US ag advocacy orgs support bill calling for pause in industry mergers
The agricultural organizations and other stakeholders were among those involved in sending an open letter supporting the proposed legislation, which would temporarily halt mergers of large companies in the agricultural industry. The coalition asked for legislators to support the bills introduced as the Food and Agribusiness Merger Moratorium and Antitrust Review Act of 2018.
The legislation was not introduced in response to a specific merger, said Matt Perdue, government relations representative with the National Farmers Union, one of the organizations supporting the proposed legislation. Instead, it was a “response to staggering levels of consolidation across the agriculture and food industry.”
“The current state of the farm economy certainly adds a new sense of urgency to address this issue,” he told FeedNavigator. “Family farmers and ranchers typically operate on razor-thin profit margins, forcing many to adopt a 'get big or get out' mentality. That has alarming impacts on our rural communities, as agriculture provides enough income to support fewer and fewer rural families.”
“This legislation gives us an opportunity to step back and evaluate the impacts of consolidation, improve antitrust enforcement, and right the ship for family farmers, ranchers and rural communities,” he added.
Consolidation across the agricultural industry, including in the input and output markets has reduced the amount of a consumer dollar that the farmer receives, he said. Farmers get about $0.14 for every dollar spent at a grocery store, the coalition added in its letter of support.
Versions of the legislation have been introduced in the US House of Representatives and the Senate. The proposed legislation seeks to set a “moratorium” on mergers for large agribusinesses along with food and beverage producers and grocery stores.
The halt in mergers would be set to run for 18 months, starting when the bill is passed, according to the legislation. If passed, it would apply to companies with annual net sales or assets of more than $160m.
The proposed bill also would create a commission to review mergers proposed by those entities looking at “concentration and market power.” The suggested 12-member board would have six representatives selected by the Senate and six by the members of the House and several of the appointees would need to be actively involved with farming or ranching.
The proposed bills come after finding that concentrations have increased in the agricultural industry, particularly in recent years, according to the legislation. “During the past 2 years there has been a wave of consolidation among global seed and crop-chemical firms, three companies now control nearly two-thirds of the world’s commodity crop seeds. Those same three companies now also control nearly 70% of all agricultural chemicals and pesticides.”
Pausing mergers and feed implications
Industry mergers have covered farm inputs, agricultural commodity processors along with manufacturing and supermarkets, the coalition said in its letter of support.
“Farmers sell into very concentrated markets where four firms control almost the entire market and can push down the prices farmers receive for their crops and livestock,” the group said. “For example, the top four firms control 86% of corn processing, 85% of cattle slaughter, 71% of pork packing and 79% of soybean crushing.”
Although it is too early to know the full implications of more recent industry mergers, the long-term trend has established a major effect on farmers and ranchers, said Perdue.
“The decades-long trend toward increasing consolidation has had very stark impacts,” he said. “The cost of growing a bushel of corn has more than tripled over the last forty years, while the cash price for corn hovers just above 1970s levels.”
Pausing additional mergers is an initial step that could start correcting some of the trends, he said. Others include strengthening antitrust enforcement and ensuring that the “system can better serve the men and women who provide us with food, fiber and fuel.”
Looking at the feed industry, one of the concerns of consolidation has been the lack of improvement in feed crop production as seeds, chemicals and fertilizers have all seen increasing concentration, said Perdue. “Increased consolidation in seeds, chemicals and fertilizers just isn’t leading to the promised improvements in productivity and profitability,” he added.
“Farmers are receiving diminishing returns on their investments in inputs,” he said. “It’s also important to remember that seed companies are also biotech companies that develop seed traits. The recent wave of consolidation represented by Dow-DuPont and Monsanto-Bayer stands to reduce choice, particularly for products that are tailored to the specific needs of one region or another.”