Monitoring Corporate Agribusiness From a Public Interest Perspective
A.V. Krebs
Editor\Publisher
EDITORS NOTE
The few sustaining the many!
That has been pretty much the story in the some 21 months since THE AGRIBUSINESS EXAMINER first began appearing on computer screens. During the course of its existence, a small, but financially loyal group of folks have provided me with most welcome support, but their number is small compared to the near 1000 folks who today receive THE AGRIBUSINESS EXAMINER.
In conceiving THE AGRIBUSINESS EXAMINER, this editor wanted to make it as inexpensive to readers as he possibly could; hence, no subscription price, just personally affordable contributions. Thus, donations will, as always, be gladly accepted. Checks made out to A.V. Krebs, P.O. Box 2201, Everett, Washington 98203-0201 (NOT to the "Agribusiness Examiner") will continue to be received with much gratitude. To those loyal folks who have sent me financial support in the past my sincere thanks for your continued support.
CONGRESS PASSES, CLINTON PREPARES TO SIGN
ANNUAL FREEDOM TO FARM BILL BAILOUT MONEY
Congress has passed and Bill Clinton is expected to sign a $15 billion package of farm assistance --- including $5.5 billion in direct payments that would reach farmers by September 30, in the midst of the congressional campaigns --- to compensate growers for a third straight year of low commodity prices and to allow growers to buy cheaper crop insurance.
Also, in another apparent political coup by the American Farm Bureau Federation, some $8.2 billion would go toward reducing premiums on federally subsidized crop insurance over the next five years while making a series of changes in the insurance program designed to get more farmers to buy the coverage from an insurance industry in which the Farm Bureau has numerous vested financial interests.
Congress has now given farmers $15 billion in extra income assistance over the past two years, stemming from the consequences of the disastrous 1996 Freedom to Farm legislation, and the Agriculture Department has estimated that net farm income this year would drop $7.6 billion, or 16%, without another round of aid. The $5.5 billion in direct farm payments would go to grain and cotton producers who have annual "market-transition" contracts with the government, in addition to $5.1 billion in payments that those producers already were scheduled to get this year.
USDA Secretary Dan Glickman while praising the insurance overhaul, criticized Congress for refusing to alter the 1996 farm law, which was designed to wean farmers from government support. "Stopgap, quick-fix emergency assistance is not the most effective or efficient way to help struggling farmers," Glickman said.
Glickman. like many others in the nation's agricultural community, also objects to the way that the direct farm payments would be distributed, contending the money is not targeted to producers who need it the most, but in typical Glickman fashion he has stopped short of recommending that Clinton veto the current legislation.
Yet, as Abner Deatherage, a retired U.S. foreign service officer who lives in Prairie Village, Kansas and James D. Baldwin, a former rancher from Independence, Missouri and chairman of Local 249 Retiree Chapter of the United Auto Workers, rightfully pointed out in a recent Kansas City Star op-ed essay, "these bailouts are unsatisfactory -- many farmers are underpaid while some are overpaid.
"Also, bailouts are uncertain and cost taxpayers substantially more than would a dependable, fair permanent price support program. A basically reformed foreign policy --- especially its unconstitutional trade element --- is keenly needed. United States agricultural and other exports must recover and increase under a rational, mutually beneficial trade policy," they add.
Pointing out in addition that the U.S. "recently received an added farm/rural economic problem in the form of the Organization of Petroleum Exporting Countries' blackmail oil pricing. Family farmers are keenly affected by this because, of course, it takes gas to run farm machinery and some fertilizer and farm chemicals are crude oil/natural gas derivatives.
"If this blackmail, the Freedom-to-Farm law and the lack of a viable agricultural trade policy are allowed to continue much longer, they will complete the ruin of our family farming. Furthermore, continued high gasoline/diesel prices will raise transportation system costs, substantially increasing retail prices of most or all consumer goods and services.
