A 2013 USDA report on US agriculture on average farm acreage dedicated to field crops had this to say;
The midpoint acreage for U.S. cropland nearly doubled between 1982 and 2007, from 589 acres to 1,105. Midpoint acreages increased in 45 of 50 States and more than doubled in 16. The largest increases occurred in a contiguous group of 12 Corn Belt and Northern Plains States. Midpoint acreages more than doubled in each of 5 major field crops (corn, cotton, rice, soybeans, and wheat) and increased in 35 of 39 fruit and vegetable crops, where the average increase was 107 percent.
The USDA researchers measured
midpoint cropland acreage instead of US median farm size as a better indicator of field crop farm land consolidation. The typical field crop operation has nearly doubled in size over the past three decades. The USDA researchers justly cite better financial returns as an explanation for the trend but this glosses over the deep social and economic structural changes in US farming and rural communities driven by agribusiness. The report explains that
"average rates of return on equity increased with farm size" for five categories of farm commodities and further points out a contracting system is coming to dominate US agriculture replacing the old family farming system; as field cropping and livestock raising has increasingly separated, the contracting system has come to govern more and more farm crop production with big industrial contracts covering
"...32 percent of crop production in 2011, compared with 23 percent in the mid-1990s.
US farming has become dominated by agribusiness as is clear not only by output concentration of various crop categories but by specialization and the rise of monocropping or the decrease in farm diversification. In 2011, more than half of all field crops came from farms producing two or fewer crops; over one fifth of crop production came from farms producing only one crop. Crop diversification was traditionally the pattern in US farming to prevent soil depletion and reduce risks such as pests. The gradual separation of livestock raising from field cropping (about three quarters of all US crops come from farms that raise no livestock) caused a deepening reliance of farmers on industrial inputs (fertilizers and pesticides) and finally, a greater and greater reliance on industrial contracts to assure sale of output. As the contracting system deepened, direct food producers played less of a role of independent family farmers and more of a highly leveraged link between providers of industrial inputs on the one hand and industrial agribusiness customers for their output on the other. This created a more or less "proletarianized" farmer in a vertically integrated food production process that is highly industrialized and which concentrates most of the profits from food production outside the farm itself.
Rural sociologist William Heffernan points to intense vertical integration as an indication that a given agricultural system is dominated by "monopoly capital" and has transformed food production into an integrated system dominated by a few industrial processors whose monopsonist power has reduced the farmer to a cog in the system. In a 1998 essay, Heffernan discusses the shift in relations between crop and livestock farmers and their industrial contract customers;
Vertical integration occurs when a firm increases ownership and control of a number of stages in a commodity system...this system gives the firm more economic power...feed grain is very important in livestock production. A firm like Cargill is one of the three major global traders of grain (the major ingredient in animal feed), the second largest animal feed producer and one of the largest processors of hogs and beef. Many livestock producers purchase their feed from the same firms to which they sell their animals...Another example...[is] ConAgra...ConAgra is the largest distributors of chemicals in North America, one of the largest fertilizer producers, and in 1990 it entered the seed business...ConAgra is the largest turkey producer and second largest broiler producer. It produces its own poultry feed as well as other livestock feed. It also owns and operates hatcheries. ConAgra hires growers to raise its birds and then it processes the birds in its own facilities...From the basic raw materials for agricultural production to the retail store, a significant portion of the food system is owned and controlled by ConAgra. ConAgra is the second largest food firm in the United States (behind Phillip Morris) and the fourth largest in the world with operations in thirty two countries.
And Heffernan sums up his analysis regarding the transformation of the US food system under monopoly capitalism by describing the system of integration and corporate domination which led to the proletarianization of the formerly independent US farmer. He asserts;
"In the subsistence food system, the family controlled its food from seed to plate. In the emerging, vertically integrated food system, a few food companies are gaining control of the country's food system by controlling it from seed to shelf. This system is being extended around the world by many of the firms that are headquartered in the United States."
