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Modern Agriculture 101: Corporate Power Grab

May 1, 1999 | By Patty Cantrell
Great Lakes Bulletin News Service

Why is it so difficult to find locally grown cherries in northern Michigan supermarkets, or a Key lime in Key West, Florida? Strangely, in a country founded on free market principles, it's nearly impossible today for farmers with quality products to make it into the superstore nearest you. Regional buyers for multi-state food stores fill their prime shelf space instead with the mass market products of a small number of interlocking companies that have the financial muscle to under-price, out-advertise, and buy up independent competitors.

Wall Street watchers see this interstate food system as a perfect "survival of the fittest" example: companies that keep cutting costs and adding "value" to products — from nacho flavor spray to individually wrapped slices — keep winning consumers. A growing body of evidence, however, suggests that the U.S. food system looks more like a classic case of monopoly power in the hands of a few globalizing corporations.

An unprecedented wave of mergers, acquisitions, and strategic alliances in the 1990s has created clusters of corporations that combine their strengths in individual markets to consolidate control over many markets. The result is that farmers, whose costs are just as low and whose quality is often higher, can't get to the mainstream consumer because of the food giants blocking the way.

The reason farmers are failing in record numbers has more to do with the monopoly power of agriculture suppliers and buyers than the competitiveness of the farmers' products. And the fact that consumers pay more for food raised next door than halfway around the world has more to do with corporate control of processing plants and retail outlets than with family farm efficiency.

Markets Can Work When Free
One way farmers can get around global food conglomerates is to go directly to the consumer, or find some kind of "niche" market, where the chicken they may have always raised out in the open is considered a specialty product.

A good example is a free-range egg cooperative in Grand Ledge, which 11 farmers started after they decided to stop throwing all their eggs into the commercial market basket. Now they're taking home an 80-cent profit per dozen compared to the 15 to 20 cents they received when their eggs were grouped in with the low-price factory kind.

Farmers can earn more per dozen or per pound in direct and niche markets because the supply is still low (most producers are still setting their products adrift in the mainstream) and demand is strong (people who want small-farm food really want it).

But part of the often higher price tag of direct and niche market products is due to the fact that most of the processing, distribution, and retail capacity in the U.S. food system is controlled by the mass producers.

Going around that system usually means starting from scratch. John and Merrill Clark, who raise 150 head of organic beef on their Roseland Farm in Cassopolis, say one of their biggest hurdles has been the dwindling number of small-scale processors.

If market channels are open to them, more farmers and consumers can come together at prices affordable to both. To make that happen, policy makers have to work toward recommendations that the National Commission for Small Farms made in its 1998 report, A Time to Act. They include curbing monopoly pricing power in agriculture markets, ending inequities in meat inspection, and making more financing available to small farmers.

One Farmer’s Story
Jim Graham’s story is a good example of how corporate control of agriculture squeezes family farmers and corners consumers. Mr. Graham, a farmer from St. Johns, quit the hog business right before prices dropped last year to all-time lows. One problem was that he sold hogs by the pickup, not semi-truck, load. “We had hogs that graded real well, less than one inch of fat, but we were never paid any premium,” Mr. Graham said. “They said we were too small.”

In a free market, Mr. Graham could have taken his hogs elsewhere. But producers generally have to take what companies like the Michigan Livestock Exchange offer. The Exchange, the predominant buyer of livestock in several Midwestern states, satisfies much of its supply needs from its own factory-raised animals and from factories it finances.

Mr. Graham has no interest in spending as much as one million dollars to build a livestock factory to produce thousands instead of hundreds of hogs. Neither will he consider contracting, which shifts some of the risk to the company that owns the livestock but also requires farmers to follow corporate instructions. “You’re nothing but a tenant on your own farm,” he said. ~P.C.

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