EXAMINER Issue # 45 August 29, 1999
Monitoring Corporate Agribusiness From a Public Interest
CARGILL'S BRAZEN EFFORT TO OWN U.S. GRAIN TRADE
DOFJ ACTION OBSCURES SCOPE OF SCHEME
A detailed examination of the legal documents relevant to Cargill's announced purchase of the grain merchandising division of Continental Grain, compiled by the U.S. Department of Justice (DofJ) and filed with the U.S. District Court for the District of Columbia, not only reveals the nation's largest private corporation's audacious attempt to totally monopolize the U.S. grain trade, but how the public was deceived by the DofJ and the media as to the scope and consequences of the company's efforts.
Originally characterized as a DofJ "investigation" into whether the purchase violated any of the nation's anti-trust laws the inquiry in fact occasioned the DofJ to file a formal "Complaint" with the U.S. District Court charging that Cargill's purchase would "substantially lessen competition for purchases of corn, soybeans, and wheat in each of the relevant geographic markets, enabling it unilaterally to depress the prices paid to farmers. The proposed transaction will also make it more likely that the few remaining grain trading companies that purchase corn, soybeans, and wheat in these markets will engage in anticompetitive coordination to depress farm prices."
However, the DofJ totally neutralized its "Complaint" by furtively filing it on the same day (July 8, 1999) and at the same time that it furtively filed a consented "Final Judgment," agreed to by all parties. Thus, an indolent media practicing "press release journalism" rather than investigative journalism choose to ignore the seriousness of the Department's charges against the nation's largest grain trader in favor of highlighting the approval and divestiture terms of the purchase.
While the DofJ's "Final Judgment" now awaits the final approval of presiding U.S. District Court Judge Gladys Kessler, the public comment period regarding the Department's decision remains open until September 8, 1999.
The "Antitrust Procedures and Penalties Act" (APPA) of the U.S. Code provides that any person may submit to the United States written comments regarding the proposed "Final Judgment." Any person who wishes to comment should do so by September 8. The United States will evaluate and respond to the comments. All comments reportedly will be given due consideration by the Department of Justice, which remains free to withdraw its consent to the proposed "Final Judgment " at any time prior to its entry. The comments and the response of the United States will be filed with the Court and published in the Federal Register. Written comments should be submitted to:
Roger W. Fones
Chief, Transportation, Energy & Agriculture Section
United States Department of Justice
325 Seventh Street, N.W., Suite 500
Washington, DC 20530
In evaluating the responses Judge Kessler, accordingly, with respect to the adequacy of the relief secured by the decree, may not according to the DofJ 's "Competitive Impact Statement" filed on July 23, 1999 "engage in an unrestricted evaluation of what relief would best serve the public."
Legal precedent, according to the DofJ, requires that "[t]he balancing of competing social and political interests affected by a proposed antitrust consent decree must be left, in the first instance, to the discretion of the Attorney General. The court's role in protecting the public interest is one of insuring that the government has not breached its duty to the public in consenting to the decree. The court is required to determine not whether a particular decree is the one that will best serve society, but whether the settlement is `within the reaches of the public interest.' More elaborate requirements might undermine the effectiveness of antitrust enforcement by consent decree.
"The proposed `Final Judgment,' therefore, should not be reviewed under a standard of whether it is certain to eliminate every anticompetitive effect of a particular practice or whether it mandates certainty of free competition in the future. Court approval of a final judgment requires a standard more flexible and less strict than the standard required for a finding of liability. [A] proposed decree must be approved even if it falls short of the remedy the court would impose on its own, as long as it falls within the range of acceptability or is `within the reaches of public interest.'."
Whether or not Judge Kessler concludes that the consent decree
is "within the reaches of public interest" the corporate
audaciousness of Cargill in attempting to totally control
this nation's grain trade with its purchase of Continental
grain assets is breathtaking. One need only look at the facts
brought to light in the DofJ's "Complaint" to see such
"CAPTIVE DRAW AREAS" AND THE HHI
Although Cargill and Continental have from the outset sought to minimize the monopoly situation the purchase would have created within the grain trade the facts are that farmers typically sell their crops to rural grain elevator operators, many of which are owned by cooperatives and small companies.These elevators then either export the grain or resell it to flour mills and other food processors with much of it being sold to grain trading corporations such as Cargill, Continental and Archer Daniels Midland (ADM) and it is these companies that own and operate the larger grain elevators, rail links, terminals, barges and ships needed to move grain around the country and the world.
