 46,000 full-time jobs.
But as we’ve spent the last several editions of CoastLine exploring, not everybody is happy about the industry. There are questions around environmental justice, impacts to water quality, concerns regarding human health for those who live in close proximity to large hog farms. And animal rights advocates say Concentrated Animal Feeding Operations use inhumane practices.
Pork industry advocates and farmers have offered challenges to all of these claims and concerns, and these are documented in previous weeks of this series:
http://whqr.org/post/coastline-animal-well-being-hog-cafos-north-carolina
http://whqr.org/post/coastline-do-hog-cafos-impact-water-quality-nearby-streams-estuaries
http://whqr.org/post/coastline-hog-farming-nc-farm-families-and-environmental-justice
This week’s focus is on alternative uses for hog waste – one of the largest sources of contention surrounding the industry.
Guests:
Don Butler, Director of Corporate Affairs for Smithfield Foods, Inc.
John Classen, Associate Professor, North Carolina State University; Director of Graduate Programs in Biological and Agricultural Engineering
Randy Wheeless, Spokesman, Duke Energy
-------------------------------------------------------------------------------------------------
RLH: Don Butler, to provide some context here, it was the late 1990s when a lot of changes started hitting the pork production industry. Legislation passed in 1997 put a moratorium on the number of hog farms using a lagoon system for the treatment of hog waste. Then in 2000, there was an agreement between Smithfield and North Carolina’s Attorney General regarding the development of new technologies for hog waste management. Tell us about that agreement.
Don Butler: The Smithfield Attorney General Agreement was signed in July of 2000, and it had two basic components. One, Smithfield committed to invest fifteen million dollars in applied technology to look at what’s out there, to see if any of those new or emerging technologies would be applicable for use on hog farms. A mechanism was set up to conduct properly structured trials of all those technologies. As I recall, there were close to a hundred people or companies who submitted ideas for technology that they thought might work. There was an external advisory panel who helped Dr. Mike Williams at NC State winnow those down to 18 semi-finalists, and those eighteen technologies did undergo a rigorous and thorough evaluation from an operational standpoint, from an environmental deliverable standpoint, and from an economic feasibility standpoint.
RLH: And so these eighteen technologies that were semifinalists, were these ways of processing hog waste? Were they ways of converting hog waste to energy? What were they, exactly, or were they all of those things?
Don Butler: Everything that you mentioned was part of the mix. There were technologies that would separate the solid portion of the waste stream from the liquid portion. There were technologies using separated solids as a possible fuel source, as a possible source of fertilizer for other uses. There were just a number of components or unit processes, if you will, that, when strung together, seem like they may provide something that would be very good. It was a long and complicated process.
I mentioned that there were two components of the AG (Attorney General) agreement. The other component was that Smithfield agreed to provide grants for environmental enhancement projects in the amount of two million dollars a year for twenty-five years. So, we’re sixteen years into that and a lot of really good projects have resulted. It’s not exactly the subject of our discussion today, but it is part of the agreement.
RLH: That was a side part of the agreement, and those environmental projects don’t necessarily have to be related to the hog farm industry.
Don Butler: Correct.
RLH: It’s two million dollars that can be dispersed—
Don Butler: In a competitive grant situation, yes.
RLH: John Classen, you were also working on forwarding some of these technologies, you were working with these new methodologies and taking a look at them. What were the parameters? What would make a particular methodology viable or not?
John Classen: There was a definition, at least on the environmental side, of environmentally superior technologies. [That] was a designation that we were testing against, and that included preventing contamination of ground and surface water, drastically reducing ammonia volatilization to the air, substantially reducing, a technical term—
Don Butler: Substantially eliminate.
John Classen: Substantially eliminate, there you go. And then eliminate heavy metal contamination to soils, and reduce pathogen, substantially eliminate pathogen and vector attractions.
RLH: So, if it met those five criteria, then it was considered an environmentally superior technology?
Don Butler: That’s right. That’s right. And then after that, the technology had to undergo the economic analysis and modeling, to see how it performed for the farm and for the industry.
