'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
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%
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
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
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,
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
* 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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