"Some sources contend inflation-adjusted gasoline prices are the lowest ever and pose no harm to the United States. Wrong! This adjustment uses the government's Consumer Price Index, which incorrectly measures inflation-adjusted income for several groups of our society, and most family farmers have the lowest absolute and inflation-adjusted crop and livestock prices in at least 20 to 30 years.
"Continuation of these farm, energy and foreign policy problems, " Deatherage and Baldwin conclude "will substantially increase interest rates, inflation, unemployment and food supply problems and adversely affect the stock market. Such developments would cause an economic meltdown, making the Great Depression pale in comparison, and greatly weaken our military security."
BRANNAN PLAN SOUGHT TO MAKE
1930'S FARM ACT MORE WORKABLE,
INSURE FAIRNESS AND INCOME STABILITY
"A dependable, fair permanent price support program" has been the goal of family farm agriculture for the past 60 years stemming from the Farm Act instituted during President Franklin D. Roosevelt's New Deal program in the 1930's. Since that time several pieces of Federal legislation have been introduced to not only make such a program more workable, but to insure its fairness and stability.
By far one of the most controversial efforts to achieve such goals was a farm program put forth by President Harry S. Truman's Secretary of Agriculture Charles F. Brannan.
Designed primarily to provide a high level price support system that would offer greater protection to small farmers and less to corporate agribusiness, the Brannan Plan was bitterly debated both in Congress and among farmers in the late 1940's and early 1950's. The keystone of the Secretary's plan was the Income Support Standard, which sought to shift the focus of agricultural policy from farm prices to farm income.
Brannan's Plan established a minimum income goal for agriculture, beginning in 1950, which would have been equal in any one year to the farmer's average purchasing power in the first ten of the preceding 12 years. By utilizing a moving base period, the years immediately ahead would have included the prosperous war and post-war years, insuring high price support levels throughout the 1950's. (See Issue #69)
Brannan argued that "price supports are the farmer's equivalent of the laboring man's minimum wage, social security, and collective bargaining arrangements" and by using such a formula in raising price supports for meat and dairy products in relation to other commodities, farmers would be encouraged to shift production from so-called "surplus crops" --- like wheat and cotton --- to feed grains, grasses and meat animals.
Typical of the flood of criticism regarding this element of Brannan's Plan was agricultural economist Theodore Schultz's remarks before a University of Missouri agricultural extension conference in December, 1949. "It will be necessary to correct the unwarranted optimism of policy makers regarding the value of farm products . . .farm products simply are not worth 90% of parity or as much as the Brannan Plan would specify."
Another important section of the Brannan Plan was the proposed expansion and revision of the list of "basic" commodities for which price supports would be mandatory. The ten commodities "of prime importance both from the standpoint of their contribution to farm income and their importance to the American consumer" included corn, cotton, wheat, tobacco, whole milk, eggs, farm chickens, hogs, beef cattle and lambs. Support for nonbasic commodities was to be left to the discretion of the Secretary.
Perhaps the most hotly debated feature of Brannan's program was his proposal that the traditional, but misnamed, "free market" set prices, with direct government "production payments" making up the difference between actual and supported prices. To protect against too great an expansion of production and huge production payment expenditures the Agriculture Secretary would have the power to impose production controls on the basic commodities whenever necessary.
Truman's Agriculture Secretary also sought to impose restrictions and conditions on the receipt of such production payments by limiting the size of farms eligible for benefits, encouraging the "family-sized farms" and discouraging "development of extremely large-scale industrial farming."
According to a January, 1950 Farmers Home Administration report the 1945 census showed that "about 100,000 of the largest units --- fewer than two percent of all farms are selling products valued at nearly one fourth of all the farm products marketed in this country. This is more than is sold in total by two-thirds of all our farms, including half of our family farms."
In 1997, 73.6% of the nation's farms shared 6.8% of the market value of agricultural products sold while 7.2% of the farms received 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.
