The Changing Structure of American Agriculture: Will the Family Farm Survive?

OCM is now interning its thirteenth year as an advocate for open, transparent, fair and competitive markets. I offer this somewhat lengthy manuscript to show our early vision and mission and that we have remained true to these precepts over the years.

Thomas F. “Fred” Stokes, Executive Director
Summerville, Tennessee, March 16, 2000

I’m Fred Stokes from Porterville, Mississippi, a little withering rural community some two hundred miles south of here. I want to thank Don Dowdel and everyone else who had a part in setting this meeting up. I want to thank each of you for taking the trouble to come. I also want to thank those in the press who are covering the meeting. I hope that my remarks and the discussion afterwards will make it all worthwhile.

I believe we are about to put in place a new agricultural system in this country and to some extent around the world. I am very concerned about what I see emerging as a replacement to the tried and proven private agricultural system; — that has given this country the most abundant, lavish and affordable food supply in the history of man.

Bill Bishop, formerly an editorial writer for the Lexington Herald Leader and is now working for a paper in Austin, Texas wrote; “In the new agriculture everyone works for the man; they’ll raise his crops and livestock. They won’t farm they’ll fulfill contracts. They will be tractor drivers for Cargill and hog-house janitors for Smithfield. The companies don’t own farms, they’ll own the farmers”. Clearly, he was a keen observer of what’s going one. These things are happening in order to enrich some at the expense of others. It’s about money and power rather than the claimed efficiency and better service to consumers.

I spent twenty years in the Army and had two tours in Vietnam (John Brannon was in the same outfit) before returning to my home county in Mississippi in 1972 to go in the cattle business. Unlike some, I did not have a problem with the purpose behind our being in Vietnam. Containing the spread of communism was a worthy cause in my book. Perhaps we could have conducted that conflict in a better way, but I did not disagree with our purpose in being there. Certainly not as a result of Vietnam; but today the icons of global communism are in shambles. The Berlin wall, the Soviet Union; they’re now fading memories. Castro, North Korea and Vietnam are still around, but communism is a discredited political and economic system and destined for the ash-heap of history. Central planning did not work. COMMUNISM FAILED!

That said; one would have to ask why we would want to consider adopting an American version of the failed Soviet collective farm system for this country. Feedstuffs Magazine ran an article in their September 13, 1999 edition which should have caused rioting in the streets. It said in part;

“American agriculture must now quickly consolidate all farmers and livestock producers into fifty production systems. These corporate production systems will control the money and inputs costs while the farmer will supply the land, labor, equipment, and infrastructure to produce grains, meat, and fiber.”

Feedstuffs is a respected and widely read publication. This is not some idle notion but rather a concept that is discussed at some very high levels. There are people that seem to really believe we should scrap the family farm and install a system of collective farms.

As much as I feel for those who are being decimated by this farm crisis, —- and I am fully aware of the many horror stories out there, — the financial pressures, the domestic violence, problems with alcohol, the suicide rate among farmers and all the trauma, I am more concerned about what we are doing to the fundamental structure of our country. At issue is freedom and liberty and justice and full citizenship. People are being exploited by the powerful who want to make huge profits anyway they can. Farmers are being subjugated to these big agribusiness interests and forfeiting their rights as free American citizens in the process.

“BEYOND AGRICULTURE; New Policies for Rural America”, is the title of a conference to be held in Kansas City, April 27-28. The conference is being sponsored by the Federal Reserve Bank of Kansas City Center for the Study of Rural America. The Director of the Center for the Study of Rural America is one Mark Drabenstott, also Vice President of the Federal Reserve Bank of Kansas City.

Mr. Drabenstott is perhaps the most biased and vocal proponent for the industrialization, concentration and vertical coordination of American Agriculture. By any objective measure, his views are at the radical end of the industrialization side of the debate over the future of agriculture.

The Center for the Study of Rural America, by its title implies an objective pursuit of solutions. But, Mr. Drabenstott is the Director and clearly has his mind already made up. Accordingly, it is extremely unlikely that the positions and conclusions emanating from the Center will be a significant departure from the extremist philosophy of its director. The family farm is not going to be any part of the remedy for the problems of Rural America!

A major concern is the ethical implications of the Federal Reserve’s role in the debate over the future structure of agriculture. It smacks of “big brother”! The title of the conference itself, “Beyond Agriculture”, conjures up images of a country side devoid of farms and farm culture. The presence of Alan Greenspan at the conference inappropriately confers his personal prestige to the event and its message. It might be said that the fed is being used as a soapbox to propagandize the public with Mr. Drabenstott’s views; and that The Center for the Study of Rural America is not a center of study at all, but rather an indoctrination center.

Mark Drabenstott must be exposed as the icon for a goofy idea! This conference on April 27-28 must be answered with a contrasting vision; one that acknowledges the multidimensional benefits of independent agriculture, provides for a secure food supply for our people and preserves the rural culture.

There is an effort, well along in planning that would do just that. Stay tuned!

It used to be said that the remedy for low prices was low prices. That is not true anymore. Concentration and the global marketplace have changed that. Now prices go down and ——- then go down even further. Giant transnational corporations comprise the New World Order and global economy. They use their market power to leverage the underprivileged of the world against American producers to drive commodity prices lower and lower and lower; and to make vast fortunes for themselves in the process.