The role of the grain trade in a nation that is constantly touted as being "the world's breadbasket" cannot be over emphasized as the respected University of Missouri rural sociologist William Heffernan points out, 75% of the world's food (based on dry weight) is grain based.
In discussing the nation's grain network the DofJ in its "Complaint" notes that in each instance, the geographic area from which a country elevator, river elevator, rail terminal, or port elevator receives grain is limited by transportation costs and is known as the "draw area" for that facility. Draw areas, they conclude, expand and contract only slightly in response to normal economic fluctuations in crop supply, crop demand, and transportation costs.
For many country elevators, river elevators, railroad terminals, and port elevators, draw areas overlap. Cargill and Continental often operate facilities that have overlapping draw areas, and they therefore compete with one another for the purchase of wheat, corn, and soybeans from the same producers or other suppliers. In some areas within these overlapping draw areas, Cargill and Continental have been two of a small number of competing grain trading companies.
"Sometimes they are the best," the DofJ observes, "and occasionally the only realistic alternative purchasers of grain from producers and other suppliers. By acquiring Continental's facilities that purchase grain from these `captive draw areas,' Cargill would be in a position unilaterally, or in coordinated interaction with the few remaining competitors, to depress prices paid to producers and other suppliers because transportation costs would preclude them from selling to purchasers outside the captive draw areas in sufficient quantities to prevent the price decrease."
By way of evaluating concentration is these "captive draw areas" the Department of Justice uses a criteria based on the Herfindahl-Hirschman Index (HHI), a commonly accepted measure of market concentration. The HHI is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers.
For example, for a market consisting of four firms with shares of 30, 30, 20, and 20 percent, the HHI is 2,600 (302 + 302 + 202 + 202 = 2,600). The HHI takes into account the relative size and distribution of the firms in a market. It approaches zero when a market is occupied by a large number of firms of relatively equal size and reaches its maximum of 10,000 when a market is controlled by a single firm. The HHI increases both as the number of firms in the market decreases and as the disparity in size between those firms increases.
Markets in which the HHI is between 1000 and 1800 are considered to be moderately concentrated, and markets in which the HHI is in excess of 1800 points are considered to be highly concentrated. Transactions that increase the HHI by more than 100 points in highly concentrated markets presumptively raise significant antitrust concerns under the Department of Justice and Federal Trade Commission 1992 Horizontal Merger Guidelines.
In their "Complaint" the DofJ vividly shows that even prior to the purchase agreement Cargill and Continental were two of a very small number of grain trading companies competing to purchase grain in four key "captive draw area" including: the Pacific Northwest port range, which includes western Minnesota, eastern North Dakota, and northeastern South Dakota; the Central California port range, which includes the areas around Stockton, California, to West Sacramento, California; elevators in the Texas Gulf port range, which include portions of Texas and Louisiana; elevators along the Illinois river, stretching from Morris, Illinois, to Chicago, Illinois, and on the Mississippi river in the vicinities of Dubuque, Iowa, and New Madrid/Caruthersville, Missouri, and the captive draw areas for rail terminals in the vicinities of Salina, Kansas, and Troy, Ohio.
Each of those "captive draw areas" is already highly concentrated based on HHI figures.The potential combination of Cargill and Continental would have dramatically substantially increase concentration in already highly concentrated grain purchasing markets.
For example, in the Pacific Northwest port range markets for corn and soybean purchases are highly concentrated, with the top four port elevator operators accounting for 100% of all corn and soybean purchases in these markets as Cargill alone accounts for about 44% of all soybean purchases and 23% of all corn purchases. Continental, in a joint venture with Cenex Harvest States, accounts for about 50% of all soybean purchases and 30% of all corn purchases in the same port range.
