10 Reasons Food Industry Consolidation Is Bad
This piece from 2016 has been updated to reflect that the US Department of Justice has greenlighted Bayer’s purchase of Monsanto. The deal appears to be moving forward.
When Monsanto announced it was being swallowed up by Bayer for a cool $56.5 billion, making the megacorp “the globe’s largest seller of both seeds and agrichemicals,” people concerned about how food is produced felt a collective shudder.
While the acquisition might be good for investors’ pockets, it’s a raw deal for people invested in creating a more sustainable food system and for people who care where their food comes from and how it’s produced. Consolidation drives many farmers out of business and causes large farms to focus on commodity crops. But those aren’t the only problems.
You might have heard about the Monsanto-Bayer merger, but you might not know exactly why it’s a problem. While not an exhaustive list, here are 10 reasons why consolidation, mergers and acquisitions are hurting the US food system.
1. Lack of Competition
If the Monsanto/Bayer deal goes through the antitrust review, then three companies will sell 59 percent and 64 percent of the globe’s seed and pesticide respectively. The situation exists in the meat industry as well. In the US, four companies control 60 percent of the chicken market, four companies control 85 percent of the beef market and, in 2015, just four companies produced 52 percent of the pork. Such a big market share gives those companies a lot of power to dictate and even limit choices farmers can make about what to grow, where to grow it and how.
2. Price Fixing
Americans pay 50 percent more per chicken than they should because of price fixing among some of the nation’s largest poultry producers, according to a class action lawsuit brought about by food distributers. According to the suit, “…chicken companies had access to stats about their competitors’ production, scaled back on the size of their breeding flocks, exported eggs rather than selling them in the US and bought one another’s chickens.”
3. Production Contracts that Hurt Farmers
According to the National Chicken Council, more than 90 percent of chickens produced today are raised by contract farmers. This means the grower provides land, housing and care of the chickens, along with taking responsibility for managing their waste. The contractor provides birds, feed, veterinary care and transportation to and from the farm for the birds. In exchange, farmers get a guaranteed price on their birds. It sounds like a good deal, but so many poultry companies have been consolidated into so few big corporations that it’s a raw deal for many contract farmers.
4. Loss of Small to Midsize Food Infrastructure
When America’s food system was dominated by smaller companies, many of which were family owned, there were far more local slaughterhouses and food processing facilities where farmers could bring their products. Today, many of those options are gone or extremely limited. For example, just four companies control 60 percent of chicken slaughter, 85 percent of cattle slaughter and about 50 percent of pork slaughter.
5. More Corporate Influence in Politics
When large corporations go multi-national, they wield more political influence on legislation that hurts small producers. For example, Chinese-owned Smithfield, one of the world’s largest pork producers, fought against state legislation in Nebraska that banned corporate ownership of hogs.
6. Barriers to Entry for New Farmers
New farmers may be most impacted by consolidation, as the high costs of land, personnel and technology required to meet the requirements of seed and chemical companies are more than many young and aspiring farmers can afford. This is a complex issue that has strings of race, sex and class woven throughout it.
7. High Costs of Technology
Agricultural equipment is a vital part of a farmer’s business. Innovation in agricultural technology makes it possible for farmers to increase productivity. Unfortunately, technology comes at a high cost and a fair amount of loss of control. Consolidation of equipment manufacturers significantly limits farmer choice and gives an unfair pricing advantage to the few companies that make most of the world’s farming equipment.
8. Higher Food Prices
In a recent Senate hearing questioning the Monsanto/Bayer merger (among others), Senator Chuck Grassley (R-IA) expressed his frustration with what he called the “tsunami” of mergers and acquisitions, noting that they will “minimize farmers’ choice of inputs (like seeds and fertilizer), while simultaneously increasing the price of these inputs, creating a cost price squeeze and resulting in higher food prices for consumers.”
9. Lack of Transparency For Shoppers
Although most farms in the US are small, most food produced and consumed in the country is produced by very few farms. In 2012, a mere 4 percent of farms produced 66 percent of all our food. Combine that with large corporate control of food manufacturing and it’s hard to know where exactly your food is really coming from and who is making all the profits from the price you pay for that food.
10. Rise in National Health Issues Related to Poor Nutrition
Our country continues to face a concerning obesity and diabetes epidemic. Some signs point to these national health issues having arisen from the decreasing quality of food, especially processed food. While increasing productivity, consolidation drives the production of cheap, unhealthy food that contributes to diet-related disease.