RLH: And were you involved with the economic analysis?
John Classen: I was not. I was not. I was only involved in the environmental performance criteria on the farms.
RLH: Don Butler, how did you establish if something was economically viable, whether it met that criteria?
Don Butler: There was a clear definition within the agreement itself. Dr. Williams had the ability to appoint economists of his choosing to do an analysis of these component technologies and to render a decision as to how expensive they would be, and then Dr. Williams made the decision whether—at the end of the day, he made the decision whether they are economically feasible for a category or categories of farms.
RLH: The state of North Carolina—this came later, Randy Wheeless of Duke Energy?— mandated that Duke get a certain percentage of its energy from alternative sources?
Randy Wheeless: Right, so in 2007, the state passed the Renewable [Energy] Portfolio Standard, which means that, over a period of time, Duke Energy is going to get a little over 12% of their energy or generate 12% of their energy from either alternative methods, renewable energy, or energy efficiency programs. So, a small part of that is that we would get some of our energy from swine waste. It’s proven a little tricky in the early years, although I’d say a few months ago, we announced a project in eastern North Carolina that will capture the methane off of swine waste, clean it up, and put it in a pipeline that can be delivered to our power plants and burned for electricity. So that’s showing some promise. Still not off the ground yet, still in the planning stages, but we think that has some promise, and obviously swine waste to energy could be a bigger factor for us in the future.
RLH: And this is a deal that you have with Carbon Cycle Energy?
Randy Wheeless: Right, so Carbon Cycle Energy is developing the project, and we’re obviously the customer, but being the customer is very important here. So they will construct a digester probably near a large [hog] operation, I think they’re still looking at a couple of sites to do that. They will capture the methane there and then pipe it to us at our power plant. So, a little different— I think, early on, it was thought that the power plant would be near the hog operation, but we’re finding this method of just transporting the methane gas to a pipeline, to a plant that’s already existing makes a lot of sense. We’ll see where that goes. These projects can be very tricky. There’s a lot of complexities to it. It’s also a little more expensive than renewable energy that you’re most familiar with, like solar energy. So, a few things working against it, but the momentum seems to be good right now.
RLH: Just so we’re clear, what are the other forms of alternative energy that you are mandated to fit in that 12%?
Randy Wheeless: A lot of it is up to us, but right now, solar energy is by and far the most frequent renewable energy in North Carolina. North Carolina is third in the nation for solar power. I think anyone who’s driving around eastern North Carolina sees solar farms off the highway. The technology has improved over the last decade. The cost of the panels has come down. The building methods have gotten better. So really, renewable energy in North Carolina, you talk about solar. There’s a little bit of wind that’s being planned, but it seems like solar is the way to go. But, saying that, that’s another technology that, ten years ago, looked like it was way out there and way too expensive. So you’ve had ten years of technology improvements, and now, it’s very competitive with the other forms. Who’s not to say that swine waste does the same thing over the next ten years? Right now, it looks expensive, but as these technologies start to mature and start to improve, who knows what the future holds there.
Rob (email): Our company has several technologies being deployed to reduce solid waste from hog farms and chicken farms. We collect the waste at no expense to the farmers, transport it to our facilities, and convert it to energy in either our anaerobic digesters or gasifiers. We also convert the resultant digestate and biochemistry into organic fertilizer. We share a portion of the profits with the farmers. We are seeking farmers now to sign up for our program, TerraStar Energy. Our first facility is slated to be constructed this year in Columbus county. We have plans to build 30 such facilities in southeast North Carolina. We are doing the same thing in California with dairy waste. We have over 200 facilities doing this currently in Europe. They reduce the problems with solid waste, provide a renewable energy source, and reduce greenhouse gas emissions all at the same time.
RLH: John Classen, why has this been such a hard nut to crack, figuring out what to do with hog waste and how to convert it into either another form of fertilizer or energy?