THE BRANNAN PLAN:
GOP: "IF THE DEMOCRATS GET IT THROUGH,
THEY ARE IN FOR LIFE"
Support of a "family farm system" of agriculture was not the only drawback to the Brannan Plan's many enemies, who finally managed to kill it . The ultimate reasons for its defeat centered on political considerations, particular the fear of Republicans and conservatives in the Congress that its passage would cement the alliance between farmers and labor which had only recently played a major role in reelecting Harry Truman to the presidency in 1948.
Thus, the all too familiar pattern that first emerged in the agrarian populist era, later to resurface during the New Deal was evident again in the Brannan Plan --- whenever farmers and labor showed genuine signs of building an economic and political coalition the various "communities of economic interest" that have dominated corporate agribusiness for over a century react with a sense of foreboding and urgency, or what one farm leader once described as "hostility and political terrorism."
It is also no coincidence that these same economic and political forces --- such as the American Farm Bureau Federation (AFBF) and the National Chamber of Commerce --- who have historically tried to destroy trade and industrial unionism are the same forces that have traditionally and consistently depicted the major problem facing U.S. agriculture as one of "excess human resources."
As a matter of fact the Farm Bureau which prided itself on being "the voice of American agriculture," fought the Brannan Plan hard, seeing it as a threat to its own existence for President Harry Truman's Agriculture Secretary Charles Brannan had taken a heretofore "bipartisan" farm policy, i.e., Farm Bureau policy, and put it back squarely in the political arena and was receiving support from those very elements in the society --- family farmers and organized labor --- that the AFBF branded as "dangerous" and "anti-American."
It was true that the cost of the Brannan Plan was unknown, even the Secretary admitted that he couldn't estimate the cost any more "than the people who came up with the first price-support program involving loans were able to estimate for you then."
But cost was not the conservatives' and Republicans' major reason for wanting the plan killed. Rather the Grand Old Party feared Brannan's plan might have a special appeal to the farm community in the upcoming crucial 1950 Congressional elections. "That the Republicans will fight it is already evident," a New York Times report declared, "because as one observer said, `if the Democrats get it through, they are in for life.'"
INDUSTRIALIZED FARMING:
COMMUNITY PARTICIPATION AND LEADERSHIP,
ECONOMIC WELL BEING AND BUSINESS ACTIVITIES
BECOME RELATIVELY IMPOVERISHED
The validity of Agriculture Secretary Charles Brannan's belief in the family farm system of agriculture and its economic and social value to the rural economy and the nation's general economy had already been recently attested to in a landmark study in agriculturally rich California
In 1942 the Bureau of Reclamation had expressed justifiable concern whether the 160 acre limitation principle in the federal reclamation law should be applied to California's burgeoning Central Valley Project (CVP).
USDA staff economist Marion Clawson and Dr. Paul Taylor of the University of California, and the Division of Farm Population designed a study to "determine what difference it made to the character of rural life if farm units were large corporate holdings as against family-size units," such as provided for in the 1902 Reclamation law? California social scientist Dr. Walter Goldschmidt under the auspices of the USDA's now long-defunct Bureau of Agricultural Economics was given the responsibility of conducting the study.
A comparative study of Arvin, a town located alongside the mammoth DiGiorgio Corporation, long a symbol of California corporate agribusiness, and Dinuba, a community surrounded by small family-type farms, was undertaken. As Dr. Goldschmidt, now a social anthropology professor emeritus at UCLA, explains:
"The research plan that was devised from the outset included two phases. The first was a detailed examination of the two representative communities. >From that experience a series of measures of community organization were to be devised that would reflect the quality of life in the towns, based upon data that could be easily attained without questionnaires or interviews. Among the items to be considered were everything from the number of local business enterprises to the rate of teacher turnovers. From this objective data an index was to be formulated that would enable some 23 other small towns in the upper San Joaquin Valley to be rated."
