I keep hearing about "concentration" in farming. What does that mean and how does it affect me?

January 2010

Dear Farm Aid,

I keep hearing about "concentration" in farming. What does that mean and how does it affect me?

Thanks!
Matthew K.
Minneapolis, MN

Well, Matthew, you've asked me one doozy of a question for my first column! But I can't say I'm not grateful for it—your question hits at the heart of several problems in today's food and farm system as well as new opportunities that have appeared this year to shake things up for the better.

What does concentration mean?

The short of it is this: growing concentration in the farming industry is pushing you and the more than 300 million eaters in the United States farther and farther away from the family farmers who grow our food.[1, 2]

People use the word concentration to describe the control that a small number of corporations have over the whole of food production and consumption in our country. Our farming sector suffers from abnormally high levels of concentration and the consequences have been rather nasty. The trend has forced thousands of independent family farmers off the land and has caused serious damage to rural economies, public health and our environment.[3]

Corporate Concentration in Agriculture ChartTo illustrate just how out of whack it's gotten, consider what economists call the "four-firm concentration ratio." Most economic sectors have concentration ratios hovering around 40%, meaning that the top four firms in the industry control 40% of the market. Anything beyond this level is considered "highly concentrated," where experts believe competition is severely threatened and market abuses are likely to occur.

Two researchers at the University of Missouri, Mary Hendrickson (this month's featured Farmer Hero) and Bill Heffernan, have studied these ratios in agricultural markets. The situation doesn't look good. As of 2007, four companies owned 83.5% of the beef market—that's more than 40 percentage points above the "highly concentrated" cut-off! Similarly, four firms owned 66% of the hog industry and 58.5% of the broiler industry. At the same time, 93% of soybeans and 80% of corn grown in the United States were under the control of just one company, Monsanto, through their patents.[4]

Are your eyebrows raised yet? These are astronomically high numbers! As one researcher put it, "[n]ever before have the safety and sustainability of our food supply depended on the decisions of so few companies."[5] I couldn't say it any better. It's nearly certain that something's a little fishy in our curiously concentrated farm sector.

What it means for farmers…

It's helpful to consider the structure of our food system, where farmers supply the raw goods for the many products that are collected, processed, packaged, and distributed by numerous other businesses before they reach us. Each of these stages represents a different link in the supply chain that moves food from farm field to kitchen table.

As a key link in this chain, farmers rely on both buyers and sellers, and concentrated markets squeeze them at both ends. Sellers with high market power can inflate the prices of machinery, seeds, fertilizers and other goods that farmers need for their farms, while powerful buyers suppress the prices farmers are paid for what they grow and raise.[6, 7]

The resulting razor-thin profit margins that farmers and ranchers are forced to endure often push them to either expand into mega-operations or exit the business altogether. Even tiny movements away from a fair and competitive market price have choked farmers' bottom lines, siphoning money into the hands of the corporations that dominate the market and away from the rural economies that house and support our nation's farms and ranches.[8]

What it means for eaters...

Family farmers are clearly getting the short end of the stick, but the current system isn't doing a heck of a lot for us eaters either.

Despite the promise of cheaper food that is supposed to result from increased concentration, USDA data shows that the cost of food to consumers has risen steadily since the 1980s.[9] The system also narrows consumer choice and presents barriers to accessing locally-grown, organic, sustainable, and family farm-identified food. For example, if you or I want more local food in our supermarket aisles, we'll run up against giant supermarket chains with a single, national buyer that supplies thousands of stores. This structure is generally inaccessible to small and mid-sized independent family farmers who lack power to get a fair price for their goods.[10]

So who benefits? Well, if I do my math right, this leaves the corporations that act as middlemen and, let's see, only the corporations that act as middlemen.

So what can we do about it?

Actually, we already have most of the tools we need. Concentration generally happens through two avenues: via consolidation from mergers and alliances or through vertical integration, where one company controls most or all of the businesses along the supply chain.

