The New Farm Crisis

by christopher d. cook
Sullivan County, Mo.

       Like ripples on a lake, the green hills of northern Missouri rise and fold across the horizon near the Iowa border in a series of ridges and wooded dales. For generations this terrain has been home to small livestock ranchers. Now the horizon is marred by rows of factory buildings.

      A metropolis of hogs--population 1.7 million--resides in these gleaming metal barns that dominate the landscape. It’s the nation’s largest concentration of pigs, all property of Premium Standard Farms (PSF), one of the 10 biggest pork producers in the United States. Comprising more than a quarter of the state’s hogs, the factory farm generates putrefymg manure smog--and economic and environmental disaster for area farmers.

      Since PSF and other hog giants have flooded the pork market, prices have plunged to their lowest in 30 years--driving many small farmers out of business. “We lost most of our hog farmers several years back, and now we’re about to finish off the rest of them with these low prices,” farmer Gary Godfrey says.

      After knocking out the competition, PSF puts them on its payroll, turning independent farmers into animal factory employees. “It’s a horrible thing to see the family farm being lost and these lower-wage jobs being created, and people moving into those jobs because they don’t have a choice,” says Godfrey, whose family has farmed in the area for five generations.

      Since PSF built three factory-farm complexes in the early ’90s--thanks to a special exemption in the state’s ban on corporate animal farms--Missouri has lost half of its hog operations, mostly small family farms. In nearby Nebraska and Iowa, independent hog farms are disappearing by the thousands.

      Nationally, even as hog production rose dramatically from 1992 to 1997, more than 80,000 pig farms disappeared.

      The farm fatalities are piling up largely as result of what the USDA calls a “historically high” concentration in agriculture. With vertically integrated corporations controlling food production--“from seedlings to supermarkets,” as agribusiness expert A.V. Krebs puts it--half a million small independent farmers and ranchers have been plowed under in the past 15 years. Some 50,000 farms go belly-up each year due to bankruptcy--destroying local economies and turning many rural communities into ghost towns.

      Farm income is so tenuous, Krebs says, that if growers relied entirely on farm earnings, “more than 80 percent of the farmers in this country would be below the poverty line.” Now farmers are getting pummeled by a new storm of distressing data. Pork and wheat prices are sinking, and farmers are taking massive losses and racking up more debt. Farm debt has risen for six straight years, according to the USDA, and is now at its highest level since 1985.

      What’s driving today’s farm crisis is plummeting prices--not for food but for crops. Since 1980, farmers’ share of consumer spending on food has shriveled from 37 cents per consumer dollar to 23 cents, according to the 1998 USDA National Commission on Small Farms. Meanwhile, the costs of farming have far outstripped crop values. While farmers earned slightly more than they spent on supplies and equipment in 1990, now they are paying far more for seeds, pesticides and machinery than they are receiving for their crops.

      “Prices are so low that in some states around 20 percent of the farmers won’t get financing next year to farm,” warns Mark Ritchie, president of the Minneapolis-based Institute for Agriculture and Trade Policy. “The price they are receiving is below the cost of production, and so nothing can be done.... Farmers use terms like ‘the coming Holocaust in the countryside.’ “

      The price plunge has coincided with sharp declines in government farm supports, under the 1995 farm bill’s phase-out of subsidies; the USDA projected a 17 percent drop in government payments to farmers in 1998. As their production rose, farmers’ net income was expected to shrink by 7 percent. Amid election season, Congress rushed $6 billion in aid to farmers, but, in keeping with farm-subsidy tradition, the bulk of the cash went to “the big guys” who produced the most. Says John Crabtree of the Center for Rural Affairs in Walthill, Neb., “The people driving that decision don’t have a concern about whether we have family farmers raising our grain or whether we have corporations doing it.”

      The federal government’s agriculture and trade policies support the mega-mergers and market deregulations that often spell doom for small farms. NAFTA opened the United States to cheaper products exported from Mexico, pushing many U.S. fruit and vegetable producers near foreclosure, Ritchie says.