John Classen: There are actually a couple answers to that question. One is that, in spite of the similarities between pigs and people in physiology and digestion and other anatomy, waste materials are very different. The material that we get from pigs, it defies any other attempts, any other technologies for easy separation. There are differences in the digestibility, especially when it’s only swine waste. And then, also what’s making it difficult is the way we have done it, especially in North Carolina, by using so much liquid from the lagoons to flush the waste out of the house. It’s very efficient and very convenient for the producer, but it’s adding a lot of water to the waste material, which is already a wet material, so you’re working with a very dilute source. The first rule in trying to recover anything is concentration. And that’s why, as Don mentioned earlier, one of the first steps in many Smithfield projects was to separate the solids and the liquids. The other question though is, how can we stop what we’re doing and stop adding water in the first place?
RLH: And why is that important? Why can’t you just dehydrate it or somehow filter out the solids?
John Classen: When it breaks down in water, you actually get some very fine particles and those fine particles lay on top of each other and blind a filter almost instantly. Even doing a laboratory filtration test for solid content that is common, it is a very difficult thing to do with this material as it comes out of the pigs. The other answer is that it takes a lot of energy to dry water, to get rid of water, and when you have 99% of the total material as water, that’s an enormous amount of energy when you’re talking about these kinds of volumes. The practical reason is that, also, when you mix this waste with water, it’s not like mixing sand, [where the solid] comes out and it’s all the same. When the organic matter mixes with water, things start to dissolve. The solids break down even more, the ions start breaking down, the nutrients become dispersed, and it just makes the problem worse. For instance, when it comes out of a pig, some metabolism studies will show this, if you separate feces and urine at the source, most of the nitrogen is going to come out in the urine. When you put that all together in a lagoon and then try and separate it out—you can separate solids, there’s still a lot of water, it’s not efficient—but you have 50% of the nitrogen in the solid phase and 50% in the liquid phase. You’ve done nothing. That doesn’t really concentrate the nitrogen.
RLH: You can’t remove the nitrogen at that point.
John Classen: And the opposite is true of phosphorous. Most of the phosphorous is in feces, and that stays with the solids, but again, because things break down when you mix it with liquid, you don’t get nearly as much separation when you try and pull those solids back out.
RLH: And why are we talking about nitrogen and phosphorous?
John Classen: Those are the primary nutrients that are of a concern. The ammonia form of nitrogen volatilizes to the atmosphere from the houses and from the lagoons and from spray fields. It’s a contaminant in the air. It produces fine particulates and can be dispersed and deposited later in other parts of the environment, and so that’s a problem, but it also represents a loss. That reactive nitrogen is the same nitrogen that is put on crops that, in the Midwest, that go into the feeding, to grow the feed for all the animals, so that represents a significant resource loss. The question is, what is the right way to recover that that actually recovers value and is not just increasing the cost of the overall process.
Larry (caller): My name’s Larry Baldwin. I’ve been the Neuse Riverkeeper for nine years, working also with Waterkeeper Alliance and now currently the executive director of Coastal Carolina Riverwatch and also [unintelligible] Waterkeepers, so I’ve been dealing with the opposite side of this issue, from an environmental standpoint and also from an environmental justice standpoint. So there’s a couple points I have to make. First of all, we are sixteen years into this Smithfield agreement, and it’s still business as usual. We’re still pumping millions and millions of gallons of untreated hog waste onto land, affecting our surface water, affecting our ground water, affecting the communities that live near these facilities. So, sixteen years and nothing has changed except we’re still talking about it. The second point is, we’re talking a lot about methane capture. Capturing the methane is only one part of the pollution that’s in this waste, and to me, it’s a bit of a smokescreen to say “we’re going to use this as alternative power, alternative energy,” when in fact, we’re still putting the same stuff—other than methane—back onto the surface waters, back onto the rivers and the streams. And then, you also talk a little about the economics, “it’s not economically feasible.” Was there, and if there was, any value given to the negative impact to the environment as part of this economic way of looking at any of these projects? It just seems we are sixteen years into this, and nothing has changed.
