The Justice Department and U.S. Department of Agriculture have been accepting public comments in advance of a series of workshops on “competition and regulatory issues in the agriculture industry.” The first workshop is scheduled for March 12 in Ankeny.
Francis Thicke, a dairy farmer and Democratic candidate for Iowa secretary of agriculture, submitted this comment to the DOJ’s Antitrust Division. Excerpt:
Economists tell us that when four firms control 40% or more of a market, that market loses its competitive nature. Currently, four firms control 83.5% of the beef packer market; four firms control 66% of the pork packer market; four firms control 58.5% of the broiler market. The turkey, flour milling, seed, and other agricultural markets are similarly concentrated.
The anticompetitive effects of market concentration is further compounded by the fact that some of the top four firms in each market category are also among the top four in other markets. For example, Tyson is number one in beef packing, number two in pork packing, and number two in broilers. This kind of horizontal integration encourages firms that dominate in several markets to manipulate prices in order to increase their market share. For example, when beef and broiler prices are profitable, a firm with dominant market share in beef, broilers, and pork can take measures to prolong the unprofitability of the pork market in order to force out firms that deal only in pork-while maintaining its own firm’s overall profitability through the beef and broiler market sectors.
A good current example of the farm-level effects of market concentration is the milk market. Recently, dairy farmers have been experiencing record losses due to low farm-gate milk prices. At the same time, the largest dairy processor, Dean Foods-that is purported to control 40% of U.S. dairy processing-has posted record profits over the past two quarters. Clearly, Dean Foods has found a modus operandi that enables it to isolate itself from the market forces bearing on dairy farmers.
I am glad to see Thicke raise this issue, which affects the well-being of so many family farmers. I do not recall Iowa’s current Secretary of Agriculture Bill Northey or his predecessor Patty Judge sounding the alarm about excessive concentration in the agriculture industry. Someone please correct me if I am wrong.
Last month the Farmer to Farmer Campaign on Genetic Engineering released a report on consolidation in the seed industry, which has left farmers with “fewer choices and significantly higher prices in seed.” You can read more about that report at La Vida Locavore and Iowa Independent.