The Changing Structure of Agriculture
Cattle producer's perspective
By THOMAS F. "FRED" STOKES
Special to The Progressive Populist
When I was a kid, (50 years ago) there were 40- and 80-acre farms that supported
families. Back then it was possible to borrow money to buy land and then
pay off the note from production profits.
Not any more!
Even the large family farms are in trouble today. A common sight is a house
trailer sitting in the shadow of a once stately farmhouse that is uninhabited
and decaying. This scene is a telling reminder that farmers and ranchers
are not sharing in the prosperity of our society. The "Dow" may
be doing great but production agriculture is in the dumps.
The latest Census Bureau statistics reveal that if off-farm income were
not included, over 90 percent of the farm families would be living below
the poverty level.
Who gets the gold mine and who gets the shaft?
Returns to agricultural producers were never great, but they have been in
a steady state of decline for the past 50 years. In 1951 the cattle producer's
share of the beef dollar was 71 percent and the retailer's share was 19
percent. In 1996 the producer's share was 45 percent and the retailer's
share was 46 percent.
I do not have good data on other commodities but I suspect the situation
would be similar. Over time the pie grows bigger, the producer's slice gets
smaller, but the portion for the packer and retailer gets larger and larger.
Producers usually operate at a loss, the packer sometimes operates at a
loss, but the retailer never operates at a loss! In 1996 the average retail
price on beef is reported by USDA to have been $2.774 and the wholesale
price to have been $1.505 per pound.
If you care to run these numbers they reveal an 84.3 percent mark-up and
a gross profit of $635 per carcass equivalent (assumes 1200-pound live animal,
500-pound retail cuts). Remember that this was when calves were bringing
The usual line is that these margins are due too inflation and the extra
services for the consumer. Let it be understood that inflation affects everyone.
How many calves does it take today to buy a tractor or send your kid to
college compared to times past?
Additionally, retailers now get their beef as sub-primal cuts rather than
whole carcasses or sides. The amount and cost of processing at the store
is significantly reduced. Rather than going through the humbling exercise
of borrowing operating funds (like most producers), the retailer gets beef
on an invoice that is due well after it is sold. He gets to float the money.
He is the party in the structure that contributes the least but gets the
Maybe we are a bit slow!
How many times have you heard, "I don't have time to worry about the
market situation, I have to try to make a living."? The producer just
works a little harder to dig himself into a deeper hole. It is said that
the first rule of holes is to quit digging! Perhaps we need to slow down,
scratch our heads (or elsewhere) and sort things out.
Have you ever noticed that political leaders seem to always brag on the
American Farmer's productivity and never mention his lack of profitability?
Producers have become more productive and efficient but less profitable.
The marketplace summarily confiscates gains in efficiency and productivity
by the producer.
For years we have been told to ignore the profits made at the other tiers
of the system and become profitable by being "low-cost providers".
This is the moral equivalent of saying, "let them eat cake", but
it has worked!
Many producers blame themselves for their lack of profitability and believe
that somehow they are not doing it right. To tell trusting, unprofitable
producers that they should become more efficient in order to become profitable
It is like telling someone who lost in a crooked game he has to become a
better poker player in order to win. One can not overcome a crooked game
by playing better and there is not enough unrealized efficiency in cattle
production to bridge the gap between production costs and profitable prices.
We have come to accept 20 percent returns by the large food companies and
1 to 2 percent returns by producers as the natural order of things. Certainly
there is room for improvement in production efficiency and the quality of
farm products. The best way to bring about this improvement is to give reason
to expect fair compensation.
Years ago (1921) while testifying in favor of the pending Packers and Stockyards
Act, Senator John Kindrick of Wyoming said "cattlemen are good sports
and will take their chances, but they do not want to go against stacked
He recognized that the deck was stacked against the producer. Well, the
Packers and Stockyards Act of 1921 has ceased to be enforced in recent years
and the deck is stacked again.
For years we have been told (and believed) that our cattle were cheap because
of market forces (oversupply, slack demand, and competition from other meats).
