LEFT TURN, August/September 2003
Title: “Concentration in the Agri-Food System”
Author: Hilary Mertaugh
Evaluator: John Lund
Student Researcher: Anna Miranda
Over the last two decades, agribusiness and food retail mergers, acquisitions, joint ventures, and informal contract agreements have transformed the agri-food system into a powerful network of transnational corporations that have the power to control the world’s food supply at every stage of food production-from gene to market shelf. By cooperating with one another rather than competing, transnational corporations escape the scrutiny of federal anti-trust regulators and manipulate the market through “non-merger alliances.” In April 2002, the world’s two largest seed corporations, DuPont and Monsanto announced that they would agree to swap their key patented agricultural technologies and drop all outstanding patent lawsuits.
The flurry of mergers and acquisitions throughout the agri-food system has created highly concentrated markets as agribusinesses expand their dominance by diversifying their commodities. Cargill is among the top five companies in the US market for flour milling, grain and oilseed processing, salt production, corn and soybean exports, turkey production and processing, pork processing, and beer processing.
As fewer corporations control each stage of food production, farming is becoming a kind of serfdom. Consolidation among suppliers and processors leave farmers with few choices of who to buy from and who to sell to. Dominant agribusinesses have the ability to drive up the prices they charge for inputs while watering down the prices they pay for outputs. Furthermore, the rise of patented seed varieties places farmers in an even worse position, as agricultural biotech companies gain ownership of the germplasm itself.
Consolidation in the food system is not limited to the production and processing side. Consolidation activity among food retailers has catalyzed a domino effect of mergers and acquisitions. ConAgra, a company few Americans have heard of, is a major force in food production in the US and has continued to aggressively acquire small rivals while expanding its operation worldwide. It is estimated to be the #3 seller of retail food products in the world. Although consumers might be unfamiliar with the name ConAgra, they will recognize some, if not all, of ConAgra’s popular brand names: Armour, Butterball, Chef Boyardee, Healthy Choice, La Choy, Orville Reddenbacher, Parkay and Hebrew National, just to name a few. ConAgra is also known for a recall of 19 million pounds of tainted beef after 47 people were sickened and one died from E. coli poisoning in 2002.
The top five supermarket chains capture one half of all food sales in the US, and it is widely predicted that there will soon be only six major retail supermarkets selling the majority of the world’s food. Because it is necessary for each and every one of us to eat and drink, we will pay what it takes to make sure we do not go hungry or thirsty. Although food may appear to be “cheap” with fewer and fewer retailers, lack of competition will ultimately lead to higher prices, lack of choice, and poorly paid employees. Wal-Mart typically sells grocery products at prices 14% lower than competing grocers, in part because the company is a non-union employer that hires clerks at below-poverty wages.
Food corporations rely on the consumers’ lack of knowledge as to where their food comes from, how it is produced, and who wins the profits. The trend toward consolidation at every stage along the food production chain has dramatically impacted the global economy and distribution of income and wealth. Given the complexities of the domestic policy-making and legislative processes, and the numerous mergers, acquisitions, joint ventures and “non-merger mergers,” it is not surprising that few people are aware of the degree to which food companies influence food safety policies, competition and decide where and how food is produced and how much it will cost.
Prior to committing suicide as an act of political protest on September 10, 2003 against the World Trade Organization in Cancun, Mexico, Lee Kyung-Hae, a 56-year old farmer from South Korea circulated the following statement. “My warning goes to all citizens that human beings are in an endangered situation in which uncontrolled multinational corporations and a small number of big WTO official members are leading undesirable globalization of inhumane, environmentally degrading, farmer-killing and undemocratic policies. It should be stopped immediately, otherwise the false logic of neo-liberalism will perish the diversities of global agriculture with disastrous consequences to all human beings.”