What the Arvin-Dinuba study revealed has become near legend in the argument for perpetuating the "family farm system" of agriculture throughout rural America. Dinuba was found far superior to Arvin as the quality of life in each community was directly related to the inequities in landholdings and directly reflected in the difference in the community's economic, political and social stability.
"Large scale farm operations was immediately seen to take an important part in the creation of the conditions found in Arvin," Goldschmidt reported."Its direct causative effect is to create a community made up of a few persons of high economic position, and a mass of individuals whose economic status and whose security and stability are low, and who are economically dependent directly on the few. In the framework of American culture, more particularly that of industrialized farming, this creates immediately a situation where community participation and leadership, economic well-being, and business activities are relatively impoverished."
The small-farm community of Dinuba was supporting 62 separate businesses with a volume of trade of $4.3 million, while the large-farm community of Arvin had 35 established business establishments; expenditures for household supplies and building equipment were over three times greater in the small-farm community; Dinuba had a larger dollar-volume of agricultural production; over one-half of the breadwinners in the small-farm community were independently employed, while in the large-farm community less than one-fifth were so employed: public services in the small-farm community were far better; the small farm community had two newspapers while the large-farm community had one, and the small-farm community had twice the number of organizations for civic improvement and recreation. As applied to a small-farm community the 160 acreage limitation principle was also found not only to be justified, but one that should be encouraged and supported.
While the first phase of the 1946 study was completed and reported on, the second, due to the extended controversy surrounding the first, was never completed. Goldschmidt remembers,
"I had hoped to calculate a regression curve between these two variables [the size of farms measured by gross acreage and by `equivalent' acres, based upon the income potential, of diverse crops] but was prevented from making this sophisticated analysis. I have recently reexamined these data and have found that they revealed a most important relationship . . . It showed that as the average size of farm increases, the number of persons supported in the rural area and local community declines."
Reaction to the Arvin-Dinuba study, later to appear in book form in As Your Sow, was immediate and ominous. Repeated efforts were made to block its publication, the study having been completed in 1944. When it finally was issued in December, 1946, due principally to the efforts of Dewey Anderson of the Senate Small Business Committee and U.S. Senator James E. Murray, committee chairman, it was with a quid pro quo that no mention WHATSOEVER be made of USDA's involvement in the study.
Efforts, principally by the American Farm Bureau Federation (AFBF) and its corporate agribusiness allies, were made in the press, on the radio, and in Congress to discredit the study and the activities of the BAE, a long-time adversary of the AFBF.
In a September, 1946 The Nation article author Alden Stevens suggested that the AFBF was responsible for getting a provision written into a USDA appropriations bill which would prohibit any further studies similar to Arvin-Dinuba. He also went on to say that the study "was used to destroy one of the most honest and courageous organizations in Washington, the Bureau of Agricultural Economics." Goldschmidt, in recent years, recalls,
"I wrote a letter to The Nation saying that the study was not manifestly responsible for this action . . . I am not so sure as I was when I wrote that letter to The Nation that the Arvin-Dinuba investigation was not a major factor in the curtailment of the BAE and its subsequent demise."
In fact, the USDA's Appropriations Act for 1947 contained the following codicil: "That no part of the funds herein appropriated or made available to the [BAE] under the heading `Economic Investigation' shall be used for state or county land and planning, for conducting cultural surveys, or for the maintenance of regional offices." (emphasis added)
In further reflection on the events surrounding this study, Goldschmidt now believes those who sabotaged his expanded research into a larger sample of communities knew exactly what it would reveal. It was much easier to discount the Arvin-Dinuba conclusions than it would have been to dismiss the results of a much more compre- hensive study.
Nearly sixty years later that "sabotaging" by corporate agribusiness and its same allies like the AFBF who sought to discount Goldschmidt's findings, continues to this very day.
In 1993, Goldschmidt would write in an essay "What If . . . ."
