Concentration in Agriculture: Forcing our Family Farmers Out of Business
What does concentration in agriculture mean?
The term concentration describes the control that a small number of corporations have over the whole of food production, marketing and consumption. The U.S. agricultural sector suffers from abnormally high levels of concentration, a trend that has forced thousands of independent family farmers off the land. It has also caused serious damage to rural economies, public health and the environment.
How bad is it?
One way to demonstrate the severity of concentration is to consider what economists call the "four-firm concentration ratio" or "CR4." Most economic sectors have concentration ratios around 40%, meaning that the top four firms in the industry control 40% of the market. If the CR4 is above 40%, a sector is considered "highly concentrated." Experts believe competition is severely threatened and market abuses are likely to occur in highly concentrated markets.
The CR4 ratios in the agricultural sector are shocking. As of 2007, four companies owned 83.5% of the beef market—more than double the "highly concentrated" cut-off point of 40%. Similarly, the top four firms owned 66% of the hog industry and 58.5% of the broiler chicken industry. In the seed industry, four companies control 50% of the proprietary seed market and 43% of the commercial seed market worldwide. When it comes to genetically engineered (GE) crops, just one company, Monsanto, boasts control over 85% of U.S. corn acreage and 91% of U.S. soybean acreage.
What does concentration mean for farmers?
Because farmers rely on both buyers and sellers in their business transactions, 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, such as processors of the products that farmers grow and raise, suppress the prices farmers are paid. The razor-thin profit margins farmers and ranchers are forced to endure often push them to expand into mega-operations or exit the business altogether.
What does concentration mean for consumers?
In short, concentration leads to higher prices and less choice. Despite the promise of cheaper food that is supposed to result from concentration and "economies of scale," USDA data show that the cost of food to consumers has risen steadily since the 1980s. At the same time, over the past few decades, the farmer's share of the retail food dollar has plummeted. Because of their market power, giant processors and retailers have no incentive to pass their savings at the farm gate onto consumers.
What is Farm Aid doing about it?
Since 1985, Farm Aid has been highlighting the threats that corporate concentration poses to family farmers and eaters alike. The USDA and the Department of Justice (DOJ) conducted public workshops throughout 2010 to address the issues of concentration, antitrust violations and competition in agriculture. Farm Aid was heavily engaged in these workshops, working with farm groups and family farmers across the country to make sure our voices are heard.
The USDA and the DOJ have still not offered any satisfactory plan for next steps. Click here to take action on this critical issue.
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