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Food Central

by Alexander Cockburn And Jeffrey St. Clair

The world’s two largest grain companies are now one. The wave of mergers that has changed the face of the American economy in Clinton time is also engulfing the food industry. On July 9, 1999 Cargill Inc., the nation’s largest privately held company, won approval from the Clinton administration to acquire the grain-trading operations of its primary rival, Continental Grain Inc. The approval came over the objections of attorney general offices from farm states, the Farmers Union, consumer and green groups, which charged that the union will create a near monopoly in the grain business. Combined, the two companies will control 94 per cent of the soybean and 53 per cent of the corn market. How can farmers get a fair price under these circumstances? Grain is not the only product where concentration is extreme. In the Midwest four companies control more than 40 per cent of the processing of each of the major farm commodities, lamb, beef, pork and chicken.

Approval of the Cargill-Continental merger does come with a few gossamer-like strings attached. Joel Klein, assistant attorney general for the Justice Department’s antitrust division, said the full proposed acquisition would have eliminated an important competitor for the purchase of crops from U.S. farmers and other suppliers. Among the conditions of the acquisition, Cargill is:

prohibited from acquiring an elevator in Missouri; required to enter a “throughput agreement” to make one-third of the capacity at its Havana, Ill., elevator available to an independent grain company; prohibited from acquiring a rail terminal facility at Salinas, Kansas; required to divest itself of four port elevators in Seattle, Texas, California and Chicago; of three river elevators in Illinois and one in Missouri; of one rail terminal in Ohio.

But these are minimal demands and Klein himself boasted at a field hearing on the farm crisis in Montana this summer that more consolidation in the food industry might be needed “in order to make American agriculture more competitive internationally”. Klein naturally passed over the fact that NAFTA, GATT and other international treaties pressed by the big agribusiness firms and Clinton and Gore have done much to undermine the fragile balance sheets of independent farmers in the United States.

Take a look at the situation in the grain/soybean region in the Upper Midwest: western Minnesota, eastern North Dakota and eastern South Dakota. In this region, Continental Grain accounts for 50 percent of all soybean purchases and 30 percent of all corn purchases. Meanwhile, in the same region, Cargill accounts for 44 percent of all soybean purchases and 23 percent of all corn purchases. As noted above, combined they will control 94 percent of the soybean and 53 percent of the corn market.
According to the industry publication GrainNet, Cargill’s swallowing of Continental Grain means that Cargill will now control more than 40 percent of all US corn exports, a third of all soybean exports and at least 20 percent of wheat exports. Cargill isn’t done yet. Cargill executives say they want the corporation to continue doubling in size every five years. According to the Wall Street Journal, the purchase price of Continental Grain was only $1 billion. That means the company probably has another billion or so a year in profits to spend buying out other interests. Cargill could buy two operations the size of Continental’s global grain operation with one year’s earnings. That’s leverage.

Continental executives say they felt they had no alternative but to surrender to Cargill. They blame the rise of biotech alliances, such as Monsanto and Cargill and ADM and Novartis (the Swiss conglomerate that includes Sandoz and Ciba-Geigy). Paul Fribourg, CEO of Continental Grain says, “We couldn’t stay competitive as a grain trader because our competitors were cashing in on the more profitable businesses of milling and crop biotechnology”.

Grain is not the only product where concentration is extreme. In the Midwest three of every four sheep are slaughtered by ConAgra; Superior Packing; High Country; and Denver Lamb. Four of every five beef cattle are slaughtered by IBP; ConAgra; Cargill; and Farmland Beef. Three of every five hogs are slaughtered by Murphy Family Farms; Carroll’s Foods; Continental Grain; and Smithland Foods. Six firms process half of the nation’s chickens: Tyson Foods; Gold Kist; Perdue Farms; Pilgrim’s Pride; ConAgra Poultry; and Continental Grain. 95 percent of American broiler chickens are sold under contracts to less than 40 firms. Nationally, 76 percent of the grain (corn, wheat and soybeans) is sold to four companies: Cargill, Archer Daniels Midland, Continental Grain and Bunge.