"My recommendations in As You Sow were that it was essential to recognize the industrial quality of farming, which clearly was already diffusing throughout the nation, and its urban consequences, which meant that the regulations of the Labor Relations Act should be applied to the agricultural sector and that unions should not only be allowed to develop, but should be encouraged. What was needed was a professionalization of the farm worker."
He continues,
"These recommendations were also not followed. Instead, we have had the continued exploitation of the farm workers, the increased concentration of land ownership in the hands of the few, greater difficulties for the small farmer precisely because they were not protected from such centralized control of the markets, and all the other difficulties that derive from an unregulated industrialized agricultural system."
And Goldschmidt concludes, "the price of liberty is external vigilance. I fear that we have been insufficiently vigilant."
DR. HAROLD BREIMYER:
"FREEDOM TO FARM BILL,
WORST FARM BILL THEY EVER HAD,
WHOLE RECORD OF 1996 IS SORDID"
Besides Dr. Walter Goldschmidt another traditional voice of reason in American agriculture that has seen its transformation from a family farm agri-culture to a corporate agri-business is Dr. Harold Breimyer.
In his 67 years as a self-proclaimed "farm boy," a 4-H club member, a liaison between the federal government and county agents who were implementing the 1930's Farm Act, a college student, working for the USDA's Agricultural Adjustment Administration, an agent for University of Missouri's agricultural extension, and most recently a distinguished agricultural economist now retired, Breimyer has seen U.S. agriculture undergo massive changes and has helped many of those changes come about.
Today, however, he is "scared of the turn that agricultural economics has taken. What you have now is a contest to see whether the individual farmer will maintain his status, or be enveloped into a massive corporation like Cargill or something like that."
In a recent wide-ranging interview with Columbia, Missouri Daily Tribune's Christopher Leonard, Breimyer sees the family farm of his childhood, the kind of farm that once defined our culture, slowly being edged into extinction by corporate giants like Monsanto and Tyson Foods who are taking control of the food supply like hungry kings with dreams of conquest.
Leonard notes that the 1930's Depression laid the ground for an agricultural revolution Breimyer would become a part of. "It was the severity of the Depression that was one
of the reasons people rushed to vote for Roosevelt and support his Farm Act," he remembers. Passed in 1933, Roosevelt's Agricultural Adjustment Act, known as the Farm Act, was an unprecedented program for farmers in the U.S. because it used a tactic most farmers consider anathema: government intervention.
"It was a shocking kind of change to think that farmers could have the government allot how much they could plant of their crops," Breimyer recalls. "Farmers accepted it partly because they were hurting so bad financially they couldn't afford not accept it. But, Breimyer notes "one of the generally unreported things about the program is that it was intended to serve an agriculture of relatively modest sized operations the so-called family farms."
To this day, Breimyer maintains that the Farm Act was successful in pulling family farmers out of Depression-era bankruptcy, and keeping agricultural markets stable. He says this was done by creating a price floor for commodities, without doling out money to farmers. "It worked," he says. "It may not have always worked great, but it worked."
As Leonard points out, over the years, Breimyer's work has had tremendous influence and won him wide recognition, such as in 1998 he was awarded the American Agricultural Editors Association's Distinguished Service Award.
Agricultural economics began to profoundly change in the 1960s, Breimyer observes. Instead of simply making a price floor, the government began to let farmers sell their goods for whatever price they could get, while giving them cash to make up the difference between the market price and a government-determined target price.
"It shifted from price support to direct payment, and this almost became a religion. The last few years, you saw enormous payments right out of the treasury something people in the 30s would have just screamed about," he says.
By the 1990s an "anti-government spirit just enveloped the country," Breimyer says of the movement to kill the Farm Act as many farmers backed the push. "Give farmers a couple of good years, and they'll think they don't need any government support. What farmers tend to forget is that agriculture is cyclical by nature."
