Hog heaven.

• Author: Dailey, David

Vertical integration has turned a down-to-earth business into a paradise of profits for North Carolina pork producers.

Some of Carroll's Foods Inc.'s contractors will tell you they're hog farmers, and sure enough, if you drive down one of the gravel roads leading to a Carroll's Foods' contract operation, you'll find plenty of pigs.

But before you start loading this man's operation down with a pickup-truck full of stereotypes, consider this: A geneticist selects the particular strain of hog on that farm, just as the genetics of all of Carroll's 110,000 sows are as carefully controlled as, say, the formula for Coke. And what those hogs eat is determined by a Carroll's animal nutritionist using a mainframe computer. The chow is formulated based on factors that include the least-costly ingredients available that month, the particular strain's genetic characteristics and the mix of ingredients that will produce the leanest meat, something the grower can measure regularly with an ultrasound device. Automatic feeders keep the pigs happy with a steady stream of the specially formulated meal, which comes from one of four gigantic mills that Carroll's operates. (They are capable of producing 14,000 tons of feed a week.) The feed is delivered by one of more than 100 tractor-trailer rigs that Carroll's gets at a volume discount.

The pigs, confined to a building that's heated in the winter and cooled in the summer, never touch the ground. In fact, workers and visitors must remove their clothes, take a shower and put on freshly laundered coveralls before visiting the swine to prevent the transmission of diseases. Dung falls through the steel grates that the pigs are raised on and is flushed into a lagoon several times a week. After it's broken down by bacteria, the slurry is spread on a nearby pasture, where cattle are raised. A Carroll's manager visits the farm once a week, while Carroll's number crunchers track each herd's profitability. Yes, it's hog farming. But you could also argue that these operations are more factories than farms. "No other state grows hogs like we do," says Kelly Zering, an agriculture and resource economics specialist at N.C. State.

"North Carolina producers have moved to the head of the class in many categories," Purdue University economist Chris Hurt observed in an article. "They lead the nation in such measures as pigs per litter, pigs per sow per year, productivity per animal in the breeding herd and feed efficiency to name a few." Sometime during the next few months, the lowly pig will squeal past tobacco in Tar Heel cash receipts. Hogs, which outnumber people 20 to one in Duplin and Sampson counties, will net about a billion dollars for the state's farmers this year, and workers in shipping, processing and farm supplies will earn at least that much again, if not more, getting the pork into grocery stores. Carroll's alone saw $251 million in 1992 revenue from hogs and turkeys combined.

In sheer number of hogs on farms, the state has gone from 2.8 million in 1990 to 3.7 million in 1991 to 4.5 million in 1992. That's because in the past three decades innovators such as Carroll's founder, O.S. Carroll of Warsaw, former Carroll's CEO Bill Prestage of Clinton and Wendell Murphy of Rose Hill have turned hog farming into something of a science, using large-scale, specialized production techniques.

Because corn is cheaper in the Midwest, where most of it is grown, their challenge was to be efficient enough to take East Coast market share from farmers west of the Mississippi. That they've done by selling their factory-produced pigs at a 10-cents-a-pound profit during the past five years, while operators with small herds of 50 or so earn only two or three cents.

North Carolina's three big producers are largely responsible for the state moving from the nation's 12th-ranking pork producer in 1965 to No. 3 last year. While the efficient production techniques are driving many small farmers out of the hog-raising business, they have helped some who have become contract operators hold onto their family farms -- and made a number of Eastern North Carolina families millionaires many times over. And with only a fifth of all hogs raised under contract, the inevitable growth of corporate hog farming will make those families even richer.

Over the years, Carroll's Foods, which in 1992 sold 231 million pounds of turkeys and 220 million pounds of pork, has led the pack in both innovations and revenues. Carroll's which dates back to 1938, had more revenues than either Bill Prestage's Prestage Farms Inc. in Clinton or Rose Hill-based Murphy Farms Inc. (Murphy is the nation's largest pork producer with 150,000 sows, compared with Carroll's 110,000.)

In 1986, Carroll's Foods took a step ahead of the state's two other big pork producers by forging an alliance with Smithfield Foods Inc., a Virginia-based packer with sales of $1.1 billion in 1993. Part of the partnership involves an experimental lean pig that could boost both businesses' profits and growth.

As it is, Carroll's revenues have grown from $45 million...