Speech by Wes Sims, TFU President
National Catholic Life Rural Conference

Friday, July 27, 2001

It is a pleasure to speak before this audience on the issue of agricultural concentration in the context of economic and social justice.

The rapid concentration that is occurring in agriculture is threatening the livelihood of an entire culture--rural America. The increasing pace of concentration among large corporate firms is squeezing out the farmer's ability to compete in the marketplace and earn a fair price for his commodity. Today, the position of the family farmer has become even weaker as consolidation in agribusiness and food retail has reached all time highs. Farmers have fewer buyers and sellers than ever before.

As large corporations dominate the food system, family farmers and ranchers are either forced to get larger to try and survive, or they are forced to exit farming. As a result, there are fewer and fewer families who support the local schools, churches, and main street businesses in rural communities. Throughout Texas and the nation, rural communities whither and die.

These large corporate entities have little to no regard for the environment, rural communities or human dignity. They have no moral or ethical sense to do what is right, but rather their core purpose of existence is for profit. Unless policy decisions are made to change the emerging system, I'm afraid U.S. agriculture is embarked on a course traveling back in history to a medieval feudal farming system.

More and more farmers and ranchers are finding themselves in a position in which they must contract with these large corporate entities if they want to continue farming. The result is that they lose their independence in decision-making and essentially become serfs to the land. Meanwhile, the control of the food system is shifted to a very few powerful players.

In 1999, Dr. William Heffernan with the University of Missouri published a report, "The Consolidation in the Food and Agricultural System," that analyzed the structural changes occurring in the agricultural sector. In his report, Dr. Heffernan illustrates how increasing vertical and horizontal consolidation in the food and agriculture industry has led to the emergence of four or five "food clusters" that dominate the market from the seed to the grocery store shelf."

Heffernan's report reveals startling levels of concentration. Today four firms control 81 percent of all beef slaughter, 73 percent of sheep slaughter, 57 percent of pork slaughter, 62 percent of flour milling and 50 percent of broiler production.

Rapid consolidation in the agriculture sector continues. In June this year, a Delaware judge ruled that the poultry giant Tyson Foods must proceed with its buyout of IBP. This transaction will significantly reduce market opportunities and farmers' abilities to obtain a fair price in the marketplace. The merger would give Tyson control of 30 percent of the U.S. beef market, 33 percent of the chicken market, and 18 percent of the pork market.

Other mergers this year include:

*Smithfield buying Moyer Packing Co.--the largest beef packer in the eastern United States.

*Land O'Lakes purchasing Purina Mill--that would create the nation's largest feed company.

*ADM finalizing the takeover of Farmland Industries' grain operations.

*ADM also agreed to purchase a leading U.S. animal feed processor, Consolidated Nutrition, from cooperative soybean processor and vegetable oil refiner Ag Processing, Inc.

*Suiza and Dean Foods proposed merger. This merger is still under review by the Justice Department.

This year, Dr. Heffernan and Dr. Mary Hendrickson released another report examining the food system as it extends through to the retail stage. Today more and more processors are being squeezed as the balance of power shifts to retailers, who are now in a position to dictate terms to food manufacturers. As a result, the processors are forcing these changes back to the farm level.

These changes are not only significant issues for farmers, but also present critical problems for communities in inner urban and rural areas that are no longer profitable for large retail stores. These large retailers have little interest in putting a significant investment of products in a Safeway grocery store located in inner Washington, D.C., or in a small-town grocery store in rural Texas.

Today, five supermarket chains account for over 40 percent of food retail sales in the U.S. The major players are Kroger, Albertson's, Wal-mart, Safeway and Ahold USA. This percentage is alarming when by comparison, the top five retailers accounted for only 20 percent of food sales in 1993.

Wal-mart is one of the significant drivers of change. Wal-mart, which was virtually non-existent in food sales in 1993, is today the second largest food retailer in the U.S. Wal-mart is forcing many changes in retailing. As Wal-mart integrates its way backward in the food system, it is creating relationships with the dominant processors. For example, Wal-mart was one of the first supermarkets to use case-ready meat in its stores--meat that was pre-packaged from IBP.

However, this power-shifting trend toward a corporate monopolistic industrialized food and agriculture system is not inevitable. It is not natural economic forces at play. This emerging system is the result of policy decisions--or more appropriately, lack of policy decisions--that need to be enacted to sustain our family farmers and rural communities and to ensure that all consumers have access to a wide variety of foods at a reasonable cost.

Clearly, the crisis in rural America is not going to be solved by reliance on the markets. Public policy must be premised upon a social commitment to restore the economic health of rural America. Farmers Union has developed a set of policy recommendations to restore fair, efficient and competitive markets so that family farmers, ranchers and rural communities can thrive and prosper.

Our list of recommendations is long and comprehensive. I would like to highlight a few of our proposals.

Foremost, as the Senate and the House draft and mark-up a farm bill, Farmers Union strongly recommends incorporating a concentration and competition title in the next farm bill.

The competition and concentration title in the next farm bill would define the fundamental principles governing the agricultural marketplace and provide more effective solutions for problems resulting from unfair, anti-competitive practices. Provisions would include addressing anti-trust enforcement, price discrimination and transparency, and reforms related to contract production.

Farmers Union also strongly supports enacting a temporary moratorium on agricultural mergers until Congress can review anti-trust laws and determine the effects of mergers on farmers, ranchers and rural areas.

Farmers Union recommends the creation of a Special Counsel for Competition within USDA as a key proposal of reform to provide greater protection to farmers.

We support reform and enforcement of the Packers and Stockyards Act. The Packers and Stockyards Act prohibits packers from engaging in unjust, discriminatory or deceptive practices. A significant and necessary change is to include poultry within the Packers and Stockyards Act. Currently, the Act does not give USDA the authority to bring anticompetitive practices against poultry dealers.

Additionally, USDA's GIPSA should have the authorization and funding to analyze the economic impact of mergers and investigate possible anti-competitive practices.

Farmers Union supports measures that regulate captive supplies and prohibits packer ownership or feeding. We also support a Producer Protection Act that would provide minimum protections for contract producers of agricultural commodities and legislation that ensures bargaining rights for contract farmers.

At the beginning of the 21st century our nation is at a crossroads. It is my hope that society chooses the path that includes continuing its long-standing commitment to independent farmers and ranchers, preserving rural communities, protecting our environment and managing our nation's food supply.

I thank you for the opportunity to speak this afternoon, and I'll be happy to answer any questions.

Do you have questions for Wes Sims? E-mail him.

Texas Farmers Union, P.O. Box 738, Sweetwater, Tx 79556