ROLE OF COROPORATIONS IN
MODERN AGRICULTURE
Effects of Corporations
• The family farm has had to adopt the structure of a corporate
business, which also has changed the character of rural life.
• Many farms now are partners with corporations. They get their
seed from corporations and sell their crops (animals) to
corporations.
• For example, the chicken industry is done almost entirely in
partnership with corporations.
• Only a few large corporations now dominate all the agribusiness
in the world and shape the markets.
The following slides are from Professor Taylor of
Auburn University.
The Changing Structure
of
Global Agriculture
The New Cowboy Economy
“… The world is going to have a global
economy without a global government.
this means a global economy with no
enforceable, agreed-upon set of rules
and regulations, no sheriff to enforce
codes of acceptable behavior, and no
Judges and Juries to appeal to if one
feels that justice is not being done.”
Lester Thurow
Economics of Wealth Creation
in the Global Economy
• Businesses bring Labor and Capital together to
create “wealth” or profit
• How is wealth distributed in the global economy?
• The “investor class” increasingly capture wealth
that is created …
• With less and less going to the “working class”
• Profits increasingly flow to financial centers, and
not to rural areas
The Deadly Combination
 Horizontal concentration
 Vertical integration
 Interlocking spider web of directorates, subsidiaries,
joint ventures, strategic alliances, and partial ownership
of other agribusiness firms
 No real structure to the global economy
 Only “Imposing facades” Thurow
 No global antitrust laws or police
 Dated domestic antitrust laws
 Increasingly narrow interpretation of domestic antitrust
laws
 External (community) costs
Early Antitrust Interpretation
“[I]t is not for the real prosperity of any country
that such changes should occur which result in
transferring an independent business man . . . into
a mere servant or agent of a corporation . . .
having no voice in shaping the business policy . . .
and bound to obey orders issued by others.”
Justice Peckham one of the first substantive
decisions interpreting the Sherman Antitrust Act
(from Carstensen)
Independent Businessmen?
• Many of us admire the fierce independence of
farmers and farm families
• Are farmers really independent any more?
• No!
• They are increasingly puppets of the corporate
world
• Their independence has hindered actions for them
to band together to “countervail” corporate power
Free Markets?
“There isn’t one grain of anything in the
world that is sold in a free market.
Not one! The only place you see a free
market is in the speeches of
politicians.”
Dwayne Andreas, CEO of ADM
Is the Global Food System Out of Control?
 Our present economic system has emerged without
any apparent forethought about what kind of
economic/social system citizens want
 Change has been driven by corporate interests
 Fathers of a competitive market economy recognized that
there is an inherent instability in the system:
A competitive market economy may evolve, through
natural growth, acquisitions or mergers, to monopoly
Unless the market is regulated
Antitrust laws were intended to prevent this outcome
 Contract production is part of the corporate mindset
Giant Corporate System
• Big business is not necessarily bad, but
• An imbalance of market power or economic power often
leads to abuse, which is bad
• Concentration was initially driven by economies of size,
which do not include costs imposed on the environment
and on rural communities
• Concentration is now driven more by attempts to gain raw
economic power than by economies of size
• Corporations are more concerned about immediate profit,
rather than long-term conservation and stewardship
• Increasing control of food production technology
Lost in the Fifties
• Small and mid-sized producers of
“commodities” selling on the cash market
• Returns will likely be dismally low, at best
• Some markets are disappearing with vertical
integration
• Many markets thinning due to contracting
– Less accurate and more easily manipulated
– Partial vertical integration transfers risk to what
remains of the market
• Markets are increasingly manipulated by giant
transnational corporations
Traditional Family Farms
• Growing size
• Attempt to compete within the industrialized
system
• Some may produce bulk commodities, while
others will produce identity preserved products
• Even with large size, they cannot countervail the
market power of buyers of their products, or the
market power of input sellers
• Thin profit margins
Giant Corporate System
• Participation in commercial production agriculture
is increasingly “by invitation only”
– Who will be invited?
• Independent, outspoken, astute businessman and
entrepreneurs?
• Or Servile, submissive, not particularly astute businessmen?
• The free market allows for cultural diversity in the
production system; the evolving global food
system may not
• Are a few CEO’s through their economic and
political power becoming the “social planners” for
the world?
Degree of Corporate Concentration
•
The following data is from Professor William Heffernan of the University
of Missouri
•
Economists worry when the top four firms control more than 40% of the
industry. The following industries were under such control:
•
•
•
•
•
•
Beef packers
Cattle Feedlots
Pork packers
Turkeys
Animal Feed Plants
Multiple Elevator Companies
• Flour Milling
• Dry Corn Milling
• Wet Corn Milling
• Soybean Crushing
• Ethanol Production
World’s Largest Agribusiness Firms
• The following data is also from Prof. Heffernan
• The world’s largest agribusiness firms are:
•
•
•
•
•
•
•
Phillip Morris
Nestle
ConAgra
Archer Daniels Midlands (ADM)
Cargill
Dow Chemical
Monsanto
• Novartis
• Continental