Concentration and vertical integration has destroyed functional markets. These days, prices are pegged in boardrooms by edict rather than being the product of marketplace dynamics. Aided and abetted by government policy, these bullies of global commerce exact undue fortunes with their “sell it or smell it” approach to prices discovery. Proud and independent farmers are brought to heel and rural communities are ravaged by this rapidly emerging “seamless vertical structure”.

The poultry industry broke trail thirty years ago and now it seems that all farm commodities are queuing up to travel the same path.

It is ironic that we are helping the Russians establish competitive model for their markets at the same time we are in the process of destroying competition in markets here at home.

John Helmuth, was a founding member of The Organization for Competitive Markets and a fine economist. John passed away shortly after this past Thanksgiving. He spent a couple of years in the Ukraine helping establish commodity markets. John lectured us with a single fundamental premise:

“When fewer and fewer individuals make more and more of the economic decisions, whether those individuals are in government or big business, the result is anti-competitive, inefficient and harmful to the society as a whole. But when more and more individuals make more and more of the economic decisions, the result is more competitive and more beneficial to society as a whole”

This essential idea was presented another way in a recent New Yorker Magazine article. Economics writer John Cassidy wrote:

By allowing millions of decisionmakers to respond individually to freely determined prices, it allocated resources — labor, capital, and human ingenuity — in a manner that can’t be mimicked by a central plan, however brilliant the central planner.” Competition is almost magic! Competitive markets are the missing essential aspect in “freedom to farm”. The “counter cyclical mumbo-jumbo” aside, the FAIR Act of 1996 can not be made to work without competitive markets. At this point, this farm program is a dismal failure. We should scrap it and start with a blank page.

“ This program is getting more and more expensive with fewer and fewer satisfied customers,” Sen. Bob Kerrey, D-Neb.

I just came back from Washington last week. Practically everyone in government agrees that we will have another multi-billion dollar bailout this year. That’s three in a row and a damning indictment of the current farm program. Farmers cannot get their livelihood from a marketplace that does not exist.

Representative Larry Combest and his House Agriculture Committee are holding field hearings in Memphis tomorrow morning. I hope he is told over and over again that farmers don’t want handouts that are viewed as welfare. They just want to be fairly recompensed from a market system that works. The committee should be told to save the tax-payers money; — just stop the big agribusiness mergers, enforce the antitrust laws and restore competition to the price discovery process.

Dr. Neil Harl, a well known and highly respected agricultural economist and attorney from Iowa State calls concentration and vertical integration a deadly combination. I would agree. These are the devises being used to bring a modified collective farm system to America. It is sold based on efficiency, — but be assured it is all about market power and money.

This gimmick was used by the poultry industry thirty years ago to destroy the open market system and bring producers to heel. The instrument used was the contract. At a recent legislative hearing in Mississippi there were some five hundred disgruntled contract poultry producers that showed up. Hopefully we are going to pass and get the Governor to sign a Contract Poultry Growers Bill of Rights this year.

The Baltimore Sun ran three large, front-page articles last year about the oppression of contract growers by integrators. This is the new plantation system.

Producers of all stripes need to realize that when they choose to deliver their goods by a contract rather than the open market, the open market soon disappears and then contracting; — under the integrator’s terms becomes the only option. I know that there are some contract growers who are happy with their arrangement. I suspect that many of these people get a special deal; but the other explanation that occurs to me is that some folks just take to servitude more readily than others.

A red herring that is being dragged around these days is that the farm crisis was caused by the collapse of foreign trade. An objective examination will show that these folks are fudging the facts. NAFTA has not been the farmer’s friend and the Asian Flu was not the cause of the farm crisis. Increased exports will not help producers if prices remain below production costs. Be assured that increased exports do not necessarily mean higher prices at the farm gate. It’s all about how the pie is being sliced. The producer needs to get what he has earned.

Let me say a few words about one effort to change these things. The Organization for Competitive Markets is a small and young nonprofit, 501(c)(3) organization. It is focused on the marketplace and competition issues. We believe that farmers are going broke primarily because they are getting shortchanged in the marketing process.

It is silly to contend that we have a functioning supply and demand situation, when producers go broke while the other players make record profits, — handing the same volume, — of the same commodity. So we want to stop mergers, enforce antitrust laws, label food products as to country of origin, deny packers the right to own and control livestock inventories so that they can break the market at will, and we want to reclaim for producers the right to go to court when there is price fixing at the retail level damages them. If the government is not going to enforce the law, they could at least untie our hands and let us go to court. The Illinois Brick Decision needs to be repealed. A $600 retail margin on a single carcass of beef is powerful evidence that something is wrong.

This is not some protest movement or another general farm organization. This is a fight about freedom, fairness and social justice. There is certainly no guarantee that we will win. There are big guns on the other side and it is late in the day. I would just say that it will be to our eternal shame if we don’t try to avert this new feudal order that looms over Rural America. What will you say to your grandkids? What will history say of us? Good men have paid the ultimate prices for less than what’s at stake here! FS


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