Under this system, in which monopoly capital dominates US agriculture, the family farmer is returned to a system of debt peonage similar to that of tenant farmers in the early post-US Civil War era only this time dominant force is a concentrated monopoly of firms that control inputs and processing facilities whereby farmers are reduced to workers effectively paid on a piece rate system with no control over their income, contract terms or conditions of work. Thus, under late monopoly capitalism, farmers, even those with large operations, are reduced to low paid workers with most of the revenue from sales going to the big industrial processors. The gradual control of agribusiness of our food has led to high prices, poor food quality and the impoverishment of America's once vibrant rural communities.
It is obvious, that capitalist relations in agriculture lead not only to land and output concentration but to intense specialization and monocropping as previously pointed out which creates greater dependence on pesticides, synthetic chemicals and fertilizers. This ultimately leads to a dramatic reduction in biodiversity that helps to protect field crops naturally and organically but also to contamination by synthetic pesticides. Richard Lewontin, who has published essays on US Agriculture, has argued that vertical integration produced concentration and that the farmer under late monopoly capitalism has become, in effect, a serf in a new medieval style "putting out system" in which the contracting system between the farmer and corporations extends its hegemony over the US agriculture. One reviewer of a key book on the subject, Hungry for Profit, explains;
Ironically, one consequence is the “modern” contract system, in which the farmer becomes essentially a “putting out” worker under contract with a major corporation. In addition, the farmer must use by law the corporation’s products throughout the entire farming process. In addition, vertical integration and thus corporate power extends into the realm of biotechnology (notably, the major players within biotechnology are those same companies that dominate both the seed and chemical industries). A function of biotechnology involves the manipulation of genetic material — in this case, the transformation of an organism (e.g., a seed) into a more “productive” variety. Thus, efficient seed and livestock varieties are the goal, with undesirable traits selected out and removed. Yet, as Hungry for Profit points out, this “standardization” leads to a reduction in genetic diversity and an intensification of market concentration, both of which make the agricultural system increasingly inefficient. Corporate hegemony vis-à-vis biotechnology is made precariously clear with what is known as “terminator technology” where the seed itself is made sterile after each harvest. As a result, growers are forced to return to seed companies every year; thus, the traditional practice of “saving seed” is rendered moot.
The researchers who authored the 2013 USDA report point out that the growing system of production contracts (mostly for livestock) and marketing contracts (mostly for field crops), while providing credit and reducing certain risks associated with traditional farming and ranching also a self expanding system that invariably
"...may facilitate shifts to larger farm operations." The report's authors point out that in 2011, contracts covered 40% of
all agricultural production (and about a third of all field crop production) with a strong correlation between contracting and farm size (the larger the farm, the more likely it is to be under contract with a large corporation).
Contract farming is the hallmark of industrialized farming whereby farmers become integrated into an overall industrial system as would factory labor. One rural sociologist comments on this development emphasizing the decline of the farmer as an independent force in the system as farm income generally shifts toward the corporate rungs of the agro-industrial latter. Leland Glenna in a one analysis points out that;
"...agricultural processing and input firms receive 20% return on their investment when farm producers receive only 3-5%, making agricultural firms second only to pharmaceutical companies in their ability to generate a return on investment. The implication is that agribusiness is able to exploit farm producers even though they lie outside a formal factory system."
Glenna's concern in his essay of roughly ten years ago, was to situate the 1980s "farm crisis" within the overall history of the political economy of US agriculture. Pointing out that the major loss of family farms took place over a half century period from the mid-1930s, when the total number of farms was roughly 6.8 million, to the late 1970s when there was about 2.5 million farms in the US, a loss of over 4 million farms or in excess of 100,000 farms annually on average! Over the entire decade of the 1980s, fewer than 300,000 farms disappeared with most of them disappearing during the "farm crisis" of the very early part of the decade. What was misleadingly called a farm crisis was really an agricultural crisis. As Glenna points out,
"I believe that I can link the 1980 farm crisis to the more general crisis of accumulation and the agricultural restructuring process...policy makers defined the conditions as an agricultural crisis, not a farm crisis...[as they] developed strategies for bailing out agricultural input and processing industries by expanding world markets even as they generated rhetoric about helping the farmer."
