Is the Independent U.S. Family Farm about to be History?

Thomas F. “Fred” Stokes
President

Back in July of 1999, journalist Bill Bishop wrote a piece in the Lexington Herald Leader, entitled; “Corporate Interests plow deep”. In the article he said;

“In the new agriculture, all farmers will work for “the man”. They’ll raise his chickens,
turkeys, cattle, corn, tobacco, wheat and hogs. Farmers won’t farm; they’ll fulfill contracts. They will be hog-house janitors for Smithfield and plow jockeys for
Carill and ConAgra. ………. These companies don’t own the farm; they own the farmer”

True to Bishop’s prediction, the past dozen years has seen a rapid and seemingly
irreversible march toward concentration and vertical integration in agriculture. Dr. Neil Harl, noted Iowa State University Economist and Attorney, calls horizontal concentration and vertical integration a deadly combination.

The disciples of concentration and vertical integration extol the alleged efficiency of scale and the vertically aligned production chain. My question is; efficiency from whose perspective? Concentration has certainly been efficient (rewarding) for integrators, big food processors and big retailers, giving them an ever-increasing and undue share of the food dollar (at the expense of the farmer). But, is that efficiency or market power?

A key defining characteristics of the family farm is that the owner makes the management decisions; stated in a single word, INDEPENDENCE! Independence and freedom have traditionally been American ideals. It is this quest for independence and freedom that attract folks to farming. However, these blessings are forfeited with the signing of a
production contract; the independence seeking producer suddenly becomes indentured. Under this arrangement, the farmer does the work and totes the mortgage while the integrator wields the power, makes the decisions and makes off with a disproportionate share of any
profits.

The poultry industry was the first to adopt the production contract and vertically integrate. Essentially all poultry production is now done by contract. The company furnishes the chicks, the feed and operational direction. The producer under contract provides the facilities, utilities and labor. The mortgage on facilities is typically massive and for a period of 15 years or more but the producer is only assured of a contract for a much shorter time. Without a contract, mortgage payments cannot be made.
This gives the integrator tremendous leverage in the relationship.

While there are indeed some happy and profitable contract poultry producers, they are scarce and there are many others with horror stories. Essentially, the treatment and welfare of the producer is subject to the whims of the integrator. Who in their right mind would want to invest millions in borrowed money in single purpose facilities under these conditions?

The answer is; those who have an overpowering urge to farm and the production contract is the only way they can obtain the necessary capital for entry into the game. Both the state and federal government are complicit in providing special programs and loan guarantees
which sometimes entrap unsuspecting, would-be farmers.

The swine industry has rapidly followed the poultry model with some 90% of all independent producers having been replaced by contract production in the past decade. Contract swine producers also share a lot of the downside aspects with contract poultry producers.

I often hear folks in the cattle business exclaiming that the beef business cannot be “chickenized”. I would argue that when you have the current degree of market concentration (four firms with 80% +) , the packers can impose contracts as a condition of market access. That is essentially what happened with the hog guys.

The row-cropper is also vulnerable. Cargill and ADM own the grain markets! The seed industry is also highly concentrated. The row crop farmers can be brought to heel by these dominant companies in much the same way as was the livestock industry.

Open, transparent and competitive markets are absolutely essential to the survival of the American independent family farm.

Market concentration and acquiescent government enforcement agencies have paved the way for Big Ag to impose its will. Market concentration equals market power; the antitheses of independence and a bane to traditional family farms.

Market power is invariably abused, which is why we have our body of antitrust law. While these laws have been scantily applied over the years, the present administration gave us hope for more vigorous antitrust enforcement. Christine Varney came on to the scene as the
Assistant Attorney General for Antitrust with a lot of hype and expectation. I often
referred to her as Teddy Roosevelt in a skirt. However, she has resigned her position for reasons not well understood and her promised antitrust actions have yet to materialize.

Alan Keyes spoke eloquently of the family farm during his presidential campaign a few years back:
“The family farm has been the paradigm for family life in America. The desire to retain it is not nostalgia, but is rooted rather in our resolve that the deep things of the heart and soul shall endure in America, regardless of the impersonal or antipersonal ‘tendencies’ of modern life.”

But the independent family farm is not some obscure romantic notion; nor is it the little sod house on the prairie. It is an agricultural system of farms, big and small and a culture that has provided this country with responsible, patriotic people and reliable and affordable food and fiber for many years.

It is the encroachment of the industrial model, the “modern-day-best-production-practices” that has jeopardized our national food security and transformed us from the bread basket to the world into a net food importer.

The independent family farm has also served as a great prep school for citizenship. A study in Missouri found that young people with a family farm background did better across the board regarding such things as job retention, marital stability, teen pregnancy, substance abuse, etc. Ask NUCOR Steel (our largest domestic steel company) who is their most desirable employee recruit and the response will be: “the farm kid”. But farm kids are increasingly in short supply.

It is abundantly clear; the INDEPENDENT Family Farm is a vital part of the fabric of this country. We now abandon it at our national peril!
FS


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