|HARVESTING AGRIBUSINESS FACTS
FACTS underscoring the consequences of corporate America's successful transformation of an agri-culture into an agri-business:
* From 1987 to 1992 the formation of new U.S. farms dropped to fewer that 67,000 a year while farms closing averaged 99,000, a net loss of 32,500 farms a year. While the nation's farm operators now number 1,911,850. down only 13,450 from 1992 Census Bureau figures, slightly more than half that number (961,560) list farming as their chief occupation. In 1978 some 1,269,305 said farming was their chief occupation.
* Likewise, 73.6% of the nation's farms share 6.8% of the market value of agricultural products sold while 7.2% of the farms receive 72.1% of the market value of agriculture products sold, leaving those 18.2% farms with yearly sales between $50,000 and $249,999 a meager 21.1% of the market value.
* Recent U.S. Commerce Department final 1998 income figures for farm proprietors, showed that even with a strong improvement in the last three months of 1998 as emergency aid checks arrived, the total income for farm proprietors fell in 1998 to $27.1 billion from $35.5 billion in 1997. That represents a decrease of 23.6%, or to put it in more stark terms, farm income was 31% higher in 1997 and than in 1998.
* In 1996 alone, according to the USDA, 985,718 farms registered a positive net cash return while 926,108 showed a net cash loss. Even more telling is the fact that while the average farm operator household income ($52,300) in 1996 was on a near par with the U.S. household income, farm income was only a very small part of that total. Since 1987 farm income has ranged from only ten percent to 17% of the total farm operator household income.
* Meanwhile, the nation's food marketing system, with a value of $658 billion, accounts for 9.3% of the U.S. Gross National Product (down from 12% in 1972). Yet, animal and crop products value amounts to only $123 billion of that total, while the value added sector accounts for $535 billion. Likewise, the average farm value of the food we eat has gone from 49% in 1951 to 25% in 1996.
* In January, 1999 testimony before the U.S. Senate Agriculture Committee hearings on concentration in agribusiness, C. Robert Taylor, Alfa Eminent Scholar and Professor of Agriculture and Public Policy at Auburn University testified about the implications for the agriculture economy of general trends in vertical integration and market concentration in agribusiness.
Among his findings were the fact that since 1984 the real price of a USDA market basket of food has increased but 2.8% while the farm value of that food has fallen by 35.7% and that a "widening gap" between retail price and farm value also exists for the components of that market basket, specifically meat products, poultry, eggs, dairy products, cereal and bakery products, fresh fruit and vegetables, and processed fruit and vegetables.
By way of illustration, between 1980 and 1996 in choice beef that gap widened by 42.4%, in pork it widened to 74.6%. In a one-pound loaf of wheat bread the gap from 1970 to 1996 was 238% and the gap in one pound of oranges from 1982-1996 was 59.8% to name a few commonly purchased items.
* It is when one looks at return on investment (equity) that the true picture begins to emerge as to who profits and who pays when it comes to the food we eat.
During the 1990's, Professor Taylor points out, the rate of return on investment for retail food chains was 18%, for food manufacturers the rate of return was 17.2%, for agriculture banks it was 10.8% and for farming the rate of return from current income averaged 2.38%!!! Looking carefully, however, at professor Taylor's testimony it is noted, buried in a footnote, that "the average return to farming may actually include a return to integrators and non-family corporations, thus overstating returns to farmers, per se."
He goes on to point out that not only would retail food prices be relatively lower if markets were more competitive, but with the high profitability of concentrated agribusiness attributable to market power or to the realizing of economies of size it would permit such corporations to invest in product development "which might eventually benefit food consumers."
* Outside of developing agricultural biotechnology and genetically modified organisms (GMOs) in food we see very little of the type of "product development" that professor Taylor speaks about. Rather we see large amounts of money being spent on packaging, food advertising ($11 billion spent in 1996 compared with $8.4. billion in 1991) and corporate agribusinesses merging and acquiring to the extent that food manufacturing remains one of the most leveraged industries in the U.S. economy with debt alone in 1996 increasing by $10 billion to a total of $318 billion. At the same time, since 1982 the food manufacturing sector has out performed the owner investment equity index for all other U.S. industries during most of those 17 years.
* Figures developed by Stewart Smith, a senior economist for the Joint Economic Committee of Congress, vividly illustrates how serious our disequilibrium among the major divisions within agribusiness has become. In an October, 1992 study, covering an 80-year period, viewing the economic activity within agribusiness sector by sector, Smith found that farming suffered a shocking descent from 41% in 1910 to nine percent in 1990, while the input sector in agriculture rose from 15% to 24% and the marketing sector went from 44% to 67%. At the same time, the value of the marketing sector in real dollars increased from $35 to $216 billion, the input sector from $13 billion to $58 billion, while farming skrank from $24 to $23 billion.
* In a 1916 study requested by President Woodrow Wilson, the Federal Trade Commission (FTC) found that there was no longer competition in the meat packing industry. In 1921 the Federal Packers & Stockyards Act was passed in reaction against a slaughter market where four firms - - - Swift, Armour, Cudahy and Wilson --- together controled nearly 40% of the market. The 1996 USDA's long-awaited study of who controls the present-day beef packing industry showed that one company --- IBP Inc. --- controlled 38%, while Cargill (Excel) had a 22% share, ConAgra, 21% and National Beef, six percent, meaning that three corporations now control 81% of the U.S. meat packing industry.
