In January, U.S. Department of Agriculture Secretary Tom Vilsack told Congress that USDA could not stop purchasing meat from global food giant JBS, connected to violations of the Foreign Corrupt Practices Act, because there would not be enough meat on the market from other sources. The admission that a major player in the U.S. food system, headquartered in Brazil, could not be disciplined due to its market power was the inevitable result of decades of rubber-stamped merger approvals by regulators.
The permissive system of merger approvals, housed at the Justice Department (DOJ) and Federal Trade Commission (FTC), is rooted in an economic theory that emerged from the University of Chicago in the 1970s supporting a so-called “consumer welfare standard.” This theory, enshrined in the 1982 merger guidelines from the DOJ and FTC, claims that mergers make companies more efficient and provide lower prices for consumers. This “consumer welfare standard” should be the primary basis of merger reviews. Concerns about how mergers might affect farmers or workers, small businesses or communities were largely cast aside. The result has been an open door for practically any and all mergers across all sectors.
Today, the agriculture sector is enormously concentrated in most segments. The top four beef companies control 86% of the market, the top four soy processors control 80%, the top four pork companies control 67% and the top four poultry companies control 54%. Earlier this year, USDA issued a report on the highly concentrated seed industry, documenting the many challenges for competition and innovation, including fewer choices and higher prices. Mergers have led to both horizontal and vertical integration issues in the agriculture sector, with some of the larger players dominant in multiple segments of meat and feed or seeds and pesticides. In a recent example, animal feed giant Cargill acquired America’s third-largest chicken business.
The Missouri Rural Crisis Center’s Rhonda Perry explained in an article this week how a series of mergers led to the corporate takeover of the hog market and the loss of thousands of independent hog producers in less than a generation. “PSF (Premium Standard Farms) got bought out by Continental Grain, who then got bought out by Smithfield (who had already bought out the two biggest pork producers in the country–Carroll’s Foods and Murphy Farms), who ultimately got bought out by a Chinese corporation (Shuanghui, now WH Group). Each of these buyouts and mergers mattered.”
Merger-driven concentration makes it extremely difficult, if not impossible, for new innovative companies to enter agriculture markets. Innovation, responsiveness and diversity within the agriculture sector will be essential as the escalating climate crisis introduces growing risk to farming and our food supply. The most recent U.S. National Climate Assessment outlines what is coming for our food system, including increasing drought, wildfires, the depletion of water supplies, and new pests and diseases for crop and livestock production. We will need to rapidly adapt seeds, pest management tools, animal breeds and cropping systems to adapt to these new conditions. We will also need to reconfigure our food processing infrastructure to be more decentralized and less dependent on vulnerable long supply chains favored by multinational food companies.
The current permissive merger approval process has also led to a lack of genetic diversity in seeds, cropping systems and animals in our agriculture system. Most U.S. cropland grows only one or two crops sold by a few big seed companies, leaving many of the nation’s farms vulnerable to plant disease, a risk that is expected to rise with climate change. The shift toward a large Concentrated Animal Feeding Operation (CAFO) model to raise cattle, hogs and poultry for a handful of companies has led to thousands, if not tens of thousands, of identical breeds in close quarters, an ideal environment for the rapid spread of disease. The CAFO system has been affected by mass disease outbreaks in the poultry and pork industry over the last several years.
Source: iatp.org
Photo Credit: gettyimages-branex
Categories: Missouri, Business, Livestock, Poultry