After the proposed acquisition, Cargill would have accounted for about 94% of Pacific Northwest soybean purchases and about 53% of Pacific Northwest corn purchases. The approximate post-merger HHIs for purchases of soybeans and corn in the Pacific Northwest port range would be about 8868 and 5004, with increases in the HHIs of 4400 and 1364 points, respectively, resulting from this transaction.
Likewise, the Central California port range market for wheat is highly concentrated, with Cargill and Continental accounting for virtually all wheat purchases in this market. The approximate post-merger HHI for purchases of wheat in the Central California port range would be about 10,000, with an increase in the HHI of 7,888 points resulting from this transaction.
In the Texas Gulf port range markets for soybeans and wheat are also highly concentrated, with the top three purchasers accounting for 100% of all purchases of soybeans and the top four purchasers accounting for 79% of all purchases of wheat in these markets. Cargill accounts for about 16% of all soybean purchases and 25% of all wheat purchases in the Texas Gulf port range. Continental accounts for about 33% of all soybean purchases and 9% of all wheat purchases in the same port range.
After the proposed acquisition, Cargill would have accounted for about 49% of Texas Gulf soybean purchases and about 34% of Texas Gulf wheat purchases. The approximate post-merger HHIs for purchases of soybeans and wheat in the Texas Gulf port range would be 5105 and 2611, with increases in the HHIs of 1056 and 451 points, respectively, resulting from this transaction.
Other geographic markets in which Cargill and Continental
compete for purchases of corn, soybeans, and wheat are also highly
concentrated. These markets include river elevator markets on
the Illinois River and the Mississippi River, authorized delivery
points on the Illinois River for corn and soybean futures contracts,
and rail terminal markets in Kansas and Ohio. The proposed transaction
would have increased the HHIs in each of these markets to over
BANKING ON THE FUTURES
The issue of concentration in the grain trade, even prior to the Continental purchase by Cargill was promising to become a major issue in the year 2000, when new delivery terms take effect for the Chicago Board of Trade's (CBOT) corn and soybean futures contracts as Toledo, Ohio, will cease being a delivery point for the CBOT contracts, and delivery points will instead be clustered up and down the Illinois River where a large portion of grain facilities, on the northern portion of that river, are owned by Cargill or Continental, and likely will be combined.
In its "Complaint" the DofJ stresses that by consolidating the Cargill and Continental river elevators on the Illinois River, this transaction would concentrate approximately 80% of the authorized delivery capacity for settlement of Chicago Board of Trade corn and soybean futures contracts in two firms. "This concentration," they emphasize, "would increase the likelihood of price manipulation of futures contracts by those firms, resulting in higher risks for buyers and sellers of futures contracts."
For farmers like Floyd Schultz who currently transports his grain by truck just four miles to Lockport, Illinois where he can choose between Cargill and Continental grain terminals, sitting side by side along a canal leading to the Illinois River, the proposed merger of the two grain companies will leave the nearest competitor an Archer Daniels Midland ("Supermarkup to the World") terminal 30 miles and another 10 cents a bushel in shipping costs away. While Cargill could lower its prices and improve its margins, he notes, "we as farmers would be the ones who pay."
In a 1998 land-grant college study, titled "Cargill's Acquisition of Continental Grain's Grain Merchandising Business," and conducted by Marvin Hayenga and Robert Wisner of Iowa State's Economics Department, the authors obvious area of concern was the northern section of the Illinois River. They noted at the time that even if the Continental sale to Cargill is approved, ADM will remain the largest firm on the river, controlling 36% of storage space.
Faced with such a situation Sid Love, analyst with Joe Kropf & Sid Love Consulting Services in Overland Park, Kansas, told the Wall Street Journal that he regrets the possible departure of Continental from the grain market. "My concern is deliveries on the Illinois River," Love said. "Now, you'll basically have two big companies [Cargill and ADM], and if they're both bullish, you won't have any deliveries," since they could export the grain rather than meet contract obligations.