      Despite the occasional populist paean to the family farm, state and local politicians roll out the red carpet--and huge cash incentives--for agribusiness corporations promising economic salvation to rural communities. Tim Whitaker, mayor of Trenton, Mo., describes his concerted (though unsuccessful) attempts to convince PSF to build its processing plant in his city: “We put together a package showing the company what we could do for them.... Free land, tax abatements and locked-in utility rates.” Likewise, it was special exemptions shepherded by Democratic State Rep. Phil Tate that allowed PSF and its Wall Street investors to develop their sprawling factory complexes.

      Aided by such policies, agriculture corporations are buying out their competitors and pricing out farmers. Although small farms (those with under $250,000 in annual sales) comprise 94 percent of the nation’s farms, they take in just 41 percent of all farm revenue. The USDA commission on small farms found that “ownership and control over agricultural assets is increasingly concentrated,” and, as a result, “farmers have little to no control over setting the price for their products.”

      Nowhere is this trend more dramatic than in meat packing, where four firms account for more than 80 percent of all cattle slaughtered and just three firms control 70 to 75 percent of the lamb market. A 1996 USDA report on consolidation found a “depression of producer prices at all levels,” and concluded that cattle ranchers’ “losses seem out of control and hard to justify in light of the record profits being recorded at the higher levels of the beef industry.”

      Concentration also is encouraging a race to the top among farm lending agencies, which, given the price pinch, are reluctant to finance small farms. “Farmers who have made decent livings and survived the ’80s farm credit crisis are now refused operating loans unless they agree to expand” to factory farm size, according to the USDA report. By granting credit only to large-scale farms, lenders promote a future in which, “the only operations that will survive will be big operations... because of their access to capital.”

      But the USDA, by its own acknowledgment, has deepened these inequities. The agency has made “policy choices” that have “perpetuated the structural bias toward greater concentration of assets and wealth in fewer and larger farms and fewer and larger agribusiness firms,” according to the report. It acknowledges that federal farm programs “have historically benefited large firms the most,” and that tax policies, such as incentives for capital purchases, only encourage large farmers to expand.

      Hard times on the farm come amid heady days for the largest agribusiness corporations engaged in a financial feeding frenzy of mergers and acquisitions. In the biggest recent buyout, Cargill (the nation’s largest privately held company) snatched up Continental Grain Company’s (in the top five among private U.S. grain traders) grain storage, transportation, export and trading operations in North America, Europe, Latin America and Asia. The purchase, estimated to be worth as much as $ 1 billion, will give Cargill control of one third of all U.S. grain exports.

      Cargill, a commodities king-maker with annual sales of more than $50 billion, owns 29 subsidiaries spanning the manufacturing, financing, wholesaling and transportation of dozens of food crops, livestock and commodity futures. Its scope captures nearly every aspect of food production, including seeds, fertilizer, feed grain, cattle feed lots and contract hog production. Cargill heralds the further consolidation as a boon for farmers.

      “Together these grain operations will expand farmers’ reach into new markets,” says Cargill CEO Ernest S. Micek. “Continental’s worldwide grain handling and export facilities will help us move farmers’ crops to our processing plants and to our customers more reliably and efficiently.”

      Exports may expand markets, but farmers and agribusiness critics say consolidation chokes off any increased cash flow. “The bonanza isn’t shared with farmers,” Food First’s Peter Rosset says. “It’s pretty much sucked up by the intermediaries.” As Krebs explains: “Farmers don’t trade grain, grain traders trade grain.”

      Before the Cargill buyout, Illinois corn grower Floyd Schultz could sell his crops to Cargill or Continental Grain. Now, he told the New York Times, he will have to drive an extra 30 miles--costing him an extra 10 cents a bushel--to bargain with the nearest competitor, Archer Daniels Midland (ADM). Mike Yost, a Minnesota corn and soybean grower, predicts the Cargill deal will cost him about $2,700 a year in diminished crop value. “We see constant consolidation of both our input suppliers--for seed, fertilizer, pesticides and the people who purchase our production,” Yost told the Times. “Obviously, the trend’s not healthy for the American farmer.”

