Agribusiness Sheds
'Excess Human Resources'

U.S. family farm agriculture, long the agrarian ideal and model of efficiency for many countries throughout the world, is slowly if not inexorably, making its way onto the scrap heap of history. One has only to look at recent U.S. Department of Agriculture statistics, including summary figures from the recently released 1997 Agricultural Census and other authoritative studies to see the reality that is facing family farm agriculture heading into the new millennium.

While the nation's farm operators now number 1,911,850, down only 13,450 from 1992 Census figures, slightly more than half that number (961,560) list farming as their chief occupation. In 1978 some 1,269,305 said farming was their chief occupation.

Likewise, 73.6% of the nation's farms share 6.8% of the market value of agricultural products sold while 7.2% of the farms received 72.1% of the market value of ag products sold, leaving those 18.2% farms with yearly sales between $50,000 and $249,999 a meager 21.1% of the market value.

In 1996 alone, according to the USDA, 985,718 farms registered a positive net cash return while 926,108 showed a net cash loss. Even more telling is the fact that while the average farm operator household income ($52,300) in 1996 was on a near par with the U.S. household income, farm income was only a very small part of that total. Since 1987 farm income has ranged from only 10% to 17% of total farm operator household income.

Meanwhile, the nation's food marketing system with a value of $658 billion accounts for 9.3% of the U.S. Gross National Product (down from 12% in 1972). Yet, animal and crop products value amounts to only $123 billion of that total while the value added sector accounts for $535 billion. Likewise, the average farm value of the food we eat has gone from 49% in 1951 to 25% in 1996.

Those figures are in keeping with the trend seen throughout our food system this century. A study developed by Dr. Stewart Smith, a senior economist for the Congressional Joint Economic Committee, vividly illustrates how out of balance our economic equilibrium relative to agriculture has now become.

In October, 1992 he examined the economic activity of agribusiness' three basic economic sectors--farming, inputs [seed, feed, chemical poisons, capital, machinery, fertilizer, etc.] and marketing [processing, packaging, advertising, wholesaling and retailing of food.]. Viewing the economic activity within agribusiness, sector by sector, he found that farming suffered a shocking descent from 41% of total agribusiness activity in 1910 to 9% in 1990, while the input sector rose from 15% to 24% and the marketing sector went from 44% to 67% in that same 80-year period.

At the same time that farm income has been dwindling, production expenses have been increasing. Between 1987 and 1997 the cost to farmers of seeds, fertilizer and agricultural chemicals alone increased 86%. Thus, as noted above, while farmers are receiving $123 billion for their animal and crop products they are paying out $185.1 billion in production expenses.

As U.S. agriculture continues to suffer from what can best be described as the nation's "permanent agricultural crisis," its total business equity ($971.2 billion) is equal to twice the reported assets of the U.S.'s three largest auto makers.

Yet, despite such assets, the U.S. Commerce Department's recently released final 1998 income figures for farm proprietors, even with a strong improvement in the last three months of 1998 as emergency aid checks arrived, showed that the total income for farm proprietors fell last year to $27.1 billion from $35.5 billion in 1997. That represents a decrease of 23.6% or, to put it in more stark terms, farm income was 31% higher in 1997 than in 1998.

At the same time that farmers are seeing disastrously low commodity prices, corporate agribusiness is thriving.

In January testimony before the U.S. Senate Agriculture Committee's hearings on concentration in agribusiness C. Robert Taylor, Alfa Eminent Scholar and Professor of Agriculture and Public Policy at Auburn University testified about the implications for the agricultural economy of general trends in vertical integration and market concentration in agribusiness.

Among his findings were the fact that, since 1984, the real price of a market basket of food has increased but 2.8% while the farm value of that food has fallen by 35.7%, and that a "widening gap" between retail price and farm value also exists for the components of that market basket, specifically meat products, poultry, eggs, dairy products, cereal and bakery products, fresh fruit and vegetables, and processed fruit and vegetables.

By way of illustration, between 1980 and 1996 in choice beef that gap widened by 42.4%; in pork it widened to 74.6%. In a one-pound loaf of wheat bread the gap from 1970 to 1996 was 238% and the gap in one-pound of oranges from 1982-1996 was 53.8%, to name a few commonly purchased items.

It is when one looks at return on investment (equity) that the true picture begins to emerge as to who profits and who pays when it comes to the food we eat.

During the 1990's, Professor Taylor points out, the rate of return on investment for retail food chains was 18%; for food manufacturers the rate of return was 17.2%; for agricultural banks it was 10.8%; and for farming the rate of return from current income averaged 2.39%! But then, looking carefully at Professor Taylor's testimony, it is noted, buried in a footnote, that "the average return to farming may actually include a return to integrators [vertically integrated companies that contract with farmers to produce commodities or livestock] and non-family corporations, thus overstating returns to farmers, per se."

He goes on to point out that not only would retail food prices be relatively lower if markets were more competitive but with the high profitability of concentrated agribusiness attributable to market power or to the realizing of economies of size it would permit such corporations to invest more in product development "which might eventually benefit food consumers."