Reacting to the initial announcement of the purchase one Illinois farmer also speculated that if Continental was unable to successfully compete financially with other grain trading companies to the extent that it was willing to sell it's assets to a competitor why would anyone believe that an independent elevator operator could achieve success in such a concentrated market.
Indeed, as the Seattle Times business correspondent Patrick Harrington recently reported regarding Cargill's mandated divestiture of the Pier 86 elevator that it now leases from the Port of Seattle:
"With Cargill now planning to shift operations to Tacoma after all, it remains to be seen whether there is a player big enough to fill its shoes.
"Cargill, even before it acquired Continental
last month, was the nation's largest exporter of grain; Continental
was the second largest. Illinois-based Archer Daniels Midland,
another large grain company, had earlier expressed interest in
the facility, according to Port of Seattle officials, but spokesmen
for the company refused to comment."
FACTS FROM HERE AND THERE
Other interesting facts that can be found in the Department of Justice's "Complaint" against the announced Cargill-Continental purchase and it's "Competitive Impact Statement" include:
* It is not likely that Cargill's exercise of market power in any of [the] relevant geographic markets would be thwarted by significantly increased purchases of corn, soybeans, or wheat by processors or other buyers. The purchase decisions of these buyers are based on factors other than small but significant changes in crop prices. It is also unlikely that Cargill's exercise of market power will be prevented by new entry, by farmers and other suppliers transporting their products to more distant markets, or by any other countervailing competitive force.
* The original Purchase Agreement included a Covenant Not To Compete that prohibits Continental from becoming involved directly or indirectly in any business presently conducted by the Continental Commodity Marketing Group for five years. "Because this agreement," the DofJ argues, "is broader than necessary to protect the good will of the business that Cargill proposes to purchase from Continental, it has the effect of unlawfully dividing markets between the two companies."
* Specially in its's "Complaint" the DofJ cites the following alleged violations
The effect of Cargill's proposed acquisition of Continental's Commodity Marketing Group may be substantially to lessen competition in interstate trade and commerce in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18, in the following ways, among others:
a. competition among buyers of corn, soybeans, and wheat in multiple geographic markets will be reduced, causing farmers and other suppliers of grain to receive lower prices for their crops; and
b. concentration of authorized delivery capacity for settlement of Chicago Board of Trade corn and soybean futures contracts will increase, resulting in higher risks for buyers and sellers of those contracts.
The Covenant Not To Compete contained in the Purchase Agreement is an unreasonable agreement in restraint of trade, in violation of Section 1 of the Sherman Act, 15 U.S.C. §1.
* In their "Complaint" the DofJ "Request for Relief" stated:
WHEREFORE, Plaintiff prays:
1. That a temporary restraining order, preliminary injunction, and permanent injunction be issued preventing and restraining defendant Cargill from acquiring defendant Continental's Commodity Marketing Group;
2. That plaintiff be granted such other and further relief as may be determined to be just and proper; and
3. That Plaintiff recover the costs of this action.
* In its "Competitive Impact Statement" the
Justice Department, while discussing "Remedies Available
to Potential Private Litigants," warns that "Section
4 of the Clayton Act, 15 U.S.C. § 15, provides that any person
who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three
times the damages the person has suffered, as well as costs and
reasonable attorneys' fees. Entry of the proposed `Final Judgment
'will neither impair nor assist the bringing of any private antitrust
damage action. Under the provisions of Section 5(a) of the Clayton
Act, 15 U.S.C. § 16(a), the proposed `Final Judgment' has
no primafacie effect in any subsequent private lawsuit that may
be brought against defendants."
TRADE COLLUSION BY ANY OTHER NAME????
In its "Final Judgment" the DofJ directed Cargill to divest all of its property rights in the East Dubuque river elevator and Morris river elevator and to divest all of its property rights in the Seattle port elevator, both to an Acquirer acceptable to the United States in its sole discretion.
