What’s Ahead for American Agriculture?

Thomas F “Fred” Stokes
President

After attending an OCM retreat near Kansas City in 2000, noted writer William Greider wrote an article containing this rather apocalyptic bit of prophecy.

“The contemporary triumph of free-market capitalism has revealed to farmers, if not to other Americans, the bitter last act in this drama. Farmers can see themselves being reduced from their mythological status as independent producers to a subservient and vulnerable role as sharecroppers or franchisees. The control of food production, both
livestock and crops, is being consolidated not by the government but by a handful of giant corporations. ……..
Growers are surrounded now on both sides-facing concentrated market power not only from the companies that buy their crops and animals but also from the firms that sell them essential inputs like seeds and fertilizer. In the final act of unfettered capitalism, the free market itself is destroyed.”

This trend toward contract agriculture was also noticed by reporter Bill Bishop, working at the time for the Lexington (KY) Herald Leader, who wrote;

“The Companies won’t own farms, they will own farmers”.

Galloping market concentration and vertical integration continues but many farm and ranch operations managed a rare profit during this past year. The exception was mainly those in the severe drought areas. Relatively high prices for crops and livestock allowed profits even though production inputs costs were very high. Some delinquent bank loans were made current and new tractors and pickups were seen here and there.

However, these profits are almost certainly a temporary situation which may placate many who would otherwise be pushing for market reform. If history is an indicator, prices for commodities will decline well before those for fertilizer, equipment and other production inputs and red ink will again be the norm.

This past year was a clear win for the meat packers and the proponents of big-is-better and challenges remain:
• The devastating defeat of key provisions of the proposed GIPSA Rule underscored the death grip by meat packers and transnational corporation on agriculture and revealed the timidity of the current administration.
• NCBA continued as the prime (essentially exclusive) contractor for the Beef Checkoff Program, even after being shown by a routine performance review to have committed gross misappropriation of these funds. NCBA was and still is a major opponent of market reform.
• U. S. Farmers and Ranchers Alliance (USFRA) received millions of dollars from the various commodity promotion programs and used them to help fund its misinformation campaign aimed at selling the industrial model for American agriculture.
• Global fertilizer cartels continued to gouge producers.
• The MF Global scandal pilfered millions from farmer and rancher hedge accounts, discouraging the use of commodities futures markets for risk management and advancing alternative marketing arrangements and captive supply.

The clear message is that the assault on independent family agriculture continues unabated. But, just maybe our trouncing will be the shock therapy that will prompt folks to come out of their apathy and denial and take part in the reform struggle.

There are some things in the works that give us hope for a better year ahead:
• Considerable effort is being aimed at reversing the flawed appellate court rulings requiring a showing of harm to competition across an industry before considering harm to individuals or classes of individuals. This has provided a veritable shield from accountability for the misdeeds of packers and integrators.
• The USDA Inspection General is conducting an Audit of the Beef Checkoff Program which will be completed in March. A credible audit will almost certainly reveal gross misappropriation of funds and disclose the role these funds played in the defeat of the proposed GIPSA Rule.
• A number of actions are likely which could halt the misuse of commodity promotion funds by USFRA.
• There is an ongoing major price fixing suit against the global chemical fertilizer cartels that could bring relief from absurdly high fertilizer prices.
• Hopefully, the MF Global affair will result in the culprits being held accountable, pilfered funds returned and confidence restored to the commodity futures markets as a risk management tool.
• There is likely to be litigation filed soon by a confederation of law firms against one or more major meat packers under the Sherman Act. It seems that private litigation is the more promising way to deal with market power abuses by the big meat packers.
• There will likely be a major, indepth investigative reporting initiative during the upcoming year. This is a very significant undertaking that may well laybare modern-day meat packer corruption and have an impact comparable to Upton Sinclair’s 1906 book, The Jungle.

So, after a brief period of self pity, we will lick our wounds and reengage in a vigorous effort to bring about fair play in the marketplace so that independent, family agriculture can remain a part of the American scene.

The MF Global debacle has cast a cloud over the commodity futures markets and accelerated the trend toward contract agriculture. The loss of $1.2 Billion in customer funds, much of it from farmer and rancher hedge accounts, has made contracts a more appealing means of managing risks. FS


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