How Monopolies are Killing Farms

How Monopolies are Killing Farms

To farmers, farming is about much more than just growing crops. It’s a way of life. That may sound corny (pun intended), but it’s true, and it is a reality to millions of farmers around the county and the world. Unfortunately for them, though, farmers are being phased out.

Although some may disagree, this is not a part of some malicious plan to destroy small farms, and it is definitely not intentional. It is simply evolution. It comes from the large-scale consolidation of American farms that has been occurring for the past 80 years. The year of 1935 is the year that researchers have coined “peak farm”, where there were roughly 6 million farms operating in the US. By 2011, however, this number had dropped to only 2 million. The cause for this lies in quite a few things, such as heavy urbanization and mechanization of farm labor. Yet, the primary cause for this is one thing: consolidation.

Since “peak farm,” the largest farming operations haven’t necessarily been swallowing up small farms, but have instead simply grown at an astronomical pace when compared to more humble farms. By 2005, household brands had concentrated in the agriculture industry as so:

Beef Packers & Feedlots (Tyson, Cargill, National Beef Packing Co., Five Rivers) 83.5%

Pork Packers & Production (Smithfield, Tyson, Triumph, Swift & Co.) 66%

Broilers (Pilgrim’s Pride, Tyson, Perdue, Sanderson Farms) 58.5%

Turkeys (Butterball LLC, Hormel, Cargill, Sara Lee) 55%

There are many other facets of the food and agriculture industry, and trends like this are reflected all across it. These aren’t all necessarily monopolies, but if only a select few companies are controlling almost all of the food industry, then there is merely not enough room for small-sized farms to compete and grow into medium-sized farming operations. As pertaining to the forming of monopolies, the third circuit court ruled that “a share significantly larger than 55% has been required to establish prima facie market power,” with prima facie meaning “correct until proving otherwise.”

Where there is market power, there is the potential for greed. Take note on how Tyson is on 3 out of the 4 subjects listed above. In February 2017, Tyson Foods disclosed to investors and the public that the company had been issued a subpoena by the SEC for antitrust violations related to pricing, production, and compensation in the poultry industry. Allegedly, Tyson and its competitors (Pilgrim’s Pride Corp and Sanderson Farms) have been colluding since 2008 to shrink production and manipulate market prices. Predictably, all companies have denied this.

How could this be possible though? Wouldn’t competition be able to undercut this price hike, especially during the Great Recession? Unfortunately, the answer is no, because what they had created was a de facto oligopoly. And, lucky for these multinational food corporations, is that their margins had exploded during this period. In 2008, Tyson’s stock price hovered between 5 and 10 dollars. By the start of September 2017, it was at 62 dollars.

In industries where these companies have not (yet) cornered the market, multinational food corporations tend to undercut small farming operations. This is a phenomenon felt by farmers not only in the US but globally. Around the world, small farmers generally have less access to international or even interregional markets and suffer for that. Because of this, they must sell their products at higher prices and pay out of pocket for expensive technology that is commonly already considered antiquated by larger corporations with more access to capital. With a smaller ability to network and having less money on hand, product marketing frequently falls entirely onto farmers.

For many, it may seem like small farming operations will be swept away with the tide of history. Yet, there is still hope. It can be found in the movement towards organic food, local products, and public awareness of factory farms. However, this largely falls on government institutions, as they have the ability to put the needs and qualms of farmers into legislation. Hopefully, they will. After all, the 2017 lawsuit against Tyson Foods might just be the beginning of a new trend.


Sources:

 

“07contable.pdf.” Accessed September 7, 2017. http://www.foodcircles.missouri.edu/07contable.pdf.

 

“Competition And Monopoly: Single-Firm Conduct Under Section 2 Of The Sherman Act : Chapter 2 | ATR | Department of Justice.” Accessed September 7, 2017. https://www.justice.gov/atr/competition-and-monopoly-single-firm-conduct-under-section-2-sherman-act-chapter-2.

 

“Consolidation in Food and Agriculture.” Accessed September 7, 2017. https://www.organicconsumers.org/scientific/consolidation-food-and-agriculture.

 

Deva, Eswara Reddy. “Impact of Globalization on Small Farmers Worldwide: Implications on Information Transfer.” Accessed September 7, 2017. http://www.academia.edu/2649388/Impact_of_Globalization_on_Small_Farmers_Worldwide_Implications_on_Information_Transfer.

 

Ferdman, Roberto A. “The Decline of the Small American Family Farm in One Chart.” Washington Post, September 16, 2014, sec. Wonkblog. https://www.washingtonpost.com/news/wonk/wp/2014/09/16/the-decline-of-the-small-american-family-farm-in-one-chart/.

 

“Tyson Reveals Subpoena Linked to Alleged Price Fixing.” Reuters, February 6, 2017. https://www.reuters.com/article/us-tyson-foods-results/tyson-foods-quarterly-profit-jumps-28-6-percent-idUSKBN15L1DF.