Glenna's analysis sees the crisis less as one of farm loss than of overall agricultural system restructuring to make it compatible with nascent trends in corporate globalization and to support the interests of transnational agricultural corporations, such as those with concentrated animal feeding operations (CAFOs), at the expense of farmers, workers and consumers by ensuring global product competitiveness and increased domestic productive capacity. His argument was that by 1980s, corporate farming was beginning to take over the US agricultural system as was poised to benefit from the globalization of the overall US economy. The drop in agricultural exports and farm output harmed the interests of large agribusiness firms that sought to sell inputs at a high prices and purchase output at a low prices for sale in global markets. The conditions in the early 1980s threatened agribusiness profits as much as farm income and it was the first problem which the federal government most addressed. Programs that boosted farm income were rejected in favor of programs that helped corporations (which received most of the USDA subsidies) boost production and exports and cheapened their purchases from the small farmer.
Glenna points out that large transnational agribusiness firms, like Archer Daniels Midland (ADM), began to see the farmer "...as laborer in the national agricultural system and the USDA as its manager." When it came to the policy response of the federal government, big firms like ADM recommended that only the most efficient farmers who could produce the most output at the cheapest unit cost be paid to guarantee a stable supply of output to large agricultural export firms. Glenna believed that policy was structured to "...foster the continued dominance of United States agricultural export companies in international markets." Thus, farmers became mere workers in an overall industrial system dominated by transnational firms with the USDA facilitating a labor management relationship between the two. The interests of big corporations, as processors and marketers of farm output, was increased production and lower farm prices for the raw goods they purchased to process and sell. This ensured that only the most efficient farms survived. As such average farm size grew while the number of farms continued to dwindle and the vertical integration system enriched mostly the large corporations dominating the global system.
When large food conglomerates control every step of the production process in a vertically integrated system while pushing to globally expand and concentrate agricultural markets and profits among fewer and fewer firms, the result is an corporate agricultural system that reduces the farmer to a workers whose income amounts to a low wage considering the time worked. One analyst, Phil Howard, explains this dynamic with regard to the contemporary poultry industry.
Ninety-five percent of chickens produced for meat are grown under production contracts with fewer than 40 companies. The farmer furnishes the land and labor, and is required to invest hundreds of thousands of dollars for buildings and other equipment. The company provides the chicks, feed and medicine and agrees to pay a guaranteed price per pound. In the 1950s, when there were more than a thousand companies, most poultry farmers benefited from such contracts because they were protected from price fluctuations. Now that four vertically integrated firms control 50% of the market, the terms of the contracts are much more favorable to the companies. Their power is so great that some companies have been found to systematically cheat farmers by underestimating the weight of birds, overestimating the weight of feed, or providing poor quality chicks or feed. A farmer who complains is likely to have their contract canceled and be placed on a blacklist5. Although most poultry farmers are making poverty level wages or below, without a contract they can't pay off their mortgages and face foreclosure. Some cynics have suggested, "why buy the farm when you can own the farmer?” and describe chicken farmers as "serfs" who are never able to escape their debts.
Conditions are similar for pork and beef. According to a report published on a blog run by
Mike Callicrate, a rancher and political activist, over 544,000 family owned ranches have disappeared since 1980 with about 17,000 such ranches due to disappear this year alone. Despite unprecedentedly high retail beef prices, traditional family run ranch operations continue to disappear at an alarming rate due almost entirely to unsustainably low financial returns. In a special report prepared by radio host and activist Tim Danahey published on Callicrate's blog, it is noted that the top four meat packing corporations dominate the US beef market controlling more than 85% of all beef packed and sold in this country. The 1921 Packers and Stockyards Act forbade large meat packing firms from owning stockyards and livestock in order to prevent a process of vertical integration in the beef industry, such as the one currently in existence, from emerging to form and promote monopoly beef pricing. The failure to prevent such consolidation has put ranchers out of business and caused beef prices to skyrocket.