RLH: Don Butler, I want to get you to weigh in on this. That last question that Larry asked, about whether the environmental impact was part of the economic metric that was used…
Don Butler: Well, first of all, I’d like to respond to a couple of comments that Mr. Baldwin made. He said that, here we are, sixteen years later and nothing has changed. I don’t agree with that. There are a lot of things that have changed. The diets of animals have changed, the genetics of animals have changed, and the fact of the matter is that today, compared to twenty years ago, there’s about half as many nutrients in the waste stream as there was two decades ago. So that is a huge change. That means we have half the loading coming out of the farm that we did twenty years ago.
RLH: So you’re saying the nutrients in the waste, coming from the pigs, are lower, they’re less than they were several decades ago…
Don Butler: Yes, and I think Dr. Classen can confirm that. We are committed to finding technologies that work. We’re committed to continual improvement. We’ve put our money where are mouth is. We have invested tens of millions of dollars, not just in North Carolina but in facilities across the country. Some of our experiments are still out there, and we’re in the process of proving, over the long haul, whether they are viable. Others, simply, we made the investment in good faith, but they did not work. There’s an example in Utah where we invested twenty-three million dollars in a biodiesel plant that simply did not work because there wasn’t enough fuel in the animal manure to make it work. So, that goes to the point that I made earlier.
Animal manure’s been used for fertilizer since the dawn of civilization. There’s a right way and a wrong way to do it. I would submit that, under North Carolina rules and regulations, the requirements that farmers have to meet every day, and the legal consequences for not following those, have resulted in an industry that’s doing a great job of managing their facilities. We continue to look for new technologies that would be workable on different types of farms. Not all hog farms are alike.
RLH: And what are some of the differences there, the material differences, when it comes to the practical application?
Don Butler: I would say that in North Carolina, there’s approximately 2000 hog farms, all of which have to be permitted by the state. There’s a long list of requirements that a farmer has to meet in order to stay in business. And about 80% of those farms are owned by family farmers, and I think the general public may not quite understand that, and those farms tend to be smaller in scale. So, the potential for a technology to work, most often comes down to concentration of animals in a geographic area, a relatively small geographic area so you can take the waste material from the barns and get it to one place without having to haul it or pump it or pipe it great distances. So, transportation is a factor. And the beat goes on. We are continuing to invest in trials. We have one going, that Dr. Classen is involved in, as we speak. So, that process never ends for us. When we find a technology that is truly better, that is workable from a practical standpoint, and can be implemented in a way that allows us to remain competitive in a commodity business, we will adopt it.
John Classen: I’d like to address Mr. Baldwin’s concerns also. The characterization of untreated swine waste being put on land is incorrect, and it’s a misunderstanding of what an anaerobic lagoon is, and that’s the current technology that’s used on farms.
RLH: So is it fair to say then that every single lagoon that’s part of a hog farm in North Carolina is an anaerobic lagoon?
John Classen: They were designed that way, yes. They were designed for treatment and storage. It is not just a waste storage. Over time, the waste that goes in there, as I’ve mentioned before, part of the reason that things are more dilute and more separated and degraded is because there is treatment going on. First, I do want to acknowledge that there are problems with this system. There are problems with sighting. There are problems that people are experiencing. I am not disputing that. But the treatment is there. It is not sufficient, and there are still odorous compounds, there are still a lot of nutrients, and there are still pathogens, which is why pathogen reduction is part of this. When we take methane out of waste in the newer technologies that were mentioned before, digesters, it is not methane that is already in the waste. That methane is produced from carbon that is in the waste, and if we’re doing a good job with the digester, all of the organic carbon is going to be converted to either methane or carbon dioxide, and that means the odorous compounds, which are other organic compounds, usually organic acids, those don’t exist anymore in the effluent or in the gas. Those are all converted into either carbon dioxide or methane. And so, the application of these newer technologies will address those concerns as well.
