The first thing that it takes is an administration that cares enough about free markets and protecting competition to enforce the antitrust laws that exist on the books. Theodore Roosevelt obviously cared, believing corporations let loose would structure the economy to their special and singular benefit.
History confirms such behavior. Iowa Sen. Chuck Grassley has long championed the independent farmer and livestock producers, worried that they would become corporate serfs on the land.
You own the farmer if you own his market. If corporations control market transparency and market access, they control the markets. Despite the Iowa senator’s long hard work in this arena, nothing was done by any previous administration for many decades. One could call what the Obama administration is currently doing a “once every century ag competition review.” It is long overdue.
For some time now, those interests who were benefiting from industry concentration and increasing corporate control held the reins of the enforcement agencies purposely seeing to it that nothing was done. There is no guarantee that the Obama Administration will embark on any dramatic structural overhaul, but at least we see what appears to be some sincerity in government oversight that has been sorely absent.
Too often, we have seen the agribusiness managers move in and out of government like generals working for defense contractors in conflict of interest. When Congress enacted laws such as COOL or mandatory price reporting, agribusiness insiders in USDA significantly altered outcomes via rules written for implementation. There was undo corporate influence inside USDA. What this administration has planned is unprecedented in agriculture.
The Justice Department and USDA are coordinating efforts to review and enforce anti-trust laws for the first time since whenever. Both departments are devoting significant resources to the effort. Assistant U.S. Attorney General Christine Varney is heading up the administration’s effort saying, “When companies have a tremendous amount of market share, it is our responsibility to keep the playing field level.”
There is a private and a public review occurring. Department of Justice has been fact gathering, including requests for internal documents from major corporate players in the ag sector. They are going through contracts to see how business is being transacted.
There is also the public venue in the series of “workshops” on the status of competition in agriculture. The first, focusing on issues of concern to crop farmers was held on March 12 in Ankeny. Other workshops planned include one on poultry, to be held May 21 in Normal, Ala; one on the dairy industry planned for June 7 in Madison, Wis.; one on the livestock industry scheduled for Aug. 20 in Fort Collins, Colo., and the final workshop focusing on Farmgate and consumer price relationships to be held Dec. 8 in Washington, D.C.
I think a focus also needs to be put on the fertilizer industry which is concentrating, gaining significant pricing power globally. This overall effort is at least a decade too late for the hog industry. Independent hog producers are few and far between today, primarily functioning in niche markets and not as commercial producers.
Some semblance of competition could be restored by requiring packers to purchase a percentage of their hogs in cash markets but there is no guarantee there are enough independent producers are left to fill such a market or who have a desire to do so.
Hog producers were herded where packers wanted them to go and have become corporate employees for all intents and purposes. An industry that once welcomed young men an opportunity to “start farming” with market access for all, willing to work hard to accumulate equity, is gone, now controlled by and designed to accumulate wealth for a select few.
The hog industry is structured by contracts that have less flexibility to respond to market signals than even the integrated poultry industry appears to have. Captive supply is an issue for the cattle industry. There will still be a lot to talk about at Fort Collins in August. Mandatory price reporting meant to provide much needed market transparency to livestock producers was undermined by USDA agribusiness insiders so that it has enough holes in it that were it the dairy industry, it would look like Swiss cheese instead of American.
One participant in the Ankeny forum made the observation that the administration was serious enough about it this time that it “was not a dog and pony show.” This effort being undertaken is much needed. It’s not going to magically improve farm prices. Farmers blame bad prices on agribusiness and sometimes fundamentals deserve bad prices.
This is about the playing field, making it level, believing it is not. It doesn’t require new anti-trust legislation. All the tools to fix the tilt of the field exist in statutes. Previous administrations have purposely kept the toolbox lid shut and promoted conditions for players in ag industries where uncompetitive behavior was encouraged. There is an opportunity here with what the Obama administration is doing that needs to be capitalized upon to benefit farmers/ranchers.
David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.
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