In addition the Seattle port elevator may enter into a Standard Throughput Agreement with Cargill, or any joint venture involving the Tacoma elevator to which Cargill is a party (the "Cargill Joint Venture"), provided that: 1) the Acquirer has no interest in Cargill or the "Cargill Joint Venture;" 2) the throughput agreement gives Cargill or the "Cargill Joint Venture" no more rights concerning the operations of the facility than are commonly granted to sublessees in Standard Throughput Agreements, and 3) Cargill or the "Cargill Joint Venture" obtains continuing rights to move no more than 8.5 million bushels of grain and oilseeds combined in any given month through the Seattle port elevator.
A "Standard Throughput Agreement" means an agreement that allows one grain company to move its grain through an elevator operated by another person, with unloading, storage, loading and ancillary services provided by the operator pursuant to terms, conditions and rates that are common in the grain industry.
"Moreover," the Justice department states, "the United States must be satisfied, in its sole discretion, that any Standard Throughput Agreement that may be negotiated between Cargill or the "Cargill Joint Venture" and the Acquirer of the Seattle port elevator: 1)would leave the Acquirer with sufficient capacity for it to be a viable and effective competitor for the purchase of corn and soybeans in the Pacific Northwest draw area; and 2) would not adversely affect the Acquirer's ability or incentives to compete vigorously for the origination of corn and soybeans in the Pacific Northwest draw area, by raising the Acquirer's costs, lowering its efficiency, or otherwise interfering in the ability or incentive of the Acquirer to compete effectively."
The DofJ notes, however, that Cargill need not divest the Seattle port elevator if it does not buy, lease or otherwise acquire an interest in Continental's port elevator at or near Tacoma, Washington.
If another firm, however, acquires the Tacoma port elevator pursuant to a right of first refusal (and Cargill retains the Seattle port elevator), Cargill shall not subsequently purchase or lease the Tacoma port elevator. If another firm acquires the Tacoma port elevator pursuant to a right of first refusal, Cargill shall not subsequently acquire any other interest in that facility (including a joint venture interest) without the written consent of the United States.
The "Final Judgment" also mandates that Continental is ordered and directed to divest all of its property rights in the Lockport river elevator, Caruthersville river elevator, Salina rail elevator, Troy rail elevator, Beaumont port elevator, Stockton port elevator and Chicago port elevator to an Acquirer acceptable to the United States in its sole discretion.
Assets shall be made to an Acquirer for whom it is demonstrated
to the sole satisfaction of the United States that: 1) the
purchase is for the purpose of using the Asset to compete effectively
in the grain business; 2) the Acquirer has the managerial, operational,
and financial capability to use the Asset to compete effectively
in the grain business; and 3) none of the terms of any agreement
between the Acquirer and defendant(s) give defendant(s) the ability
unreasonably to raise the Acquirer's costs, to
lower the Acquirer's efficiency, or otherwise to interfere in the ability or incentive of the Acquirer to compete effectively.
Among the other terms of the "Final Judgment" Cargill shall not purchase, lease or acquire any interest in the Lockport river elevator, Caruthersville river elevator, Salina rail elevator, Troy rail elevator, Beaumont port elevator, Stockton port elevator or Chicago port elevator, or any interest in the river elevator at or near Birds Point, Missouri (in which Continental formerly owned a minority interest, and had a right of first refusal to purchase grain).
Cargill was also directed to enter into a throughput agreement that makes one-third (1/3) of the daily loading capacity at its river elevator located at or near Havana, Illinois, or one barge-load per day, whichever is greater, to an independent grain company acceptable to the United States in its sole discretion (the "Havana Throughput Agreement"). Daily loading capacity shall be the capacity registered with the CBOT.
The independent grain company that obtains the throughput right from Cargill (the "third party") must be qualified under CBOT rules and regulations to make delivery of at least one barge-load of corn and soybeans per day for the settlement of CBOT corn and soybean futures contracts, and must agree to register that capacity at the Havana facility with the CBOT.
The "Havana Throughput Agreement" shall allow the
third party to use its share of the loading capacity at the Havana
facility to transload grain from trucks onto barges for commercial
purposes unrelated to futures contract deliveries, as well as
to make deliveries under CBOT futures contracts. Cargill,
however, is not obligated by the "Final Judgment" to
provide storage services to the third party in excess of the storage
services required to accommodate the transloading of grain shipments
from trucks to barges. Load to barge loading, may not exceed the
HIGH COSTS DISCOURAGE COMPETITION
The Department of Justice's willingness to use "throughput agreements" as part of its Cargill\Continental divestiture order has received sharp criticism from Dan McGuire, a board member of the American Corn Growers Association and the Nebraska Farmers Union.