* Another example of corporate concentration can be seen in the annual $7 billion U.S. cereal market, in which every one percentage point in market shares is equal to $70 million in annual revenues. Four major companies control 89% of the total market ---- Kellogg's, 32%; Gnereal Mills, 31.9%; Philip Morris (Kraft\General Foods\Post), 16.4%, and Quaker Oats, 8.8%. The average annual return on equity (profitability) from 1993 through 1997 for the four largest cereal manufacturers was: Quaker Oats, 28.9%; General Mills, 25.2%; Kellogg's, 24%, and Philip Morris, 22%.
THE FACT CORRAL
From the United Nation's Human Development Report:
* One fifth of the world's people living in countries with the highest incomes produce 86% of the world gross domestic product, 82% of the world's exports and 68% of foreign investment and control 74% of the world's telephone lines. The bottom fifth, in the poorest countries, produce about one percent in each catagory.
* The 200 richest people in the world more than doubled their net worth to $1 trillion between 1994 and 1998.
* Rich industrialized countries hold 97% of all patents worldwide.
* The income gap between the richest fifth of the world's people and the poorest fifth increased from 30 to one in 1960 to 74 to one in 1997.
* Only 38 countries in the world achieved a sustained annual growth rate of at least three percent per capital between 1980-96. During that period per capita growth declined in 59 countries, mainly in sub-Saharan Africa and the former Communist nations in Eastern Europe and the former Soviet Union.
* Organized crime syndicates are estimated to gross $1.5 trillion a year. The value of the illegal drug trade was estimated at $400 billion in 1995, about eight percent of world trade, more than the shares of iron and steel and motor vehicles, and roughly equivalent to textiles and gas and oil.
* The percentage share of the market by the top ten corporations in each sector in 1998 was telecommunications, 86%; chemical poisons, 85%; computers, almost 70%; veterinary medicine, 60%; pharmaceuiticals, 35%, and commercial seed, 32%.
If we could shrink the earth's population to a village of preceisely 100 people, with all the existing human ratios remaining the same, there would be:
14 from the Western Hemisphere (North and South America)
52 would be female
48 would be male
70 would be non-white
70 would be non-Christian
30 would be Christian
89 would be hetrosexual
6 people (all U.S. Citizens) would possess 59% of the entire village's wealth
80 would live in sub-standard housing
70 would be unable to read
50 would suffer from malnutrition
1 would be near death
1 would be near birth
1 would have a college education
. . . and only 1 would own a computer.
* The value of U.S. households' stock portfolios rose 20% to $10.77 trillion in 1998 and now represents 25% of total household assets, higher than at any time in the post-World war II era, according to new Federal Reserve Board data. In 1984, only eight percent of America's wealth was in stocks, but a soaring stock market of the 1990s and the expansion of retirement plans that allows workers to direct investments into the market has change the trend again. Just ten years ago, only 10.4% of Americans' wealth was in the market.
* The Fed's latest quarterly "flow-of-funds" report says that the value of Americans' real estate assets --- $9.22 trillion at the end of 1998 --- also has risen, but not nearly as much as the value of the stock portfolios. In the last decade, the value of U.S. households' real estate has increased 55%; the value of their stocks has increased 381%. The figures aren't adjusted for inflation. Consumer prices rose by 38% over the decade.
* Consumer borrowing has increased, but not nearly as rapidly as asset values. The fed data shows that the collective net worth of U.S. households continued to climb in 1998, reaching $36.79 trillion at year's end, up 10.7% over 1997. Of that, $5.11 trillion is home equity. On average, Americans have mortgages that represent about 45% of the value of their homes, up from 35% a decade ago.
* A 1995 Fed survey, now being updated, found that 68% of the stock-market wealth owned by households was held by the richest five percent of the population. Extrapolations by economist Edward Wolff, done by the Economic Policy Institute, a Washington, D.C. think tank, suggest that more than 40% of the gains created by the bull market of the 1990s have been claimed by the wealthiest one percent of the population and that more than 85% of the gains have gone to the top ten percent.
* As of 1995, only 40.3% of the households owned any stock, according to the Fed. The percentage probably has risen since then. The Fed's flow-off-funds data lump household wealth with holdings of non-profit organizations, but the assets of non-profits represent less than three percent of the combined total assets of $43.04 trillion. In measuring household ownership of equities, the Fed includes individual stock mutual funds and equities held in employee-directed retirement plans. It doesn't include stock held for workers' benefit in defined-benefit pension plans.
* Of the $10.77 trillion the Americans hold in equities, the Fed says $6.28 trillion is in individual stocks and $1.73 trillion is in mutual funds; the rest is in bank trust funds and estates, life insurance companies and retirement plans.
* By the end of fiscal 1998, the federal government owed $5.5 trillion, $1.8 trillion of which is owed to retirement trust funds established for federal civilian employees and the military. Social security and other federal trust funds, according to the General Accounting Office (GAO). The other $3.7 trillion was borrowed from the public by issuing government secutities ---- Treasury bills, bonds, and other debt instruments. Of the $3.7 trillion, nine percent is owed to private individuals, 12% is owed to state and local governments, 32% is owed to foreign lenders, and 35% to corporations and others. Another 12% is owed to the Federal Reserve.