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DEVELOPMENT: Farmers, Consumers Squeezed by Middlemen

Matt Homer

NEW YORK, Apr 24 2008 (IPS) - With global grain stocks at record lows and soaring prices for agricultural products, new attention is being paid to which farming methods are best poised to meet global food needs.

The United States and Europe have long utilised large-scale industrial farming – which has generated enormous increases in output – but this method is coming under increasing scrutiny over concerns about monopolistic behaviour and sustainability. In order to increase output in a sustainable way, agricultural experts are increasingly looking to alternative models, or at least significant alterations to the existing industrial one.

A conglomeration of over 110 countries – including the United States – and key global institutions recently concluded a three-year study of world agriculture and found that North America is increasingly dominated by a vertical agricultural structure.

According to the report, “The International Assessment of Agricultural Knowledge, Science and Technology for Development” (IAASTD), this has created a situation where “the largest actors…have predominant influence over the production, processing and marketing of food.” It further argues that this has disconnected farmers from consumers and ensured that most profits are “captured by industries after the farmgate, not by farmers”.

In fact, according to agriculture expert Raj Patel, although the average basket of food has increased by 2.0 percent in real terms over the past 20 years, farmers are receiving 40 percent less. And the National Farmers Union estimates that for every dollar that U.S. consumers spend on food, only 20 cents actually goes to farmers or ranchers. The rest is found in “marketing, processing, wholesaling, distribution and retailing”.

This increasing concentration means a fewer number of agribusinesses are exerting a larger amount of influence over the food supply chain, from inputs to sale. Critics of this situation compare it to the shape of an hourglass. A vast amount of producers must funnel their goods through a handful of large corporations before they can make their way to consumers.

Research by Mary Hendrickson, a rural sociologist at the University of Missouri, shows the level of influence by agribusiness in the United States has increased significantly. In soybean crushing, for example, the largest four firms now make up 80 percent of the market, whereas in 1977 they comprised 54 percent. In flour milling, the top four have increased their concentration from 42 percent of the market in 1982 to over 60 percent today.

Farming is also concentrated at the extreme beginning and endpoints of U.S. agriculture. The top two seed providers comprise 58 percent of the marketplace and nearly half of purchased food comes from just five retailers: Wal-Mart, Kroger, Albertson’s, Safeway, and Ahold.

Critics point out that this monopolistic influence has a perverse impact on competition, and consequently on prices for consumers. Denis Keeney and Loni Kemp of the Institute for Agriculture and Trade Policy wrote in a review of U.S. agriculture that “any commodity where four or fewer industries exert over 60 percent control has the makings of a price cartel. Farmers have no market price control, and consumers, over time, will pay higher prices.”

Small-scale farmers and ranchers have been particularly pinched by the hourglass configuration of U.S. agriculture. Because farmers must rely on just a handful of major buyers, they have little ability to influence the price of their products. They must also depend on seeds and fertiliser from a few large corporations at the beginning of the food chain.

And because of intellectual property right restrictions on seeds, they are often required to purchase new seeds each year instead of saving them from previous ones. In short, although farmers vastly outnumber buyers and input suppliers, they have significantly less leveraging power. And although a significant amount of government subsidies are directed at agriculture, few of them make their way to small-scale farmers or ranchers.

In addition to distorting effects related to monopolistic behavior, large-scale industrial agriculture is also under attack for reasons of sustainability. “We have seen adverse ecological impacts on water and soil quality and biodiversity,” Hendrickson told IPS. “The use of synthetic inputs (fertilisers, pesticides, etc) from off the farm enhanced productivity fabulously, but has had some serious impacts.”

Keeney and Kemp agree, arguing in their report that “one cannot see how this structure can hold over the next century because it is so heavily dependant on fossil fuels, taxpayer subsidies, and environmental externalities.” Already, they point out, this form of agriculture has resulted in “water pollution, groundwater pollution, hypoxia zones, increased flooding, depletion of ground water, air pollution, excessive odors, climate change, loss of wildlife habitat, degradation of natural ecosystems, loss of pollinators, loss of soil quality, and soil erosion.”

Proponents of large-scale agriculture argue that despite these considerations, it is still the most efficient way to produce large quantities of food. They say that industrial farming is best suited to bring new areas of land into production, increase productivity and boost output.

The reasoning is because of economies of scale. Larger firms are able to consolidate functions and thus reduce costs. For example, whereas each small-scale farm may require its own tractor, industrial farming could purchase multiple farms and use one tractor among all of them.

These claims of greater efficiency, however, have come under question – especially when considering the external costs associated with this method – pollution, soil depletion, etc. Critics such as Gary Howe of the International Fund for Agricultural Development point out that industrial farming cannot really be considered more efficient than small-scale farming when it relies so heavily on subsidies. He also points to the vast productivity generated from small-scale farming in the green revolutions of Asia.

An important key for the future of agriculture, Hendrickson argues, is to change the measurement of success. It should be shifted away from measurements such as the number of bushels produced per acre to something more like the number of nutrients produced per acre.

She remarks that “what the Latin American [IAASTD] assessment showed is that agro-ecological strategies can be as productive – or more productive – than current large-scale intensive agriculture that is dependant upon outside inputs.”

In fact, she concludes, “they are probably a better model for boosting food production exactly in the areas that need it.” These are methods that “employ both local/traditional knowledge and findings from formalised science, [and] are adapted to their particular social and ecological niche.”

With the world facing dire agricultural straits, experts are hoping this will be a crucial moment in which the direction of agricultural production can be changed. They point out that output can be boosted, prices eventually reduced, and sustainability improved all at the same time.

Although a variety of options are available, many agree they must start by giving farmers greater influence within the food chain and breaking the monopolistic and unsustainable influence of big agribusiness.

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