A remarkably diverse group of organizations are urging the Biden administration to issue an executive order that would enact a moratorium on mergers and acquisitions in the food and agricultural industries. Led by Food & Water Watch the groups have sent a letter dated January 28, 2021 to Susan Rice, Director of the Domestic Policy Council for the new administration, asking for a moratorium on approving large agribusiness mergers and acquisitions and to undertake a comprehensive evaluation of how consolidation has impacted farmers, rural communities, workers, consumers, the environment and food system resilience.
Moreover, the groups ask the new administration to investigate and if appropriate, break up any companies engaged in anticompetitive practices or having excessive market share. The letter spotlights the rampant consolidation that has plagued America’s agricultural sectors and overall food system resulting in a profound loss of independent, family farmers and hollowed-out rural communities.
The details undergirding this hope-inspiring call to action by our newly inaugurated POTUS are familiar, yet remain startling: (i) the four largest processors slaughter 83 percent of beef cattle, 66 percent of hogs and half of all broiler chickens; (ii) just two companies, Ardent Mills and ADM Milling, mill half of all U.S. wheat; (iii) a few seed and agrochemical firms effectively control their markets, with the largest four companies controlling 67% and 70% of the seed and agrochemical sectors, respectively; (iv) vertically integrated agribusinesses require farmers, by one-sided contracts, to take on enormous amounts of debt, pitting farmer against farmer, which can result in unfair and abusive practices; (v) today’s farmer earns just 15 cents per food dollar; (vi) just four firms control 2/3rds of all grocery sales; and (vii) more and more revenue from rural economies is funneled to corporate headquarters and Wall Street investors.
The letter also focuses on the dangers of monopsony (as distinct from “monopoly”). In an article on Monopsony published on Investopedia, reporter Julie Young explains the meaning and economic impact of this market condition in which there is only one buyer, the monopsonist.
In a monopsony, a large buyer controls the market. Because of their unique position, monopsonies have a wealth of power. Like a monopoly, a monopsony also does not adhere to standard pricing from balancing supply-side and demand-side factors. In a monopoly, where there are few suppliers, the controlling entity can sell its product at a price of its choosing. In a monopsony, the controlling body is a buyer. This buyer may use its size advantage to obtain low prices because many sellers vie for its business.
As Annie Lowrey, staff writer at The Atlantic, explains in her must-read article, The Rise of the Zombie Small Businesses (9/4/18), a recent U.S. Small Business Administration report, called into question whether all those family chicken farms are really family chicken farms. The economic concept of monopsony explains why they’re not really family chicken farms!
Let us now praise these 28 groups who have signed this urgent letter to President Biden’s administration:
American Federation of Government Employees Council 45,
American Grassfed Association,
Animal Legal Defense Fund,
Buffalo River Watershed Alliance,
Dakota Resource Council,
Dakota Rural Action,
Green State Solutions, HEAL (Health, Environment, Agriculture, Labor) Food Alliance,
Family Farm Action,
Food Animal Concerns Trust,
Food & Water Watch,
Friends of the Earth,
Institute for Agriculture and Trade Policy,
Idaho Organization of Resource Councils,
Iowa Citizens for Community Improvement,
Johns Hopkins Center for a Livable Future,
Land Stewardship Project,
Missouri Rural Crisis Center,
National Family Farm Coalition,
Natural Resources Defense Council,
Open Markets Institute,
Organization for Competitive Markets,
Public Justice Food Project,
Rural Advancement Foundation International – USA (RAFI-USA),
Socially Responsible Agriculture Project,
Western Colorado Alliance,
Western Organization of Resource Councils (WORC).
(Frank W. Barrie, 1/30/21)