McGuire, a consultant on international trade farm policy, points out that the concept of "throughput arrangements" using established export houses is an important one relative to the "additional" concentration of market power "that certainly will take place" with the Cargill\Continental purchase.
By way of example, he recalls recent conversations he had with a European grain trader and a U.S. grain company that he works with and arranges cleaned wheat sales to Europe on a regular basis who seeking anonymity for fear that Cargill's marketing power could impact their businesses negatively. They made the following points:
* Neither Cargill nor the handful of exporters with export houses in the U.S. gulf region want any independent entities competing with them for export business. Consequently they are not going to make it easy or economically competitive for such "independents" to make an export sale using their facilities thus such market concentration inevitably limits the exporting players field.
* Because there are so few export facilities and those few are owned by a handful of companies, it is very difficult for even the established interior grain companies such as co-ops to actually make an export sale. Again, because of the exporting capacity being in the hands of so few, there is typically a lineup of ships waiting to load Cargill's or the others export houses.
* With a lineup of ships keeping their export facilities busy, Cargill is not likely to offer terms for grain, oilseed or processed product throughput to someone they view as a competitor. Asa result, the throughput costs are prohibitive. Consequently, that reduces competition and makes U.S. products less competitive in world markets. The other multinationals who have export houses simply follow suit with Cargill, so that would-be independent exporters who lack their own facilities are simply kept out of the market.
* As a practical matter, a foreign buyer who wants to buy U.S. grain directly from farmers or from organizations that represent farmers find that the throughput costs added on to the costs from the interior making the FOB export price noncompetitive with what Cargill could offer it for. That reality is a direct result of the market power now in the hands of a few multinational exporting firms.
McGuire also recounts a recent conversation with a large Nebraska grain producer who has been directly impacted by Cargill's recent acquisitions of numerous grain elevators in south central Nebraska.
"There is no competition" the producer who choose not to be named told McGuire. He added that he had no choice but to sell his 1998 corn production to Cargill. Previously, he had marketed his grain through the National Farmers Organization (NFO), however, Cargill now owns over 14 elevators in his region and with the Continental purchased has added one more meaning that between 70% to 80% of the market in his market area is controlled by Cargill.
Often farmer-owned co-ops are forced to sell their grain to Cargill much of the time because of the Company's omnipresent marketing power.
Still another producer, fearful of being named) recounted to
McGuire how he had seen a document that contained Cargill's
plan already in place to purchase a large number of additional
grain elevators in the marketing region.
CALL TO THE STATES
ABANDON DofJ'S PASSIVE & GENERIC MERGER ANALYSIS
While encouraging farmers and those who are concerned about the growing corporate concentration in agriculture to communicate their concerns to the Department of Justice before the September 8 deadline established for comment on the Cargill\Continental purchase, Jon Louck, the author of the forthcoming book American Agriculture and the Problem of Monopoly (University of Nebraska Press) believes that states need to to take up the anti-trust fight.
"Midwestern attorneys general can underscore the critical importance of competitive agricultural markets, a point often lost on Eastern enforcement officials," he adds."Instead of employing the passive and generic merger analysis used by the DOJ, states can argue the importance of heightened judicial scrutiny in agricultural markets, which are already concentrated and susceptible to market manipulation by large agribusinesses."
He cites the fact that in a time not so long ago, concerns about potential market manipulation would have stopped a merger the size of Cargill-Continental. After passage of the Celler-Kefauver Antimerger Act of 1950, the courts and federal enforcement officials tightly controlled mergers, fearing the anticompetitive problems inherent in concentrated markets.
But in 1974 the Supreme Court changed its merger analysis and began to consider factors beyond market concentration.