I would suggest that when a near-record supply of beef is sold at near-record
prices, there is no oversupply; and demand is fine.
It is fundamental that consumer prices for the end product are the true
reflection of the overall supply and demand situation. Why is it then that
cattle prices are low when retail beef prices high? The only plausible answer
that I can find is: "so that retail margins and profits on beef can
reach new highs"
Who's on our side?
On Organizations: With age comes a certain awareness of truisms. One of
these has to do with organizations. They come into existence in response
to some cause. Almost without fail, the organization itself becomes the
cause and the agenda becomes self-perpetuation. They measure their success
with glitzy charts and numbers that have little to do with the gut issues.
Major agricultural organizations have mostly followed this pattern. They
need to live up to their calling to be the voice and staunch advocates for
producers. These days farmers and ranchers are the most endangered species
On Government: I believe in low taxes and small government. I believe in
capitalism. I also believe in basic fairness and obeying the law. Were it
not for the Sherman Antitrust Act of 1890, we would all be domestic help
for the Rockefellers today.
Regulating business to maintain competition and free markets is a vital
function of government. We have abandoned our antitrust laws and encouraged
monopolies and oligopolies "to be competitive in the global marketplace".
We laud free trade and then say we need to cheat to promote our national
interest; that we need to create only one major airframe manufacturer through
merger (Boeing and McDonnell Douglas) to compete successfully against Airbus.
The urge to merge has become a mania. It was many small businesses, competing,
innovating and becoming more and more efficient that built the greatest
economy in history. It is corporate greed that threatens to destroy it.
The large transnational corporations justify their existence in the name
of efficiency while they systematically destroy markets, consolidate their
control and accumulate obscene profits. This intense concentration of market
power must be reversed. The Packers and Stockyards Act of 1921 and our entire
body of antitrust law must be enforced.
Where are we going?
The trends are obvious and ominous for the farmer and rancher. We are ushering
in an era of corporate feudalism. Concentration, industrialization and globalization
of agriculture appear almost inevitable. The family farm and ranch seem
destined to join the buffalo hunter as a romantic part of our history.
The very large transnational corporations; ConAgra, ADM, Cargill and several
others, are in the process of displacing private producers. They don't want
to own production; they just want to control it!
(Why should a corporation that is making 20 percent return get into a business
that has historically returned less than 1 percent?) Markets are systematically
destroyed and desperation becomes the motivation for consummating unholy
Smell the coffee!
This bear is going to eat us before we acknowledge that he is there. We
need to wake up and discuss this critical issue. Farm organizations need
to provide a forum for a full-blown dialog.
Let's hear from those who contend that everything is working fine and producers
are just sore losers, looking for someone to blame. Then let those of us
who are proponents of the "stacked deck theory" have their say.
We need to raise the level of awareness to the point that when someone brings
up the issue at a meeting, he won't be considered a smart aleck.
I have no doubt that people understand the importance of private agriculture
and will denounce this monster (total corporate control) if they are told
the truth. The transnational corporations are driven by greed and are rapidly
consolidating their total control of agriculture! They commit high crimes
and pay $100M fines, yet successfully represent themselves as "supermarket
to the world"!
Can we trust them with control of the world food supply? Are we going to
wake up and smell the coffee -- or become slaves on the global plantation?
I have discussed this situation with eminent economists and business people.
Almost all agree that we are in the process of discarding private agriculture
and installing corporate control -- on a global basis. Some think this trend
I believe we still have some time. People in this country understand that
our family ranch and farm have served us well and be allowed to coexist
with corporate agriculture. They need to be told of the real implications
of this "new world order".
Will you help me promote a full airing on this issue?
Thomas F. "Fred" Stokes, is a military retiree turned Mississippi
cattle producer who decided the game was crooked after losing lots of money.
He can be contacted at Route 1, Box 171, Porterville, Mississippi 39352
(601) 476-5568 e-mail: STOKESFARM@worldnet.att.net
News | Current
Issue | Back Issues
| Essays | Links
About the Progressive
Populist | How to
Subscribe | How
to Contact Us
Copyright © 1997 The Progressive Populist