Randy Wheeless: John had a good explanation about methane and carbon dioxide, but you know, we talk about lowering carbon emissions, and this is from a power plant perspective, but if we can capture methane from these lagoons and use it to produce electricity, we’d be doing the environment a big favor. Methane is a much more damaging byproduct than carbon dioxide is to the environment. A lot of these projects involve capturing methane, using it as a natural gas, and burning it at power plants. We actually call that carbon-neutral electricity because the emissions that Duke Energy has is actually probably the same or better than if the methane was escaping naturally. So, there’s a good environmental story in there. I know we kind of brushed over methane capture, but there’s a good environmental story there about using methane to produce electricity versus letting it escape naturally.
John Classen: Randy, I think the story is even better than that. So far, the digesters that are in place, mostly on dairy [farms], are producing energy through generators that are on site. Now, because of efficiencies of generators, those necessarily smaller [generators] than the ones you have, that Duke Power has, are not as efficient. They’re going to be therefore emitting more carbon dioxide and having less of the methane energy converted to electricity. So your efforts and other recent efforts at putting digester-produced methane from organic waste, including swine waste, into pipelines and then getting those back to a more efficient generator, power plant, is, I think, a bigger benefit than just putting a lot of small generators on farms around the country.
Randy Wheeless: Don, I’ll just add one thing here about costs, and you mentioned that too. From a Duke Energy perspective, there’s a lot of ways to produce electricity, and obviously we’re looking for those that are cost effective. A stumbling block I think some of these projects had in the past was that they were going to produce electricity at a very expensive price, and from Duke Energy’s perspective, it’s like, “Hey, I think we could do better elsewhere.” But we’re starting to see, it’s still going to be more than a typical renewable—solar or wind, probably—but the price is coming down and it’s making it a little bit easier for some of these projects to get going. So, who knows where the momentum goes from here, but price is still something that we look at, and I’m sure something that Don is looking at too.
Don Butler: Rachel, if I might add, I’m not in a position to make an announcement today, but we’re hopeful that in the near future, we will be able to make an announcement that people will pay attention to, and it’s in this area of technology development and energy production. We’ve been working on some projects for a long time to put all the pieces together. We’re not there yet, but hopefully in the near future you will hear from us that we will have an announcement that will be interesting to people.
RLH: Is this related to the trial that you referred to a little earlier that John Classen is working on?
Don Butler: It’s a different one, in addition to that. So there are a number of things that we are looking at right now. And as I mentioned earlier, that is a continual process. We will never stop looking. We talk to everybody who comes to us. We have looked at hundreds of different ideas that people have had. Many of those have been naïve approaches to the situation, but technology does evolve, and we will never stop looking.
Betty (caller): Rachel, we really appreciate your efforts with this whole series, concerning CAFOs and hog waste. I come at this as a retired environmental professional who works for a public utility, and I’m very interested in the hog waste to energy issue. My question is, going back to the very beginning, if the problem is the dilute form of hog waste, has any research been done on processes that the farmer might use to clean his pig sties or buildings without having to use so much water?
John Classen: In fact, there is. There’ve been a number of efforts, including two in the Smithfield agreement, that are trying to find ways, economical and effective ways, of removing waste from the building without water. One that’s being used now in at least a few barns, and I literally mean three barns of Smithfield hog production group, is a scraper. The barns are on a slope of about 2% front to back, and liquids drain naturally through that and go to one pipe to a liquid storage. Twice a day, a scraper comes down. It collects all the solid waste, and of course pushes any liquids that are there, but as it gets to the end of the barn, the mechanism changes, and that particular material goes to a different place. Right now, the efficiency in terms of separating solids and liquids is not as great as it could be. There are other efforts using a belt and perhaps maybe a slope to the side instead of front and back that would shorten the way that the liquid has to move, but the answer is yes, and those methods are key to finding alternative uses for the materials, both solids and liquids, to recover nutrients and energy.
Christine (email): In North Carolina, animal manure is one of the primary pollutants of our rivers, which are in turn our drinking water supplies. If we are to successfully manage the waste at the watershed level, the companies have to be stakeholders in the process. However, in most cases, waste management is the responsibility of the independent grower through its contract provisions with the integrator. The result is that the liability for waste disposal rests with the independent grower.
