WACO, TX (May 10, 2001) -- Texas Farmers Union (TFU) President Wes Sims today voiced his concern because powerful mergers between industry giants have become a familiar affair to those in the nation's agriculture community. The latest such merger, between Suiza Foods and Dean Foods Co. in the dairy industry, raises the eyebrows of a diverse group of lawmakers, farm organizations and leaders. They share legitimate concerns about the sweeping trend of concentration in farming and its implications for agriculture in the United States.
In every major sector of agriculture, including the seed, packing, pesticide, grain, dairy and transportation industries, the number of players has shrunk to just a handful in recent years. Currently, four packers control over 80 percent of the cattle slaughter business and five firms control more than 60 percent of the pork packing industry. Railroad consolidation, most notably the 1997 merger between the Union Pacific and Southern Pacific railroads, has pared service in the West to two class I carriers and only four nationally.
Concentration has virtually eliminated competition in many regions of the country, making it nearly impossible for producers to negotiate fair prices for their products and inputs. The effects of concentration in my hometown of Sweetwater are stikingly evident. The lack of open and competitive markets jeopardizes the livelihood of farmers and ranchers, and consequently ripples into the comunity and surrounding areas.
Sweetwater is experiencing economic hardship as mainstreet businesses are straining to survive. This year, for example, a John Deere dealership, in operation for almost 100 years, announced it was closing. People are moving out of the area, and this is most notably apparent in the declining number of students enrolled in our school system. Additionally, it is becoming increasingly more difficult to access proper health care. However, Sweetwater is not unique, while this trend is occurring throughout towns and communities in rural America.
The nation's farm economy is suffering among the worst years on record. USDA is forecasting net farm income for 2001, at $41.3 billion compared to its 1996 record peak for $54.9 billion. Grain pric4es continue to remain low and milk prices have also been in the tank. Despite the infusion of federal emergency aid for the past three years, credit is running thin and many farmers and ranchers are being forced out of business due to low prices and uncertain safety net.
In 1996, passage of the new farm program rolled in a new era of agricultural policy. The stated goal was to give producers the tools and independence to better reap the rewards of a competition-driven free market system. It does not make sense then to expect successful family farms while at the same time we permit large corporations to gobble up controlling stake in agriculture that destroys the market competition necessary for independent producers to have a chance at success. Producers simply cannot flourish in a system where their hands are tied, whether it is by government or big business.
These issues have impications for the future structure of agriculture and the long-term health of the U.S. economy. The net effect of concentration is an undermining of America's system of independently owned and opreated farms, which has for centuries provided us with safe, abundant, wholesome and inexpensive supply of food and fiber. The structural shifts also have consequences for our nation, which has long relied on competition to create a vibrant and productive economy.
Stemming the wave of consolidation and returning competitiveness to the nation's farm sector will require action on several fronts. Most importantly, we need more aggressive enforcement of the antitrust provisions already on the books. One of America's first antitrust measures, the Packers and Stockyards Act of 1921, was spurred by concerns that four firms controlled 40 percent of beef packing industry. Today, four companies control more than 80 percent of the market. This calls into question why we aren't applying the laws we have.
In addition, Congress and the administration must review the adequacy of current anti-trust laws and take a close look at the growing farm-to-retail price spread. There are also targeted actions that would help revive competition, such as price reporting and requiring mandatory countyr-of-origin labeling on meat and other products.
The recently announced merger between Suiza Foods and Dean Foods isn't the first merger of significance in agriculture. We already witnessed the approval of the Continental Cargill merger, but the Suiza-Foods merger certainly make it clear no sector in agriculture, including dairy, is unique to what is occurring the industry. Recent reports have already indicated the proposed merger would lead to Suiza controlling 30 percent of the U.S. fluid milk market.
This merger demands careful scrutiny by the country's regulators.
One often hears the statement that agriculture is changing and we must adapt to the changes. However, the structural changes occurring in the agricultural industry are not the result of inexorabe forces or some mystical figure or an "invisible hand." These changes have occurred as a result of government inaction to maintain market competition, and people in our country must voice their concern to redirect our vision to ensure the long-term sustainability of our family farmers and ranchers and rural communities.
|Texas Farmers Union, P.O. Box 738, Sweetwater, Tx 79556|