Statement to the Subcommittee on Monopoly, Senate Small Business Committee | 1971
By Roger Blobaum, 301 West Seneca Street, Creston, Iowa
November 23, 1971
I appreciate this opportunity to appear at these hearings, to discuss the movement of conglomerates, integrators and other corporations into agriculture, and to suggest ways to document this corporate activity and bring it to the attention of those who should do something about it.
We owe a debt to the Chairman for being the first member of Congress in many years to raise this important issue. And to this Committee for conducting hearings three years ago that were the first official inquiry into this problem since 1946.
I want to make it clear at the outset that I oppose the growing influence of corporations in agriculture because (l) farms and ranches are the last bastions of individual enterprise in this country; (2) 1-man and 2-man farms are more efficient than corporate units; (3) land should be kept in the hands of as many people as possible to diffuse economic power; (4) people on the land are better community builders than impersonal and absentee company owners; (5) individual land owners are better stewards of our water, soil and wildlife resources; (6) corporate units pushing people off the land undermine the economies of rural towns and cities and increase congestion in large cities; (7) corporations erode our competitive system in attempting to own or control the food industry; (8) corporations add to welfare and educational problems by hiring workers on a seasonal basis, and (9) corporations farming at a loss until independent competitors are driven out will be able to administer food prices.
Admittedly there are subjective overtones to these contentions. However I am prepared to provide supporting evidence if any serious doubts are raised about them. In my judgment, a corporate takeover of the food industry would be a national disaster.
It is difficult to get this issue discussed in Congress, mainly because so many consider it just another farm issue. The attempts of big companies to take over the nation’s food industry—which involves annual retail sales of about $115 billion—and control it from the farm to the supermarket is not a farm issue. It is a critical national issue that deserves something better than neglect and indecision.
It involves the fundamental issue of what kind of agriculture and what kind of rural America we will have. It also involves, indirectly, the level of competition we will have in the food industry, the future of small business, the success of rural development, and solutions to the staggering problems of our cities.
Tremendous economic power is involved in this takeover attempt, which is being led by three main categories of big business:
–Large feed companies and other suppliers of farm inputs that use vertical integration as a way to tie down a share of the market and eventually to maximize power and profits through outright control of certain commodity areas.
–Packers, processors, and other buyers of farm commodities that either enter into direct production or use contractual arrangements to weaken the market position of individual producers and keep procurement costs low.
–Large conglomerates, such as Textron, Tenneco and Ling-Temco-Vought, attempting to develop total farm-to-market food systems through acquisition of production, processing and retailing facilities.
The large agribusiness companies appear to be the major threat thus far, probably because they are well financed and represented in farm communities through thousands of well-established retail outlets. Their success in integrating the broiler industry is a classic example of how they operate.
The “total system” approach of the conglomerates could develop rapidly if it shows the profit potential that attracts capital from big banks and insurance companies. Its main limitation is the tremendous investment requirements, a problem avoided by the integrators who gain control through contractual agreements.
Assisting the corporations is such government favoritism as subsidized water, realization of substantial capital gains, favorable rates of depreciation, and availability of tax-write off losses against nonfarm income1] These privileges, documented ‘by this Committee in the 1968 hearings, for the most part are unavailable to independent farmers.
The apprehensive target of all this activity is the farmer, still independent but relatively powerless, who is the pride of America in terms of productivity and efficiency. The farmer averages a 5.3% increase in productivity each year, compared to half that for industry, yet the decision makers in this country appear willing to stand by and see him and his way of life destroyed.
One limitation on those attempting to evaluate this trend is the lack of data, both from official and business sources, on the extent, characteristics and consequences of corporate intrusions into agriculture.
Corporate secrecy, the subject of these hearings, is partly to blame. Companies engaged in farm production, through integration or otherwise, are required to report virtually nothing about their activities. And they volunteer as little information as possible to either the public or their stockholders.
The value of corporate secrecy was dramatically illustrated in the 1950s when feed companies persuaded chicken growers in the South to sign contracts that eventually made them as powerless as sharecroppers. They agreed to expand production and borrow large sums of money, then discovered there were more growers than contracts and had to either sign a take-it-or-leave-it agreement or get out of the broiler business.
The companies knew what they were doing in tying up the growers, encouraging excess capacity, acquiring the processing plants, and destroying the open market. But they didn’t disclose their plans ahead of time to the growers or the public. The result was a shocking example of human exploitation and corporate banditry that may well be repeated elsewhere in agriculture.
Another problem in obtaining data is lack of cooperation of the land grant institutions, where hundreds of millions of dollars are invested in research capability. These universities, developed more than 100 years ago to serve farm people, downplay reports of integrator and other corporate activity and carry out little or no research on the economic or social consequences of their activities.