Yet, outside of developing agricultural biotechnology and genetically modified foods, we see very little of the type of "product development" that Professor Taylor speaks about. Rather we see large amounts money being spent on packaging, food advertising ($11 billion spent in 1996 compared to $8.4 billion in 1991) and corporate agribusinesses merging and acquiring to the extent that food marketing remains one of the most leveraged industries in the U.,S. economy with debt alone in 1996 increasing by $10 billion to a total of $318 billion.

At the same time, since 1982 the food manufacturing sector has outperformed the owner investment equity index for all other U.S. industries during most of those 17 years.

In a study prepared by Dr. William Heffernan for the National Farmers Union, released prior to a February hearing before the House Agriculture Committee, the rural sociologist from the University of Missouri showed how linkages in our current food system, through "strategic alliances," joint ventures, partnerships, mergers and other relationships "have formed a complex network of 'clusters' of firms," each a vertically integrated "food chain," controlling the system from the gene to the supermarket.

NFU President Leland Swenson said the study revealed "the complex web of relationships among a handful of firms in the food chain. The trend toward a privately centralized food system puts our food security in great jeopardy," Swenson stressed. "Food is different than other goods and services, and it would be dangerous to permit a few major firms to control decision making throughout the entire food chain. This study should compel Congress to take action to ensure the industry remains competitive."

The Heffernan study details the relationships forming the three major "clusters"--Cargill/Monsanto, ConAgra and Novartis/ADM--which currently dominate the nation's food system. Among the study's findings are:

* The complexity of the linkages in the system undermines market competition and makes it difficult to measure. The network of relationships is creating a seamless system with little market transparency along the various stages of the food system. Because of this complexity, a firm that does not hold a majority share of a specific market may still have great decision-making power within the food chain.

Examples of such "conglomerate concentration" which can be defined simply as the possession of a large share of a given industry's resources or activity by companies that are primarily engaged in other industries, but are not suppliers or users of the given industry's products. Two of the nation's three largest food manufacturers, tobacco companies Philip Morris and RJR Nabisco, are prime examples of this form of economic concentration.

* Technological advances are accelerating the process of vertical integration. Biotechnology and the "terminator" gene have put the farmer at the mercy of these food "clusters" for seed to plant the crop. Also, precision farming's (or "prescription agriculture" as it is now sometimes called) "global positioning system" separates management from the production of agriculture. With this technology, it is possible for "managers" in distance offices in different countries to make decisions about farm production, while the producers or the farmers simply become hired labor.

Farmers in India are committing suicide in record numbers due to the almost inevitable outcomes of the corporate model of industrial agriculture--with its indebtedness, crop failures and systematic destruction of their agri-culture--resulting from the corporate decisions that are being made far from them in St. Louis, Missouri and Minnetonka, Minnesota.

* This new structure threatens independent producers. The "clusters" influence opportunities are all along the food chain--from production inputs to global trade--and are severely hampering the farmers' ability to earn a fair return for their product. It also erodes the independence of farmers by shifting major decision-making to a handful of firms and corporate executives.

Expanding forcibly these "clusters" begin to absorb all that lies in their path. In mid-1997, for example, Archer Daniels Midland ("Supermarkup to the World") began its entry into the nation's meat industry by first purchasing 10% of the stock of IBP, the nation's leading meat packer (it now owns 13.3%) during the Hudson Foods scare. Coupled with its surprise buyout of Moormans Manufacturing, a large, reputable animal feed producer in mid-September, 1997, ADM gained what the Agribusiness Council Inc. called a "jugular hold" on many of IBP's suppliers. Today, for hundreds of miles encircling its processing centers, IBP finds itself in a "cozy relationship" with ADM, which controls the supply and price of animal feed.

* This new structure is also harming rural communities because corporate returns are reinvested in the firm, rather than in local economies where the crops are produced.

By deifying "cost benefit analysis" at the expense of the "common good" corporate agribusiness has managed to annul the positive dimensions of the family farm system and eliminate its economic and environmental advantages, particularly as they relate to building genuine communities.

As social anthropologists Patricia L. Allen and Carolyn E. Sachs point out, any system built upon a foundation of structural inequities "is ultimately unsustainable in the sense that it will result in increasing conflict and struggle along the lines of class, gender, and ethnicity." Corporate agribusiness has become just such a system.

Thus, as corporate agribusiness continues in its pursuit of substituting capital for efficiency and technology for labor as it also attempts to standardized the food supply through the globalized industrialization of food production while, at the same time, creating synthetic food through such means as biotechnology, the food industry's "excess human resources," i.e., family farmers, are rapidly being eliminated.

In the grand scheme of history, the 20th century may well be remembered as the point in the evolution of humanity when those corporations that trade, process, manufacturer, pack, ship and sell the U.S. and the world's food successfully removed the culture from agriculture and in the name of "efficiency" and in the pursuit of a globalized industrialization of the world's food supply reshaped that culture it into an agribusiness.

With the prospect that such a metamorphosis might well soon occur the words of Tim Ralston, a Petersburg, North Dakota, farmer strike a poignant note:

"When tractors are as big as barns,
their machinery the size of groves.
Then might shall have become right . . .
machines will have won.
When there's one yard light in a Dakota night
and one farmer waking in the morning sun.
There there by the grace of God
went us and technology's logic is done."

A.V. Krebs is author of The Corporate Reapers: The Book of Agribusiness [Essential Books: 1992]

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