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More than 200 people attended the Leopold Center’s agricultural concentration conference in Ames on February 4. The event was one of the first activities of the Leopold Center’s new policy initiative led by associate director and economist Mike Duffy.
The conference featured five leading national experts who provided an overview of the problem and possible future consequences, legal and political solutions, and farmer responses.
“I think the good attendance is an indication of the level of concern that people have about concentration,” Duffy said. “Although people are concerned, no one’s talking about it in a systematic, non-emotional way.”
In recent months, agricultural concentration issues have headlined numerous news reports. A federal court ruling struck down an Iowa law that had banned meatpackers from owning livestock. A similar ban has been proposed at the federal level but has failed to receive Congressional approval.
Duffy said he wanted the sessions to be educational rather than divisive. Evaluations indicated that the approach was well received.
“I was curious,” said Bill Furlong of Iowa City, who raises beef, corn, soybeans and hay on his family’s 1,000-acre farm. “I want information about the state of the industry and whether I would be able to survive in it. I’ve decided that networking will be very important for farmers in the future.”
Whiting hog producer Leo Benjamin admitted that he came to the conference to hear about the meatpacker ban.
“But it became clear to me during the sessions that we, as livestock producers, need to focus on things that we can control and not what’s controlled by others,” he said.
Rural sociologist Mary Hendrickson from the University of Missouri-Columbia offered a “who’s who” in corporate mergers and acquisitions in the food production, processing and retail industries. She said that five or six food chain clusters are emerging globally, squeezing out independent and small business owners.
But Benjamin said Hendrickson’s report left him feeling optimistic.
“I feel empowered,” he said. “The more that ‘they’ consolidate, the more ‘we’ outnumber them, ‘we’ being the producers, distributors and retailers who are left behind by the mergers. And attitude is paramount: Do we consider other producers as competitors or colleagues? Competitors beat each other, while colleagues support each other.”
Representatives from the offices of Senators Chuck Grassley (R-Iowa) and Tom Harkin (D-Iowa) also offered their perspectives, and explained recent efforts at the federal level to alleviate some of the problems.
A concern for the future of rural communities brought Andrea Jensen to the conference from Litchfield, Minn., where she is a strategic planner and facilitator.
Jensen described a recent meeting in her community to talk about ways to attract businesses whose workers could make a decent wage. “Not once was agriculture or farming ever mentioned and this is a farming community,” she said. “What are the alternatives to this kind of business model [that leaves out farmers]?”
Kathleen Clark of Ames also is concerned for farmers. Clark, a retired United Methodist minister who recently moved back to Iowa, said she had worked with many farmers during the 1980s farm crisis. “I wanted to catch up on these issues,” she said, adding that farmers probably need to rely on off-farm income to survive.
Duffy said the conference provided a good beginning for the Leopold Center’s policy initiative, and that it would help determine future activities in this area.
“I think it showed the external environment in which farmers work every day,” he added. “All too often we focus on the production aspects of agriculture and its problems, but there are things at all levels of agriculture that need to be considered.”
What the speakers said:
- Current level of concentration in production, processing, and retailing
Mary Hendrickson, extension associate and network coordinator of Food Circles in the Department of Rural Sociology, University of Missouri, Columbia
A look at concentration in the food industry:
- Five corporations are involved in genetic research and seeds.
- Meatpackers and processors: 81 percent of the market share in beef is held by five corporations; 59 percent in pork, and 50 percent in broilers.
- In grains and milling, 61 percent of the market share in terminal grain-handling facilities is held by four corporations. In Brazil, three corporations control 64 percent of soybean oil processing.
- In 2000, 42 percent of the market share in U.S. food retailing was held by five retailers: Kroger, Wal-Mart, Albertson's, Safeway and Ahold. Their market share had nearly doubled since 1997. Hendrickson expects their market share to rise to 54 percent in 2003.
"Retailers can now dictate terms to food manufacturers, forcing changes back through the system to the farm level. As the balance of power shifts to the retailers, smaller entities in all parts of the food system are being left out. Rural areas and inner urban areas are most likely to be left out of the retail revolution.”
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Economic impact and impacts of continuing to proceed as we are now
Neil Harl, Charles F. Curtiss Distinguished Professor in Agriculture and director of the Center for International Agricultural Finance, Iowa State University
- “The evidence is overwhelming that the agricultural sector is undergoing the greatest structural transformation in the history of the sector.”
- “In Russia, they are trying to restore competition as quickly as they can. The irony is that we’re moving in the opposite direction.”
- “When ownership is concentrated, you don’t have to share the gains you get on the other side from being less than fully competitive. If the United States wants to keep its independent entrepreneurs, they need to have access to meaningful competitive outlets.“
- “Without much doubt, the greatest economic threat to farmers as independent entrepreneurs is the deadly combination of concentration and vertical integration. Producers are vulnerable to a combination of high levels of concentration in input supply and output processing, and high levels of vertical integration from the top down.”
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Anti-trust actions: History and current situation
Doug Ross, Special Counsel for Agriculture, Antitrust Division, U.S. Department of Justice
- “We are very much aware of the trends toward increasing concentration in some agricultural sectors. In particular, the steer-heifer side of the cattle slaughter market has been highly concentrated for some time, with four meatpacking firms now controlling over 80 percent of the market.”
- “High concentration in a market is not in and of itself a violation of the antitrust laws. On the other hand, a high level of concentration increases the potential for antitrust scrutiny…Monopolization requires demonstrating that the conduct is harming competition, not just that it is disadvantaging rivals.”
- Alternative policy options: Federal and state
Doug O’Brien, Counsel for Senate Committee on Agriculture and aide to Senator Tom Harkin (D-Iowa)
Mark Reisinger, agricultural legislative aide to Senator Chuck Grassley (R-Iowa)
Both discussed recent measures that would have helped alleviate some of the problems -- the meatpacker ban, mandatory price reporting and payment limits – and why these options face political challenges. They also discussed the potential of the Capper-Volsted Act to increase bargaining rights for farmers, and laws at the state level to regulate production contracts (Iowa is one of 17 states with such laws).
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Farmer responses: Collective bargaining, new generation cooperatives, value-added agriculture
Richard Levins, professor of applied economics, University of Minnesota, St. Paul
- “You need a vehicle appropriate to the conditions you are in. Only in farming are prices not negotiated. Farmers do not have to be price-takers.”
- “When people talk about negotiating, they tend to think only about supply management and all the things that have been used in the past to control supplies, like pouring out milk and plowing down a field of cotton. This is a big misunderstanding about negotiation.”
- “Sometimes the solution to being lost is not to drive faster down the same road, but to find a different road. We are so busy looking for help on the supply management road that we have overlooked the negotiating road.”
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