      Cargill’s mammoth acquisition is just the tip of the merger-mania iceberg. While Continental is ending its century-old grain business, it will use Cargill’s cash to further consolidate its livestock holdings; last year Continental gobbled up PSF, the hog-raising and processing giant. This past June, Monsanto bought up Cargill’s international seed operations for $1.4 billion--cash that undoubtedly helped Cargill snag Continental Grain.

      As holdings and money change hands, these firms expand and deepen their control over markets and distribution channels--making consolidation more seamless. Just two companies, Cargill and ADM (a.k.a. “supermarket to the world”), control 75 to 80 percent of the world’s grain production, according to Krebs. “Nearly every product on the market today that has corn in it [such as Iysine, citric acid and sweeteners] comes from ADM,” he says.

      The town square in Unionville, Mo., is desolate. Most of its storefronts are boarded up or empty. Some buildings are crumbling into vacant lots. Signs of earlier prosperity are peeling away, covered with “for sale” notices. Residents say the town once thrived with independent farmers whose business propelled local commerce, such as fertilizer and feed stores.

      But the foreclosures of the ’80s and the consolidations of the ’90s have transfigured the economies of Unionville and countless other farm towns into near-total dependence on corporations like PSF, which do not buy local goods and services. “As farms have grown bigger and bigger and more and more concentrated, the corporate farms don’t buy their feed or their inputs, like veterinary services, locally,” Crabtree says. “This has had a devastating impact on rural communities that depend on that economic activity.”

      As Cargill and its corporate colleagues conquer market after market, they eliminate the farmer survival strategies like diversified agriculture. “There are many producers throughout the Midwest who have depended on diversifying their crop and livestock operations, which included hogs, to round out their production to make it more profitable,” Crabtree explains. “[The corporations have] taken one big important piece of that and made it less competitive and a less profitable market for small producers. Farming in the Midwest has always been reliant on the family farming unit of production....Diversification has been the key to survival. But as we have driven more and more of the small producers out of particular sectors like hogs, they become less and less diversified and less and less able to survive those economic downturns.”

      Farmers here say there is far more at stake than their own livelihoods. The corporate countryside means a whole new way of life, defined by short-term profits and strict divisions between the company and the community. “There are farmers out here trying to make a living,” says cattle farmer Rolf Christen of nearby Green City. “We help each other, support each other, and here this corporation comes in and doesn’t give any consideration to anybody around it. They come in, they take over and pollute the neighborhood and, when people complain, they just say, ‘this is the business of the new millennium.’ “

      Amid the wreckage, Unionville farmer Terry Spence sees opportunities for new coalitions. Spence, the softspoken leader of Family Farms for the Future, points out that factory farming threatens both consumer and environmental health--encouraging rural-urban cooperation. Although Spence holds hope for the growth of popular alternatives such as organic and free range farming, he warns that small family farmers are nearing extinction and cannot win on their own. “The balance is going to be left up to the consumer,” he says--both to support small, sustainable agriculture, and to pressure the federal government into supporting it too.


      Christopher D. Cook, an investigative journalist based in San Francisco, Jon a 1998 Aronson Award for social justice journalism. This article is reprinted with permission from the June 13, 1999 issue of In These Times, published biweekly by the Institute for Public Affairs, 2040 N. Milwaukee Ave., Chicago, IL 60647. Subscriptions $36.95/year; call (800)827-0270.

Copyright © 2003 The Baltimore Chronicle and The Sentinel. All rights reserved. We invite your comments, criticisms and suggestions.

Republication or redistribution of Baltimore Chronicle and Sentinel content is expressly prohibited without their prior written consent.

This story was published on December 1, 1999.