The Food and Agriculture Organization of the United Nations (FAO.org) supports Sustainable Agriculture and Rural Development as a process which meets the following criteria: maintains and, where possible, enhances the productive capacity of the natural resource base as a whole, and the regenerative capacity of renewable resources, without disrupting the functioning of basic ecological cycles and natural balances, destroying the socio-cultural attributes of rural communities, or causing contamination of the environment.
While waste to energy may be one viable option, my question is why are these integrators not doing more to internalize these waste management costs and protect the public, the environment, and their independent growers?
Don Butler: I’d like to challenge the opening statement that waste from hog farms are a primary pollutant in the rivers of North Carolina. There’s simply no objective evidence to support that claim. Hog farmers do a good job of managing their waste in a prescribed manner. This waste material is pumped from a lagoon, after anaerobic treatment as Dr. Classen has talked about, and applied to a growing crop at an agronomic rate. That is the rate that the crop can utilize as it’s being applied. Is there a potential for runoff during storms and other events? Yes, that potential does exist, but farmers are also very contentious to not apply irrigation of waste water during a rainstorm or when the weather forecast is calling for heavy rains. So, as I said earlier, there’s a right way and a wrong way to do it, but I think it’s very simplistic to point a finger at one segment of a watershed. We all live in a watershed. Everybody who’s listening to this conversation today lives in a watershed somewhere. So every activity in a watershed has the potential to contribute to degradation of water quality if we’re not careful. Point source discharges, runoff from parking lots and other impervious surfaces, and certainly agriculture has a part in that. I believe that if we’re serious about water quality, we need to take a water shed approach. We are at the table. We will be at the table for that conversation. We are engaged with the Environmental Defense Fund on a national program right now to reduce the amount of chemical fertilizer that corn growers and grain growers that we buy things from are not over-applying fertilizer. We all have the potential to be contributors. And we all have a responsibility to do our part.
RLH: Don Butler, you bought up hurricane season. I just want to ask about that because the big storm events are when we know hog farmers have had some of the catastrophes. Other than not spraying the fields after the ground has been saturated by a rain event, if a big storm is coming through, how does a farmer prepare for that?
Don Butler: Well, he can’t wait until the last twenty-four hours before the hurricane hits to be prepared. Being prepared is a year-round proposition. The way we do that is to maintain the liquid level in our anaerobic treatment systems at a low enough level so that it can accommodate even the largest storm. For example, we try to maintain approximately four feet of storage going into the winter time on our farms. So, there’s never been a storm in recorded history that dropped four feet of water. Management is the key, not just for hog farms but for any type of waste treatment approach, whether it’s in a municipal system or anybody else. Proper management, a robust attention to detail, and diligence. So, hog farmers and many other people do that, and if proper management is not part of the mix, there will be problems.
John Classen: Proper management is absolutely key. Don, you’re certainly right about that. You mentioned row crop farmers, and this is true in the Midwest. I think all of the listeners are aware of the hypoxic zone in the Gulf of Mexico, and that is from excess nutrients getting down the Mississippi from the Midwest. That is not just from hog farms.
RLH: And for listeners who aren’t familiar with it, tell them what that is.
John Classen: That’s a dead zone. Nutrients in waterways will promote algae growth, and as they die, they consume oxygen, and they’re better at consuming and scavenging oxygen than fish are, and therefore the fish die. But that effect is not just from hog farmers. The fact is, any form of fertilizer that goes on land, even if we do our best job of going with best practices and following the rules, some is still going to leak out. It’s going to get past the root zone before it can be absorbed and taken up. It’s going to get to shallow groundwater, streams, and ultimately to the Mississippi or the Cape Fear, depending on the watershed. Someone described this once to be as, agriculture itself, the soil, is a leaky system. We do our best. Farmers are doing their best. Both crop farmers and hog producers, but the fact is, we’re going to lose some. Some is going to be to rainfall events that we didn’t foresee, but some is just going to be that nitrogen and phosphorous get past the root zone before the crops can capture them and it’s gone.