"In so doing," Louck notes, "the court thoroughly confused merger analysis and seriously undermined enforcement capabilities. Federal enforcement lagged and has not recovered since, as evidenced by DOJ's weak effort in the Cargill-Continental case. Inadequate federal efforts force states to fill the vacuum, despite their modest resources.
Recently the fledgling farm-oriented Organization for Competitive Markets in their Kansas City, Missouri annual meeting called on state attorneys general to continue the challenge of the Cargill-Continental merger.
"Given the grave consequences of the merger for farmers, state attorneys general should heed the call to arms," Louck warns.
The states', he continues, should also note the range of statutes
designed to address the problems in agricultural markets, which
indicate legislative concern with concentration and anticompetitive
behavior. There is still time to act on the Cargill-Continental
merger. "The chances of success are solid, especially
given the tremendous leadership shown by South Dakota's attorney
general Mark Barnett in the last year. Such a challenge
is no small task, however, making cooperation with other attorneys
general around the Midwest critical," he adds.
FARMER INCOME PLUNGES SHARPLY
AS CONSUMER SUPPORT BUILDS RAPIDLY
Even as the American consumer was expressing a deep concern are about the current farm crisis, and about the changing structure of the food and agricultural industries, the U.S.Commerce Department was announcing that Farm Proprietors' income plunged in July to the lowest levels since 1983.
At an annual rate, family farm income in July was only $15.7 billion. Proprietors' farm income had been falling sharply this year from the $38.9 billion in 1996, $35.5 billion in 1997, and $28.7 billion in 1998. Through the first seven months of 1999, proprietors' farm income is averaging only $22.0 billion. This INCLUDES the large farm program money that artificially inflated June income to a $34.4 billion level.
More broadly, real disposable incomes for all Americans fell in July and dissavings set a new record of -1.4% of income as the population has been spending more than they have earned since 1998.
This news came on the heels of an independent survey
of consumers about their views of the farm crisis. The poll was
conducted by Strategic Research Group, Eden Prairie, Minnesota.
from August 3-10, 1999 and was released by the Communicating for
Agriculture (CA), a national, non-profit, non-partisan rural
organization made up of farmers, ranchers and rural small business
members in 50 states. Respondents were randomly selected from
lists of American households.
PRNewswire reports that family farmers are best available to provide them with lower food prices, better food safety, and demonstrate more concern for the environment and protecting natural resources
"The perception that consumers only think their food comes from the grocery store, and don't care about where, how and who produces their food, is dead wrong," said Wayne Nelson, national president of Communicating for Agriculture. "Consumers are very concerned about food cost, food safety, and food production. They are concerned about concentration in the food and farm industries, and a strong majority clears prefers a family farm-based system of agriculture."
* 70% of respondents said they personally have found that grocery prices have gone up in the last year, despite farm prices that have dropped to 30-year lows for most crops and commodities. While groceries have gone up between 3 to 5 percent on a national average, 80% of respondents said farmers are the least responsible in the food chain for the increases.
* When asked about growing concentration in agricultural production, 59% said they believe family farmers are more likely to keep food costs down, compared to large agricultural corporations (12.5%) or multi-national corporations (17.5%). Only seven percent believe that the growing concentration of farm production, food processing and distribution under ownership of fewer companies will lead to lower grocery costs. Nearly 72% believe it will lead to greater profits for those companies.
* Nearly 83 percent of respondents believe family farmers would do a better job of protecting the land and environment; and 78% believe family farmers are more likely to be concerned about food safety compared to large agricultural or multi-national corporations.
* When asked if they were a member of Congress and had to vote to provide $6 billion in a farm relief package, 84% said "spend the money". Only 11% said they were against spending federal funds to help farmers.
"The question for government leaders is: if consumers support family-based agriculture and farmers support it, why are federal regulatory, tax and farm program policies yielding the opposite result -- leading to fewer farmers and more concentration of food processing and distribution in the hands of fewer, large, dominant food and agricultural conglomerates?" Nelson asked.
"The consumers of farm products clearly align themselves
with the producers of those products. This flies in the face of
the myth that urban and suburban Americans are against agricultural
support payments," the farm leader said.
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