Farmers Must Fight Subsidies, Not Corporate Farms
If America Sets Unrealistic Constraints on Farm Structure, Farmers May Lose Export Markets
May 9, 2000
by Dennis T. Avery
THE BridgeNews FORUM
May 5, 2000
CHURCHVILLE, Va.-I've just accepted an invitation to take an official part in the U.S. Department of Agriculture's "Millennium Debate on Farm Structure."
I'm flattered. It's the first time in 40 years the Agriculture Department has invited me to say anything in public. Unfortunately, they're having the wrong debate.
"Farm structure," or issues involving farm size and distribution, is not the problem that today's farmers face. The biggest factor in the decline of American family farm numbers is the high and rising value of off-farm jobs. City jobs typically pay more.
The Agriculture Department notes that 90 percent of what Americans buy today is not food but the other things affluent people want such as computers, cars, medical care, ski trips and vacation cruises.
The off-farm bidding for farm labor has been vigorous at least since 1910, when Henry Ford offered the farmers of Michigan the stupendous sum of $5 a day to build Model Ts. It's going on all over today's world. Only in failing Africa are farmers not being offered higher wages to leave the farm.
Structure has little to do with today's low farm prices and profits. Farmers love to hate the grain companies and packing plants that buy their products, but the low prices are due to other countries' export dumping and farm import barriers.
The European Union is still dumping millions of tons of farm surplus under subsidy. In China and India, incomes are rising and good farmland is scarce, but importing subsidized food would touch off a political firestorm among their own farmers.
I believe free trade in farm products would double U.S. farm exports in a decade, adding another $50-60 billion a year in earnings from the land, labor and processing facilities America already owns That's vastly more than farmers will get from the U.S. Congress.
I'm told corporate farms and monopolistic agribusiness are a threat to American farmers. Thirty years ago, a national farm organization invited me to write a book about the threat of corporate farming.
I didn't believe it then, and I didn't write the book. I've visited a number of hog farms recently, some corporate, some not. The major differences seem to be the corporate hog farms get more and leaner pigs per litter and offer their staffs salaries that don't drop with the hog markets.
In the past 20 years, North Carolina's Duplin and Sampson counties were transformed from rural poverty into thriving modern communities by corporate hog farming and a big nonfarm investor's construction of a slaughter plant.
In the same time period, Iowa was reducing its hog production faster than Carolina was expanding, because the productivity and quality from the old A-frame hog farms wouldn't pay a family farmer to stay in the business. Iowa was hostile to new patterns. Will its rural areas be depopulated as a result?
During the Microsoft antitrust case, it was fashionable to apply the same lesson to industries that serve the farmer. That may be, though it's hard to tell in this high-tech world. I'm amazed at how many billions of dollars private industry invested to provide the modern farmer with improved biotech inputs.
Archer Daniels Midland was found guilty of price-fixing in lysine while building the world's largest lysine plant, and cutting in half the real cost of the popular additive used in livestock and poultry feeds.
Why are farmers supposed to get rich in meatpacking, food processing or food retailing? Those industries demand big investments for low returns. The average retail food chain makes less than 1 percent a year on investment.
For that, they have to worry about teamsters' strikes, the lettuce crop and lawsuits by customers who slip on grapes. Farmers have been pursuing value-added dollars through cooperatives for 50 years.
I think it's done some good, but it hasn't solved the "farm problem." I don't know if packers should be allowed to own feeder cattle or not. I don't know if farm people will make money as salaried hog farmers in the years ahead. No one else knows either.
I do know the big prize in the agricultural world today is export market, and that the competition will be worldwide.
Selling to distant markets will require more coordination and more quality control than American farmers have ever needed before. Maybe that means corporate contracting or bigger co-ops. Maybe it means commercial farmers collaborating.
But if America sets unrealistic constraints on the structure of agribusiness, U.S. farmers may lose the 21st century's export market-the biggest opportunity in farming history.
Dennis T. Avery is based in Churchville, VA, and is director of the Hudson Institute's Center for Global Food Issues.