Food & Power: USDA Reports on Farm Consolidation but Ignores the Cause

Thursday, March 29, 2018 newsletter

A recent U.S. Department of Agriculture report concludes that big farms keep getting bigger while smaller farms keep disappearing. Since 1989, the USDA finds, the number of large crop farms has nearly doubled while the number of midsize farms has fallen nearly in half.

No news here, even for people inside the Beltway. Beginning in 2009 Attorney General Eric Holder and Agriculture Secretary Tom Vilsack conducted hearings across the country to study monopolization and concentration in agriculture. The USDA also issued reports in 2010, 2013, 2016, and late 2017 confirming that, yes, consolidation in agriculture is a big happening thing.

What is notable and telling about this report, however, is the misleading explanation it gives the phenomenon. The big reason big farms keep getting bigger and small farms keep going broke, the USDA concludes, is the march of technology. “Specifically,” the report notes, “the equipment used in field tasks—for ground preparation, planting, spraying, and harvesting—has gotten steadily larger and faster, allowing a single farmer or farm family to manage more acres.” The report also asserts that “GPS-assisted vehicle guidance systems, yield and soil mapping, and variable-rate applications of inputs—appear to have spurred further increases in farm size.”

No doubt such technologies are a factor in bringing some economies of scale to larger-acreage farms. But the USDA perversely ignores or downplays a much larger factor behind the decline of smaller scale farmers: the perverse role policy has played in fostering increasing concentration of ownership at every level of our food production, processing and distribution system.

Due largely to the decline in anti-trust enforcement, giant agribusinesses now use their market power to inflate the prices famers must pay for seed, chemicals, tractors, and other off-farm inputs. At the same time, consolidation among food processors and distributors means that farmers have fewer and fewer outlets for the food they produce, and thus have to accept lower and lower prices. As farmers’ margins grow slimmer, only the very largest farms with the highest volumes can even hope to survive.

The report is “a whitewashing,” says Joe Maxwell, the executive director of the Organization for Competitive Markets. Mike Callicrate, an independent rancher, advocate, and founder of RanchFoods Direct, goes further. The study “is an absolute piece of crap,” he says. “Really this report … is a cover-up.”

Meatpacking exemplifies the monopolization downplayed by the USDA. Packers began consolidating in the late 1970s. Cargill bought meatpacker MBPXL in 1979. Smithfield has acquired 40 beef, pork, and chicken companies since 1981. Cal-Maine, the country’s biggest egg producer, has acquired 18 companies since 1989. Today, four companies control 84% of beef slaughter in the U.S. and often hold more power at the local level, meaning less competition and lower prices for ranchers’ products. Things are much the same in pork, chicken, and eggs.

“There’s not an independent market for those farmers to sell their livestock into,” says Maxwell. Concentration among buyers, says Callicrate, steadily drives down the prices that ranchers and farmers can get for their products.

This same power relationships exist up and down supply chains and across agricultural sectors. Commodity-trading firms like ADM and Bunge and grocery chains like Walmart and Kroger have grown bigger and more powerful like the packers. “A cabal of monopolies,” says Patrick Woodall, Research Director at Food & Water Watch, “dominate every link in the food chain from seed to supermarket.”

Consolidation means lower margins for farmers and higher profits for monopolistic agribusinesses while offering little if any benefit to consumers. In ground beef, consumer prices for the product rose by 24% between 1999 and 2008, while beef cattle prices grew by 8.5% during the same period.

As a candidate and early in his presidency, Barack Obama promised farmers he would take on the monopolies that were driving them out of business but the crackdown never came. Since then, the government has continued to permit merger after merger in meat-packing, seeds, commodity-trading, processing and distribution. Contrary to the USDA’s assertion that technology is the main driver behind increasing monopoly, in reality monopoly has spread mostly because government decision-makers have neglected to enforce our anti-monopoly laws.

What We’re Reading

  • Farm bill negotiations between Democratic and Republican House members have broken down over a Republican proposal to add work and eligibility requirements to SNAP, Politico reported yesterday. Republicans have insisted on keeping the new rules in the bill, despite opposition from Democrats who contend the new requirements would force 1 million off the program. But the impasse comes at a tough time for farmers, who are struggling under falling commodity prices and looking for some relief in the bill.
  • German conglomerate Bayer’s acquisition of U.S. seed giant Monsanto received official approval from the European Union last week. The deal – which is still under review by the U.S. Justice Department – would create a new seed and chemical giant in a concentrated sector that recently saw mergers between Dow and Dupont and Chemchina and Syngenta.
  • Several dozen Delaware residents are threatening to sue Arkansas-based Mountaire Corp. over a chicken-processing plant owned by the company that has contaminated their drinking water. Mountaire, the U.S.’s seventh largest chicken producer, was last year found to have been spraying wastewater with up to 41 times the legal limit of nitrates, pollutants which have a host of negative health effects.