“One often hears the statement that agriculture is changing and we must adapt to the changes”, says William Heffernan, a professor of rural sociology at the University of Missouri. “Few persons who repeat the statement really understand the magnitude of the changes and the implications of them for agriculture and for the long-term sustainability of the food system. It is almost heresy to ask if these changes are what the people of our country really want or, if they are not what is desired, how we might redirect the change. These changes are the result of notoriously short-sighted market forces and not the result of public dialogue, the foundation of a democracy. Neither are the changes the result of some mystical figure or an ‘invisible hand’.”

Earlier this year the Farmers’ Union hired Heffernan to undertake a study on consolidation in agricultural trade. Heffernan concluded that once you disentangle a web of subsidiaries, mergers, joint ventures, parternships, side agreements, marketing arrangements and alliances you find that “three food chains dominate the global food production system”. These chains are: Cargill/Monsanto; ConAgra and Novartis/ADM. Even so, Heffernan notes that because of lax reporting requirements it’s difficult to get a fix on precisely what these companies own and how they go about doing business. “Cargill has operations in 70 countries and it’s a privately held firm. How do we get all of the necessary information? We’ve exposed the tip of the iceberg, but exposure only indicates the type of information needed to understand the global food system.”

Heffernan points to the Cargill/Monsanto cluster as one of the most dangerous of the new alliances. In 1998 Monsanto and Cargill announced that Cargill had sold its vast seed operation to Monsanto (the world’s leading biotech outfit) and entered into an agreement with the chemical company to develop new kinds of crop biotechnology. This alliance presents distinct benefits to both companies but dangers to consumers, farmers and the environment. A case in point is the alliances’ so-called terminator gene. “No longer will Monsanto have to depend on access to farmers’ fields for collection of tissue samples to make sure farmers do not keep seed from one year’s crop to plant the following year”, Heffernan warns. “Use of the terminator gene will mean that all crop farmers must return each year to obtain their seed from seed firms, just as corn producers have had to do for the past half-century.”

If the press, which rarely mentions agricultural issues anymore, doesn’t take this turn of events seriously, the corporate leaders of the agri-conglomerates certainly do. And they are not the least bit bashful about what’s at stake. Dwayne Andreas is the politically wired former CEO of Archer Daniels Midland. He recently boasted to Reuters that he wanted to make ADM the world’s dominant agriculture firm because, to his way of thinking, there’s simply nothing more powerful than controlling the world’s food supply. He said agribusiness is more powerful than the oil industry.

“The food business is far and away the most important business in the world,” Andreas said. “Everything else is a luxury. Food is what you need to sustain life every day. Food is fuel. You can’t run a tractor without fuel and you can’t run a human being without it either. Food is the absolute beginning.”

In response to the new corporate combines, the farmer cooperatives themselves are merging, creating an ever-narrowing vortex of concentration. On May 12 of this year, two of the nation’s biggest farmer coops, Farmland Industries and Cenex Harvest States Cooperatives, announced their intention to marry. The new entity will be known as United Country Brands and will probably do more than $6.7 billion in revenues every year. United Country Brands will rank as the United States’ third biggest grain company, behind only Cargill and Archer Daniels Midlands.

The CEO of Cenex said the union with Farmland was dictated by the growing might of Cargill. “Moving grain is expensive”, Estenson told the Wall Street Journal. “We need to spread these costs over more bushels.”
But the merging of the farmer coops spells doom for the small farmer in the end, as stranglehold economic policies take their toll. One estimate has the number of family farms falling from 300,000 to less than 25,000 by the year 2025. There’s a real crisis brewing and no one is paying much heed. “Increasingly, our agriculturally based communities are looking like the mining communities of the old West,” Heffernan concludes.

CP

Jeffrey St. Clair is editor of CounterPunch. His new book is Killing Trayvons: an Anthology of American Violence (with JoAnn Wypijewski and Kevin Alexander Gray). He can be reached at: sitka@comcast.net. Alexander Cockburn’s Guillotined! and A Colossal Wreck are available from CounterPunch.

CounterPunch Magazine

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