The following comment was submitted to the Federal Trade Commission and Department of Justice on September 8, 2023 regarding the FTC-2023-0043-0001 Draft Merger Guidelines.
The Institute for Agriculture and Trade Policy (IATP) welcomes the opportunity to comment on the Draft Merger Guidelines. IATP is a 37-year-old nonprofit organization based in Minnesota that works locally, nationally and internationally for fair and sustainable food, farm and trade systems. IATP has identified corporate concentration and a lack of competition in the agriculture sector as a major contributor to economic, environmental and social harms within our current food system.
IATP strongly supports the proposed merger guidelines and urges the Department of Justice and Federal Trade Commission to finalize these rules as soon as possible.
In January, U.S. Department of Agriculture (USDA) Secretary Tom Vilsack told Senators that the government would not block global meat giant JBS from government procurement contracts due to violations of the Foreign Corrupt Practices Act because there would not be enough meat on the market from other sources.1 This remarkable admission goes to the heart of many risks associated with a weak merger approval process and an agriculture sector now controlled largely by too-big-to-fail companies.
The agriculture sector is highly concentrated due to a steady series of mergers over the last 50 years. The top four beef companies now control 86% of the market, the top four soy processors control 80%, the top four pork companies control 67% and the top four poultry companies control 54%.2 Earlier this year, USDA issued a report on the highly concentrated seed industry, documenting the many challenges for competition and innovation,3 including fewer choices and higher prices.4 There are both horizontal and vertical integration issues associated with mergers in the agriculture sector, with some of the larger players dominant in multiple segments of meat and feed or seeds and pesticides. In a recent example, animal feed giant Cargill acquired America’s third-largest chicken business.5
Many of agriculture’s most dominant players have settled price-fixing charges over the last decade, including in beef,6 pork7 and poultry.8 We agree with the proposed guidelines that deals between companies with a history of collusion should face more regulatory scrutiny under the merger approval process.
For farmers, high levels of concentration mean they are squeezed by powerful companies on both sides of their business. Farmers are price takers in this system, forced to pay what a limited number of seed, pesticide, equipment and animal genetics dealers charge as part of farm expenses, as well as forced to accept prices from what a small number of meat, poultry or grain companies offer. In many geographic markets, farmers have even fewer options from which to buy and sell.
Such levels of concentration make it extremely difficult, if not impossible, for new innovative companies to enter the sector. Innovation, responsiveness and diversity within the agriculture sector will be essential as the escalating climate crisis introduces growing risk to farming and our food supply. The most recent U.S. National Climate Assessment outlines what is coming for our food system, including increasing drought, wildfires, the depletion of water supplies, and new pests and diseases for crop and livestock production.9 We will need to rapidly adjust seeds, pest management tools, animal breeds and cropping systems to adapt to these new conditions. We will also need to reconfigure our food processing infrastructure to be more decentralized and less dependent on vulnerable long supply chains.
The existing permissive merger approval process, and associated consolidation in the agriculture sector, has led to a lack of genetic diversity in seeds, cropping systems and animals in our agriculture system. Most U.S. cropping systems lack genetic diversity, leaving many of the nation’s farms vulnerable to plant disease, a risk that is expected to rise with climate change.10 The shift toward a large Concentrated Animal Feeding Operation (CAFO) model to raise cattle, hogs and poultry for a handful of companies has led to thousands, if not tens of thousands, of identical breeds in close quarters, an ideal environment for the rapid spread of disease. The CAFO system has been affected by mass disease outbreaks in the poultry11 and pork industry12 over the last several years.
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