One administrator at a leading land grant university, in discussing barriers to bigness and big business involvement, complained bitterly about political leaders who resist vertical integration in agriculture. The philosophy of the small, owner-operated family farm is deeply ingrained in our sociological and political mores, he complained, and political pressure will continue to be on the side of maintaining small family farms. It is not surprising then that many of these institutions work closely with big companies moving into farm production and set up expensive research projects to assist them in designing egg factories, automated hog feeding complexes, and huge feedlots. Each new corporate facility erodes production opportunity for individual producers.
Some universities openly promote the efforts of big companies to take over farm production. Purdue University sponsored a hog integration symposium last April in cooperation with the Department of Agriculture and several agribusiness companies.
This event, which attracted land grant college economists and agribusiness representatives from across the country, provided a prestigious forum for integrators planning the takeover of this country’s hog industry. It is a typical example of the close working relationship between the land grant institutions, the Department of Agriculture, and agribusiness.
Finally, there is the dismal record of the Department of Agriculture, which receives about $45 a year per farmer from Congress for researching agricultural problems. Also this huge agency has provided in the way of data on corporation farming is a report initiated in 1967, completed more than three years later, and labeled by many as a whitewash.
This widely circulated document, prepared by the Economic Research Service, reported that farming corporations accounted for 1% of all commercial farms and operated 7% of the farm land. It conceded that corporations had $3.3 billion in total sales of farm products but concluded this wasn’t too serious because most of the corporations were family owned.
It is obvious from the way the research was done that the Department gave this project its lowest priority. Data was gathered through a questionnaire mailed to all county ASCS offices. It asked for information on corporations that both owned and operated the farmland involved. This is a good start but hardly the basis for a thorough study.
The issue is not how much farmland corporations own and operate or how many farm corporations there are. It is how much economic control they have, either through direct production or contractual arrangements, over the production and marketing of farm commodities. This breakdown failed to document, among other things, the substantial share of production controlled by integrators. Some reports place the share of livestock, eggs and poultry under integrator control at up to 25% of the total.
It also failed to document the concentration of production in such areas as eggs and cattle feeding, where a complete corporate takeover is possible.
A growing proportion of the cattle are fed in the Southwest in lots with 50,000 head and up. A handful of well-financed corporate giants, including some with packer or supermarket chain connections, could come in and buy sufficient feedlot capacity to control beef production in this country.
One area that the Department of Agriculture has done a good job on is in its studies of the economies of farm size. These studies, summarized in Agricultural Economic Report No. 107, show that all the economies of size may be attained by moderate-sized farms. It reviewed a number of studies of crop farming situations in various states and said that in most of these situations all the economies of size could be achieved by modern and fully mechanized 1-man and 2-man farms.
Included were studies showing maximum efficiency attained by a 1-man cling peach orchard in California, a 1-man irrigated cotton farm in Texas, and a 1-man wheat summer fallow farm in Oregon. The 1-man and 2-man dairy farms with up to 150 cows were found to be most efficient.
The Department does seem to have money for a lot of trivia. It collects and publishes detailed statistics regularly on how many goats are clipped each year, how many fish end up as bait and cat food, how much farmers’ wives have to pay for cotton nightgowns, and how many antelope, wild boars and other big game animals are killed by hunters each year in our rational forests.
Yet so little information is provided to help evaluate the extent or the consequences of the drive by big companies to take over this country’s food production. The Department could take the equivalent of $1 per farmer of its research money and do a tremendous job of documenting this problem.
I think it’s time Congress either gets the Department to do this or turns the money over to some agency that will.
I would hope this Committee would call in representatives of the land grant universities and the Department of Agriculture to ask why such a low priority is placed on studies dealing with the extent of corporate intrusions into agriculture and its economic and social consequences.
We need a study, for example, of the social costs of integrating the broiler industry. What effect has low grower income and idle broiler houses had on the local economy?
What became of former growers among the 800,000 people migrating to big cities every year? What was the real cost to taxpayers of welfare and retraining and housing and crime? And what price would a sociologist place on all the human misery involved? There’s more involved here than rate of gain and it should be documented. We need studies of concentration in cattle feeding and other highly mechanized operations. This is necessary to evaluate the possibility, and the consequences, of acquisition of a large portion of this country’s feedlot capacity by large companies.
We need studies of packers that decide to feed their own livestock and processors that start to grow their own potatoes, sugar beets, fruits and vegetables. What happens to the independent producers who formerly supplied these buyers?
In summary, Mr. Chairman, I would say we are about where we were when the 1968 hearings were held as far as development of useful data is concerned. Corporate secrecy is a serious problem and so is the lack of response from those responsible for developing the facts through agricultural research.
The movement of corporations into farming and the movement of families off the land continue. In my judgment, Congress had better get some research underway, begin some meaningful discussion of these trends, and decide where we are going in agriculture. The choices are narrowing and it will soon be too late.
Statement by Roger Blobaum to the Subcommittee on Monopoly Senate Small Business Committee
November 23, 1971
Summary: Roger Blobaum, organic consultant, discusses the movement of conglomerates, integrators and other corporations into agriculture, and suggests ways to document this corporate activity and bring it to the attention of those who should do something about it.