A few laws—namely the Sherman Antitrust and Clayton Acts—exist to prevent excess power in the marketplace. However, particularly in the agricultural sector, enforcement of these laws has been virtually nonexistent, especially in the last 10 years.[11] What's more, they generally don't address vertical integration and are blind to the peculiar nature of some agricultural markets, where one firm can dominate in a rural area or region, even if it doesn't control a large share of the market nationally.[12]

Another law, the Packers and Stockyards Act (PSA), was created to regulate packers, livestock and poultry dealers, swine contractors and other middlemen in our livestock industry. The PSA does have the power to address vertical integration in agricultural markets. However, there has been a long history of mismanagement and poor enforcement that is only starting to be addressed by our current administration.

But that's where we come in.

You may have heard that the United States Department of Agriculture and the Department of Justice are scheduling public workshops throughout 2010 to address the issue of concentration, antitrust violations and competition in agriculture. This presents an unprecedented opportunity for positive change, and a massive challenge.

Have no doubt that a fight is brewing between those of us interested in growing the Good Food Movement and those that are interested in maintaining their power and safeguarding the status quo. Farm Aid intends to be heavily engaged in these workshops and will keep all of our readers informed of key developments and opportunities to take action. The workshops will only create the change we need if farmers AND consumers get involved. Stay tuned.

In the meantime, I can't stress enough how important it is to make your voice heard. This may be the best shot we'll see in a while to make transformative change in our food system. If we do it right, we could make major strides in rebuilding a food system that works for farmers, eaters and everyone in between—offering stable and fair prices to farmers and delivering fresh, healthy and safe food for us all.

So Matthew, I hope you have some fight in you. This issue is a matter of survival to our country's family farmers and control over the food that nourishes our bodies. I encourage you all to send more questions and comments our way on this complicated, but extremely important subject.

Many thanks to you and, as always, eat well,

Alicia

Sources:

1.Starmer, E. (2007). Corporate Power in Livestock Production: How it's Hurting Farmers, Consumers, and Communities-And What We Can Do About It. Leveling the Field-Issue Brief #1, Agribusiness Accountability Initiative.

2.Food and Water Watch (December 31, 2009). Public Comment to USDA and Department of Justice Re: Agriculture and Antitrust Enforcement Issues in our 21st Century Economy. Washington, D.C., USDA and Department of Justice.

3.Food and Water Watch (December 31, 2009).

4.Hendrickson, M., Heffernan, William D. (2007). Concentration of Agricultural Markets. Columbia, MO, Department of Rural Sociology, University of Missouri. April 2007., and Food and Water Watch (December 31, 2009).

5.Starmer (2007).

6.Wilson, M. (2009). Curbing Concentration: an uphill climb. OCM News. Lincoln, NE, Organization for Competitive Markets. December 2009.

7.Domina and Taylor (2009).

8.Ibid.

9.Ibid. Data is adjusted for inflation.

10.Food and Water Watch (December 31, 2009).

11.Varney, C. A. (2009). Merger Guidance Workshops. Third Annual Georgetown Law Global Antitrust Enforcement Symposium, Washington, D.C., U.S. Department of Justice.

12.Food and Water Watch (December 31, 2009).




