Updated Look at Concentration in Agriculture
By Jim Wiesemeyer, about study by Mary Hendrickson
Agweb.com, via a special arrangement with Informa Economics, Inc.
March 1, 2005
Online at: http://www.agweb.com/get_article.asp?pageid=115780
Always a hot topic in ag circles
Concentration in agriculture. You won't find many topics that bring out strong opinions in U.S. agriculture, from lawmakers to farmers themselves. It has been a growing concern with some in agriculture going back years now, and so far legislation aimed at "fixing" the situation hasn't gone too far.
One of the strongest and most vocal critics has been the National Farmers Union (NFU). They've been at the forefront of efforts to try and rein in the spread of fewer hands controlling more of the marketplace. The group commissioned a new study which was done by Mary Hendrickson and William Heffernan of the University of Missouri at Columbia.
The findings:
Beef packing industry: Tyson Foods (formerly IBP), Cargill (via Excel), Swift & Co. and National Beef Packing Co. are the top four firms. The concentration ratio of the top four firms (CR4) is put at 83.5% by the study. It stood at 72% in 1990, rising to 76% in 1995, 79% in 1998 and 81% in 2000.
Beef feedlots: Cactus Feeders Inc. (500,000 head one-time capacity), ContiBeef LLC (450,000 head one-time capacity), ConAgra Cattle Feeding Co. (440,000 head one-time capacity) and Caprock Cattle Feeders (290,000 head one-time capacity) are listed as the top four cattle feeding operations. But, the study listed no CR4 for these firms.
Pork packers: Smithfield Foods, Tyson Foods, Swift & Co. and Hormel Foods are the top four players, with the study awarding them a CR4$ of 64%. Historical levels of concentration by these four firms stood at 37% in 1987, rising to 44% by 1992 and 59% by 2001.
Pork Production: Smithfield Foods (825,000 sows), Premium Standard Farms (225,000 sows), Seaboard Corp. (213,600 sows) and Prestage Farms (129,000 sows) are the top four operators with a CR4 of 49%.
Broilers: Tyson Foods, Pilgrim's Pride, Gold Kist and Purdue are the top four with a CR4 of 56%.
Turkeys: Cargill Turkey Products, Hormel Foods (Jennie-O Turkey Store), ConAgra (Butterball Turkey Co.) and Carolina Turkeys are the top four players, with a CR4 of 51%.
Ethanol: ADM (1,070 million gallons per year),. Cargill (128 million gallons per year), Aventine Renewable Energy Inc. (100 million gallons per year) and VeraSun Energy Corp. (100 million gallons per year) are the top four players, with a CR4 of 41%. The historical CR4 for these
firms: 73% in 1987, 73% in 1995, 67% in 1999 and 49% in 2002.
Findings also were significant in U.S. supermarkets. Wal-Mart Stores, Kroger Co., Albertsons Inc., Safeway Inc. and Ahold USA Inc. controlled
46 percent of U.S. food retailing in 2004.
NFU President Dave Frederickson says that this likely means consumers could pay higher prices given the control in the industry. The researchers "have been able to document clearly that concentration is causing some huge problems for American agriculture."
Here's a link to the study
<http://www.nfu.org/documents/legislative/Concentration_Tables_2004.pdf>
(it's pdf document).
Bottom line: Focus on concentration in agriculture isn't going away. Proponents of rules to address this issue will continue their efforts to get Congress to approve legislation to address this matter. Frederickson says they'll give the info to Congress to hopefully drum up support for legislation.
But what others point out is that there are already laws on the books in terms of addressing concentration issues. In the past, challenges utilizing things like antitrust laws has not resulted in any significant shifts in how things are setting in terms of control of agriculture.
It's also interesting to note that historical increases have been seen in virtually every industry except ethanol. The decrease in the concentration of ethanol production in just a few hands reflects the growing number of farmer-owned ethanol plants that have come on line in the past decade and more that are ready to join in the output of the corn-based fuel.