RLH: To dovetail on that point, we have a question from Brandt, who asks if any of these lagoons have linings to prevent leakage into the groundwater that is part of the Cape Fear River basin. So, are these lagoons lined?
Don Butler: The state permit requires that lagoons be lined. There are a couple of different ways that a lagoon could be lined. It could be lined with natural materials, such as clay. First of all, there haven’t been any new farms built in North Carolina in about twenty years, so we’re talking about things that happened a long time ago, but I was involved in the construction of farms then. If clay material was present on site where the lagoon was being built, obviously it could be used and compacted to create the liner. If you were in sandier soils, I know a number of situations where clay material was brought in from offsite, another location, properly applied. That clay liner is twelve to eighteen inches of compacted clay. We had to take core samples, send them to a certified laboratory to make sure that they met compaction and permeability requirements in order to be a proper and safe liner. The other alternative to that is a manmade or synthetic liner. Typically it’s a very heavy-duty plastic material which is welded at the seams so that there’s no leakage at the seam and then anchored up on top of the banks on the outside of the lagoons. So yes, the answer is yes.
RLH: Earlier in this discussion, one of our callers raised the question around the metrics used to take a look at the economic criteria around some of these alternative methodologies for processing hog waste. We never really answered that. Why is it so hard to get a handle on the economics of environmental impacts?
John Classen: The short answer is because there are a lot of different ways that have been proposed to measure those impacts, and in fact, there’s an entire scientific journal devoted to this called Ecological Economics. A lot of things have been proposed, and some are being used in different ways. As yet, there’s no consensus in the environmental literature I’ve seen, no consensus on one measure that would be consistent and useful for all industries. While the short answer to the earlier caller is that there were no considerations given, in dollars and cents, on the economics of the impact to local communities or the environment, the more extensive answer is really that there was nothing viable at the time that we could do that, that there was no way to do that.
RLH: When you say “viable,” what do you mean? Because you did say earlier that you found environmentally superior technologies, but they were not economically viable.
John Classen: They were not economically viable to the producer and to the industry. Some of these might have reduced impacts to the environment and to the community, and if those could be valued properly, then that should be a credit to that system as opposed to the lagoon, but the fact is, we don’t do that in our society in any way at all. The reason we have environmental rules is because nobody is going to protect the environment, no industry that’s in business can afford to do that on their own without regulations requiring everybody to do it.
RLH: To the point where they build it into the cost of doing business or producing that product?
John Classen: That’s right. And that cost is built into, to the extent possible, the swine business. It’s a commodity business, and so there’s not much that a producer can do, or an integrator, for that matter, but adding the cost to the environment and to society and to local communities is not something that there’s consensus on how to do that nationally yet.
RLH: Don Butler, we’ve heard people say that we’re getting cheap pork, cheap bacon at the expense of the environment. Does Smithfield ever talk about raising the cost of production and incorporating some of these more expensive, new methodologies or is that just not—
Don Butler: We talk about the economics of our business every day, as does every other pork producer in the world. We exist in a global economy, and we exist in a commodity industry where we do not set the price of what we get paid for pigs. That’s determined by an open market. Even the pigs that Smithfield raises are priced on the Iowa-Southern Minnesota spot market. So, the price of pigs today in the Midwest dictates what one part of the company pays the other part of the company for raising pigs. So, it’s not as simple as “add X to a pack of bacon and therefore there will be more money to do other things.” That’s not the way it works.
John Classen: Those are called taxes.
Don Butler: That’s the way taxes work.
RLH: Don Butler, earlier in the program, you dropped the teaser—as John Classen characterized it—of something new coming down the pike. Can you tell us a little bit about what that might be?
Don Butler: I don’t want to make it any more dramatic than it should be, but as I said earlier, we have for many years—and we continue on an ongoing basis—to look at technologies and what might be in our future. So, it does have to do with manure to energy, and it would be at a scale which would make a difference at a small number of farms.