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Comments:
Anonymous @ 1/25/2010 9:33:21 AM 
Please practice the wonderful information you are preaching and DUMP HORIZON as a corporate partner. I have written several times to address this concern and do not require the generic explanation of how upright and good Horizon is for the nation. They have repeatedly bullied inspectors and are horrible for family farmers. They drive down the organic standards and are partly responsible for discrediting belief in organic farming via their business practices. There are several alternatives and I'd like to see them given the chance to share your banner and the good you try to do. Look into Organic Valley if you are really interested in promoting the family farmer and want to do something about this "concentration" issue. Affiliation with Horizon muddies your reputation and positions you directly in line with this premise of concentration.
Anonymous @ 1/25/2010 9:46:16 AM 
The appointment of Tom Vilisak as head of the Department of Ag clearly demonstrates that this administration stands firmly entrenched with the Monsanto's et al of this world. If these politicians wanted to effect real change, they'd do more than offer the lip service of Michele Obama's garden. They'd empower folks who have worked their whole lives to ensure righteous production of local food. Instead they have promoted industry insiders and lackeys who will bring only agony to the true family farmer, while stuffing the pockets of agribusiness while decimating our cropland and squandering any chance for real change. Vote 3rd party and hold your candidate to her/his promises. Use your money as a tool. Paying a bit more for your organic food gives us all added value. The cheapest of the foods labeled "organic" got those labels via pay-offs to the USDA amongst others. Fear not rewarding the local organic farmers by patronizing their stands and boycotting corporateers like Horizon...
Anonymous @ 1/25/2010 10:09:26 AM 
I agree with Anonymous! DUMP HORIZON. Did you see this article this week? http://www.registerstar.com/articles/2010/01/23/news/doc4b5a9833627b9167607263.txt
"Farmer kills 51 cows then turns gun on himself" - “It’s a hard time to be a farmer these days,” one man said from inside the fence.
ORGANIC VALLEY is a far better model for Farm Aid to promote.
Anonymous @ 1/25/2010 1:59:32 PM 
farmers probably aren't going to like this, but i think people should start growing their own food. i know my veggies are 100% organic, and i'm not brutalizing any critters, big or small. that being said, i do buy every week from a local farm that does alot of manual harvesting.
Anonymous @ 1/25/2010 2:04:17 PM 
I agree - please do not affiliate with Horizon. It's so unfortunate to me that many people think they're doing something good for their families when they buy Horizon's "organic" products, when it is clear that Horizon does NOT uphold responsible nor respectable practices. PLEASE DUMP HORIZON, FARM AID!!!
Anonymous @ 1/25/2010 5:13:29 PM 
studies have determined that GMO foods are causing Kidney and Liver damage. took 3 months for death due to failure of these organs in small animals in studies. best chances for a good long healthy life is eating real food...local food found to be best as it naturally contains the compositions needed in that region. stop letting these few corporations lead us to believe we have no choices or that it doesn't matter. It matters.
The argument against Horizon is a tough one because I know family farms that sell to Horizon and Organic Valley. One farm is every bit as sustainable as the other. It is the corporate farms that do not provide sufficient grazing for the cows that are weakening the organic seal. This will hopefully be changing with the new grazing rule that the National Organic Standards Board is revealing to the public at the end of February.
Anonymous @ 1/26/2010 1:14:01 AM 
I agree 100% DUMP HORIZION, they may have more money to put up for sponsership, but ethics and being true to the family farmer should be more important than Horizion who are doing more harm than good to real organic farming, are you listening Willie, Neal, and John, I think it would be a wise move to get organic valley as a main sponser, they may not have as much money as Horizion, but this is about being true to the cause, Don't sellout and keep promoting Horizion. And I agree, putting Vilsack in the secretary of AG spot was a sellout move by Obama, not to mention a slap in the face to small family farmers and organic practices. The white house garden is a distraction and PR stunt, Obama grows an organic garden, and mean while he puts several Monsanto crooks in key AG department positions, this is a wake up call folks, we need to fight this tooth and nail.
Anonymous @ 1/29/2010 12:28:12 PM 
To address some of the comments above:

First off, as we've said before, Farm Aid encourages this kind of conversation--is important that we ask questions about our food

Farm Aid is proud of its association with both Organic Valley Family of Farms and Horizon Organic, and both have supported Farm Aid through sponsorship donations for our work.

Organic Valley and Horizon Organic are the only two national organic milk processors and they're both very important to organic farmers. Horizon Organic contracts with nearly 500 organic dairy farmers -- without those contracts, 500 organic dairy farmers may not have a processor to pick up their milk, may not have had an opportunity to transition to organic, and those of us who drink organic milk may not have access to it.