Danahey's report tells the story of how the 1921 federal legislation failed and the consequences today;
When Cargill and JBS have captive supply of the 20% of fed cattle (cattle inventory they control outside the competitive market), they can manipulate inventory to control cattle purchases on the spot market (free market). If prices for fed cattle are starting to rise and the potential exists for ranchers to earn more on their investment, Cargill and JBS can process more of their own inventory, flood the supply of fed cattle, and depress returns that ranchers would have earned. Their ownership of 20% of the fed cattle is enough to manipulate and destroy the free market for beef in the United States. This has had an effect on the number of feedlots available to ranchers:
There were 112,000 feedlots in 1996. In 2013, only 73,000 remained 88% of fed cattle in 2011 were fed by 2,000 feedlots with capacities over 1,000 head Only 69 feedlots marketed over 1/3 of all cattle from feedlots in 2013 12% of fed cattle were fed in 71,000 small business feedlots
Without competing feedlots within reasonable distances of their cattle, ranchers are unable to access adequate market outlets. The big meatpackers effectively destroy free markets for ranchers. The government allows this. (emphasis added)
The same conditions exist with farmers effectively functioning as workers for agribusiness in a vertically integrated industrial farming system. Wenonah Hauter presents this analysis in here recent book
Foodopoly on the overtaking of family farming and ranching by big agribusiness;
One of the unusual factors about the rise of the factory hog farm is that it happened very quickly. In 1992, less than a third of US hogs were raised on farms with more than two thousand animals, but by 2004 four out of five hogs came from one of these giant operations, and by 2007, 95% were...the largest meat packers [have merged] into a virtual monopoly. The wave of mergers and acquisitions has concentrated the pork producing sector into the hands of a few powerhouses that employ heavy handed tactics that minimize the prices they pay for livestock. This means independent hog operators that sell their livestock on open markets have nearly disappeared in the face of massive consolidation of the industry. Two out of three hogs are now slaughtered by the four largest pork processors. These companies not only slaughter and process the hogs but they exert tremendous control over farmers through production and marketing contracts...vertical integration and control of the hog sector has pushed prices down [thus eliminating independent hog farmers]...In 1993, almost all hog sales (87 percent) were negotiated purchases between farmers and packers or processors...By 2006, nearly all hogs (90 percent) were controlled by the packers either by owning their hogs outright (20 percent) or through production contracted hogs (70 percent). (Hauter; 2012, 170-172.)
Hauter goes on to show how the monopoly power of the big packers allowed them to push down the price of the hogs they purchased in order to expand their profit margins in the same way these same packing houses did with poultry and beef cattle. The big packers destroy competition and push down wholesale beef, pork and poultry prices to family farm operators thus expanding their own profits at the expense of returns to family run operations causing them to go out of business due to low financial returns. The problem of "captive supplies" (packer ownership of livestock) was made illegal by the
1921 Packers and Stockyards Act which apparently has been largely ignored. A roughly one third decline in the average monthly price of livestock
per hundred weight (100 pounds) from the early 1990s to 2008 cited by Hauter has been the consequence of livestock monopolization by the big four packing houses.
And all this takes place at a time or record level retail beef, pork and poultry prices!!
The very same set of relationships obtain in the international grain trade which is dominated by the top four global firms that together control roughly three quarters of all global grain sales. According to a 2012 report by Oxfam entitled Cereal Secrets the big four, ADM, Cargill, Bunge and Louis Dreyfus operate on the same vertically integrated basis as the beef packing companies supplying inputs to the farmer and purchasing grain as cheaply as possibly from a position of unrivaled market power. The report asserts;
"...the [big four] are not just traders of physical agricultural commodities: they operate all along the agri-food supply chain as input suppliers, landowners, cattle and poultry producers, food processors, financiers, transportation providers, and grain elevator operators, and they provide much of the physical infrastructure involved in agri-food production and marketing."
