Big Business Rules American Agriculture-and Congress Doesn’t Seem to Care

Big Business Rules American Agriculture-and Congress Doesn’t Seem to Care

By Andrew Schwartz and Ethan Gurwitz Posted on May 16, 2018, 12:01 am

With the Trump administration’s litany of scandals and harmful policy decisions dominating the daily news cycle, recent congressional efforts to reauthorize the Farm Bill have flown under the radar. When the House Committee on Agriculture passed its version of the bill on a party-line vote back in mid-April, press coverage largely focused on its proposed benefit cuts that would negatively impact nutrition programs for two million Americans. While that focus is justified, few reporters have covered Congress’s significant failure to curtail rapidly rising market concentration in agriculture-and the destructive impact this concentration causes for American farmers and consumers.

The recent mergers of Dow and Dupont, Sygenta and ChemChina, and Bayer and Monsanto have further consolidated the agriculture input market; some estimates predict this will leave just three entities with 80 percent of the U.S. corn seed market and 70 percent of the international pesticide market. Crop purchasers and livestock packers have also become highly concentrated. Between 1977 and 2011, the share of the market controlled by the four largest soybean purchasing companies increased from 54 to 79 percent. Over a similar period, the share held by the four largest beef processors rose from 36 percent to 85 percent. And this trend is not stopping. Brazil’s Marfrig Global Foods SA just acquired a majority stake in one of the U.S’s largest beef processors, National Beef Packing Co, making it the second largest global beef processor in the world.

We’ve also witnessed consolidation taking place among American farms. The U.S. Department of Agriculture (USDA) finds that larger farms have amassed an increasing share of agricultural production and crop values. In 1991, farms with a minimum of $1 million in sales were responsible for 31 percent of U.S. farm production value. As of 2015, that number has jumped up to 51 percent.

Concentration, which has been increasing across many industries, can have broad, pernicious economic effects for consumers, workers, and smaller businesses. There is evidence that concentration is closely tied with negative economic trends including fewer new entrants, less private investment, and stagnant wages. Market dominance also allows firms to have greater sway over prices and market conduct. In the agriculture industry, this can result in downward pressure on farm incomes, but also the proliferation of harmful and unfair business practices such as retaliation or sudden and inexplicable breaches of contract.

Policymakers’ fears about agriculture industry concentration are not new. Back in 2000, Sen. Chuck Grassley (R-IA) wanted an "[a]ggressive [r]esponse" to megamergers; an early version of the 2002 Farm Bill, for its part, contained an entire section on competition. Combatting concentration has clearly been a long-running concern in Congress. So why does the 2018 House Farm Bill do so little about it? The answer can be found in Congress’ actions a decade ago.

In 2008, in response to rising agriculture market concentration, Congress took steps to ensure that small farmers had some bargaining power. The 2008 Farm Bill legislation required the USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA)-which enforces competition-to draft rules clarifying what constitutes undue or unreasonable preference or advantage in the livestock market. The resulting rules provided an avenue for smaller-scale farmers to more effectively bargain with agriculture giants by defining behavior that should be considered unfair, discriminatory, and deceptive.

Among the proposed rules, GIPSA argued that packers and processors should not be able to make sudden and unwarranted breaches of contract with small farms, retaliate for otherwise lawful action by small farms, or bar small farms from accessing critical compensation information. The GIPSA rules also removed an arbitrary and onerous standard that required farmers to show broader harms to competition- such as higher market prices-when bringing a claim of retaliation or discrimination.

However, in late 2011, just when regulators were finalizing the so-called GIPSA rules, conservatives in Congress blocked USDA from finishing the process. As profiled by comedian John Oliver, Congress blocked GIPSA annually until 2015. In the middle of that process, the House even tried to use the 2013 Farm Bill to permanently repeal the rules, and all future rules relating to fair practices.

In 2016, Congress oddly gave the administration a brief reprieve, allowing USDA to finalize what became called the Farmer Fair Practices Rules. But once again, this success was short lived. Upon entering office, Trump’s Secretary of Agriculture Sonny Perdue torpedoed the rules even as nearly three-quarters of farmers think it is important to "strengthen farmers’ hands in dealing with companies" when shaping agriculture policy. In addition, the secretary reorganized GIPSA to fall under the Agricultural Marketing Service. There are concerns among farmers that this will make GIPSA a far less effective enforcer of competitive markets due to the inherent tensions between regulating ag products while simultaneously promoting them. Meanwhile, agribusiness consolidation has continued to steam ahead.

Given this background, it should come as little surprise that the 2018 House Farm Bill is silent on steps to enhance competition or protect fairness in markets. The bill does nothing to challenge, or even consider, the impacts of consolidation. Even worse, the bill has other provisions that inordinately benefit large agricultural firms. For example, despite agreement across the ideological spectrum about the urgent need to solve poorly targeted crop insurance and commodity programs-which are both important drivers of farm consolidation-the House bill does nothing to address it.

This congressional inaction is sadly predictable. Market power leads to political power-and agricultural trade associations and interest groups funded by the largest firms hold considerable influence through donations and lobbying. Moreover, because the Farm Bill comes up every five years or so, special interests have been able to truly master the political, bureaucratic, and legal maze that this essential legislation has become. By contrast, small-scale farmers often lack the resources to robustly push for their interests during the recurring Farm Bill cycle.

Fortunately, small- and medium-scale farmers are still making their voices heard on these important issues. During a March 2018 confirmation hearing for four nominees to the Federal Trade Commission, Sen. Jon Tester (D-MT) noted the extreme concentration of the beef, pork, and chicken markets. Lamenting the effects on his state, the senator asked, "Is the toothpaste out of the tube and we are just hosed, or is this something we can actually do something about?"

Family farms form the backbone of our nation’s agriculture supply, and our government must take further steps to ensure that farmers have a level playing field in each and every market. The 2018 Farm Bill shows just how this administration and many members of Congress care little about the harmful concentration in our country’s agriculture market. It’s time for all of us-as taxpayers and consumers-to demand that our elected officials do more to provide every small- and medium-scale farmer with a fair chance to compete.

Andrew Schwartz and Ethan Gurwitz are policy analysts for Economic Policy at American Progress.

Patrick Woodall

Research Director

Food & Water Watch and Food & Water Action

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R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) is the largest producer-only cattle trade association in the United States. It is a national, nonprofit organization dedicated to ensuring the continued profitability and viability of the U.S. cattle industry.