[CONTINUED]
Anonymous @ 1/29/2010 12:33:25 PM 
In this tough market, with the downturn in demand for organic milk, Horizon Organic has worked to keep their farmers in contracts, rather than terminating their contracts. This indicates a strong commitment to keep family farmers on the land.

The Northeast Organic Dairy Producers Alliance (NODPA), an independent, unbiased organization of organic dairy farmers, keep tabs on the organic dairy processors and they had this to say in their January 2010 newsletter (http://bit.ly/9xY1ul): "Horizon reports that many producers responded to their request for a 5% drop in production; that they are not terminating contracts and they are honoring contracts given to transitioning producers. Producer reports indicate that Horizon has maintained its pay price." In other words, Horizon Organic is paying farmers a fair price and keeping them employed in this tough economic climate.

[CONTINUED]
Anonymous @ 1/29/2010 12:39:36 PM 
Horizon Organic and its nearly 500 dairy farmers produce milk to the standard of the USDA Certified Organic seal. Charges have been made that Horizon Organic is compromising organic standards. But Farm Aid believes that the USDA Certified Organic seal is a certification that consumers can rely upon. It's not a perfect system (what is?) and we are glad that USDA has indicated it will work even harder to make sure that there is compliance.

-- Farm Aid
Anonymous @ 1/29/2010 2:09:05 PM 
As the New York Times suggested this week, Big Food is our next bank crisis. http://www.nytimes.com/2010/01/25/opinion/25mon4.html?scp=1&sq=big%20food&st=cse
Anonymous @ 2/2/2010 9:00:19 AM 
Poet, farmer, and slow food advocate Wendell Berry has a very poignant outlook on the topic. " Economic feasibility is not a suitable standard for human activity". There is a huge difference between price and cost. Price keeps mah daddy workin' his job. Cost poisons the soil and squanders the water. Voters in Ohio just underlined the difference in passing issue 2 which will keep an insider board of people who want to keep their jobs at the cost of quality to the consumer, and humane treatment of animals. Much like Horizon's watering down of organic standards keeps family farmers in business, at what cost to our future does this happen ? There is a reason Horizon gets nailed in the articles and Organic Valley doesn't. You get what you pay for.
Anonymous @ 2/2/2010 9:07:29 AM 
Concentration, I would put forth, is going to present bigger problems in the organic niche. Let's not mislead, Horizon is owned by Dean Foods, the LARGEST processor and distributor of dairy products in this country. There is a reason dairy farming was left off Farm Aid's handy graph above, I would assume. But I am thankful for the forum for this type of dialogue and pledge to continue to support Farm Aid in doing the right things-because they are righteous, not because they support the current economic paradigm ! Greenwashing is a potent threat to the movement. Horizon IS concentration, as it relates to the organic market. Let's not skew this to the disadvantage of those who want to make an informed judgement.
Anonymous @ 2/10/2010 8:22:02 AM 
The reason that dairy was left off of our graph actually has nothing to do with Dean and more to do with practicality. Dairy is much more complicated than the other commodities. Firstly, there are two dairy products to look at: liquid milk and cheese. Secondly, there are two markets to look at: dairy marketing (the producer side) and dairy processors. Thirdly, national concentration numbers in dairy don't tell the story because dairy is so regional. In some regions, there is a large concentration factor, in others there is little to none. Averaged out nationally, the concentration ratio is at or below what is generally regarded as concentrated (40%) with marketing at 40.2% and processing at 28.2%). For more information about dairy processing, refer to this report from the USDA's Economic Research Service: http://bit.ly/cRX3oO

-- Farm Aid
Anonymous @ 2/11/2010 4:45:43 PM 
Here is another vote for growing your own food in your own backyard. Synthetic-free, pesticide free. We also have free range chickens and get about 6 eggs per day. Canned food companies won't buckle down and quit using BPA? Stop buying their products. Period. They aren't listening, and they lie.

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