The Changing Structure of Global Agriculture

1
The Changing Structure of Global Agriculture

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2
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

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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

4
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

5
Early Antitrust Interpretation

• It 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)

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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

7
Free Markets?

• There isnt 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

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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

9
Global Cowboy Economy

• Economic survival is possible in niches
• Economic survival is possible with great size
  (power)
• Mid-sized firms will find it very difficult to
  survive
• High returns to knowledge and innovation in a
  knowledge-based industrial revolution
• Where and how profits are made is changing rapidly

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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

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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

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Traditional Family Farms

• Growing size
• Attempt to compete within the industrialized
  system
• Some may produce bulk commodition, 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

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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 CEOs through their economic and
  political power becoming the social planners
  for the world?

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Sustainable Agriculture

• Must develop marketscant drive to them and
  sell on a cash market
• Develop Infrastructure
• Network (much more than a chat room)
• Business Organization (must develop
  countervailing power)
• Closed Co-op
• Quality assurances dependability essential
• Entrepreneurial training for farmers
• Must connect with the consumer and the community
• Environmental sensitivity
• Predatory pricing laws must be enforced

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Sustainable Agriculture

• Focus of the movement has been on developing and
  implementing a sustainable food production system
• We also need to give thought to developing a
  sustainable economic system

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The Well-being of Society Depends on Maintaining
a Balance Of

• Economic efficiency
• Economic power
• Economic freedom
• Stewardship of natural resources the
  environment
• Community

The Interface Between Law, Politics Economics
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Food for Thought

• Europeans have a broader view of the farmers
  job description. In addition to producing food,
  the European farmer is expected to play a
  significant role in supporting rural economies
  and in protecting the environment.
• This is additional work, and it requires more
  farmers, not fewer.

18
Food for Thought

• in spite of new teaching technologies, we
  continue to prefer smaller class sizes and more
  teachers
• But somehow the language of teachers does not
  apply to farmers in the U.S.
• Surely, the best of farmers cannot do as much
  for the environment when they are responsible for
  2,000 acres instead of 200, or 500 dairy cows
  instead of 50.

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Food for Thought

• And no one thinks rural communities will be
  better off if we pursue a policy that basically
  lays off good farmers and asks them to move
  elsewhere.
• We should be talking of farmers the way we do
  teachers, nurses, and other providers of services
  we all value.
• We would be better off with more farmers, not
  fewer.
• Dr. Richard Levins