Large grain trading corporations dominate the market and control pricing through their monopsonist purchasing power. Big grain traders that control the processing, marketing and distribution of grains can pay farmers low prices for output that the big traders mark up dramatically. According to one analysis from the early 1990s;
Farmers typically sell their crops to rural grain elevator operators, many of which are owned by cooperatives and small companies. These elevators then resell their grain to flour mills and other food processors, with much of it being sold to grain trading corporations such as Cargill, Continental and Archer Daniels Midland (ADM). These three companies currently own and operate the larger grain elevators, rail links, terminals, barges and ships needed to move grain around the country and the world. It is estimated that Cargill, Continental Grain and ADM presently owns/controls between 70 and 80 percent of the world's grain trade.
Heavily concentrated corporate control of the grain trade has made controlled the price received by farmers while allowing retail increases spot market price volatility their global speculation. Low farm prices for such things as corn, about half the production of which is used as animal feed, actually saved large factory farms producing pork, chicken, beef and other products about $35 billion between 1997 and 2005, according to the National Family Farm Coalition! In this way, family farms are starved of revenue as big corporate operations expand profits at their expense. Increasingly, only the largest farmers having long term grain contracts with the biggest traders can afford to stay in business.
A good example is the consequences of Canadian PM Stephen Harper's dissolution of the Canadian Wheat Board which, for seven and a half decades, saved family farmers from the kind of abuses suffered by US farmers in the era of the big railroads and private grain elevators. According to a Bloomberg's report lauding the Canadian PM's decision in 2012, only two firms at the time, Viterra, Inc. and Richardson International, Ltd. controlled about two thirds of the grain Canadian grain trade. The report admitted that the big traders buying Canadian wheat don't compete at all in terms of prices offered to farmers but in terms of services offered. The big trading monopolies control the price paid to farmers and there has already been a $17 billion class action suite filed against the Canadian government over the decision to eliminate the CWB.
Harper and his supporters hailed the privatization of the CWB as a blow for "freedom" whereby farmers can make their own choices (most would chose to keep the board as is) but a quote from one economist who supports the change gives a better analysis of the PM's decision;
"...times have now changed, and compared to over 70 years ago when the Board was formed, farms today are much fewer and much larger, and roads and truck transportation are much better. Instead of having 300 acre farms as in the 1930’s, many farms are now 3000-6000 acres or more. Many of today’s farmers are very sophisticated, well educated, competent, internet savvy, entrepreneurial, independent, and have sales of over a $1,000,000 annually. Many value the freedom to make their own grain marketing decisions, and think they can do better than the board."
Privatization of Canada's grain trade is only two years old and so it remains to be seen just what kind of long term structural changes it will have on Canadian agriculture. Suffice it to say that it was obviously supported by the largest, richest farmers and the big corporate traders to whom they sell their grain. Poor and middle size farmers, those who can stay in business, will become no more than low wage labor for agribusiness and even forced to abandon farming altogether if they can't weather the revenue squeeze of higher input costs and lower grain prices paid by the big grain elevators. One should expect to see the number of independent Canadian grain operations disappear as average farm size and annual revenue increase for the few independent farmers that remain in business.
Earlier this year an Alberta based blogger claimed that Canadian Tory MP, Leon Benoit complained publicly that wheat that sold quite recently for $9 a bushel is now sold for less than $4 by the farmers who grow it. This has less to do with free market conditions than the ability of a few private grain merchants to control the prices paid to farmers. Canadian prices to farmers have fallen since Harper's privatization of the grain trade in Canada even as world prices have skyrocketed. A recent blog entry by the Canadian Wheat Board Alliance, a Canadian farmers' advocacy group, has shown that before Harper's decision to privatize the grain trade, over ninety percent of the wheat port price per metric ton accrued to farmers. In February of this year, it was estimated that about $250 (roughly two thirds) of the more than $400 paid per metric ton accrued to the grain elevator and the railway firm with $200/MT being paid to the elevator alone! It seems clear whom Harper's decision really benefited! Recent developments in Canada should be the smoking gun for the argument regarding the proletarianization of the North American farmer if ever there was one!