With the killing of the Farm Act in 1996 it was replaced with the misnamed Freedom
to Farm Act, which was ostensibly written to restore a free-market system to agriculture.
"In 1996, we abandoned all controls over agriculture. Now, we are not active in trying to stabilize the price of farm products at all," Breimyer recalls. "The whole record of 1996 is sordid. I've written many times that it's the worst farm bill they ever had. The people that were trying to kill the 63-year-old program were saying that the market will stabilize itself, but we veterans said, No, it doesn’t work that way. And it didn't."
The situation turned very bleak for most farmers a couple of years ago, Breimyer adds. "Now they do know what it means to have nothing."
Control of agriculture, Breimyer told The Tribune's Leonard is steadily falling into the
hands of a few huge producers. "It's happened for a couple of reasons."
"First, technology has helped increased the amount of land one farmer can work. But the second factor is something we see all over the country: The rich are getting richer and the poor are getting poorer. What we're heading into is an age of giants," he warns, describing an almost feudal system where a few entities hold power, while contract farmers do their work for them.
The power large producers wield over markets has been building for some time, Breimyer points out. Its roots trace back decades, to a chicken farmer in Arkansas named John Tyson. "Certain poultry producers such as Tyson saw an advantage to them by gaining market control.
"They tied up the supply side by growing all the chickens they processed under contract. Other producers in the area had no choice to stay independent." Tyson "would say either you grow under contract for us, or we won't process your chicken. They destroyed the traditional open markets."
Breimyer observes that method of production has now spread to livestock, and now to grains with farmers growing genetically modified seed for corporations like Monsanto and Novartis.
"Insofar as the smaller producers stay alive, they'll do it by trying to market directly to consumers," he says, noting that such markets will revolve around specialty goods, such as organically grown ones. "I think some of those will succeed, but they'll be small."
To Breimyer, corporate takeover of agriculture will have a more profound effect than making chicken cheaper. "In the world of corporate agriculture, there will be no role for policy makers," he says. "Policy will be made by the CEOs of Novartis and other
corporations that have the markets tied up."
He predicted to Leonard that with the current turmoil of agriculture, questions of policy will become more pressing, solutions to farmers current predicament will be demanded. To do this, Breimyer says, policy makers will need to tap into a certain wisdom that lies beneath the raw mechanics of agricultural economics that has helped guide him.
"What counts most is not just maximizing production, but how people live, how they earn a living, and what kind of community they live in."
SEARCH ENGINE FEATURE TO ACCESS
CORPORATE AGRIBUSINESS RESEARCH PROJECT
WORLD WIDE WEB SITE INTRODUCED
Another new feature has been added to the Corporate Agribusiness Research Project (CARP) web site. A streamlined search engine which will allow viewers to find needed information by simply using a key word. While the search engine will soon become a fixture within the current site, it can presently be accessed at:
http://www.ea1.com/CARP/search.html
The CARP web site, which is now posted on the World Wide Web, features: THE AGBIZ TILLER, THE AGRIBUSINESS EXAMINER and "Between the Furrows."
THE AGBIZ TILLER, the progeny of the one-time printed newsletter, now becomes an on-line news feature of the Project. Its initial essay concerns one Hillary Rodham Clinton, the candidate for a U.S. Senate seat in New York State.
In "HILLARY RODHAM CLINTON'S $99,537 MIRACLE: IT'S THE PITS!!!" now available through THE AGBIZ TILLER you'll learn some of the messy details behind her cattle futures "miracle." You will also find in this section the archives for past editions of the THE AGBIZ TILLER.
By popular reader demand THE AGRIBUSINESS EXAMINER section includes not only an issue-by-issue and verbose index of this weekly e-mail newsletter, but an archive of past issues #1 through #51..
In "Between the Furrows" there is a wide range of pages designed to inform and educate readers on the inner workings of corporate agribusiness. In addition to CARP's "Mission Statement," "Overview" and the Project director's "Publication Background," the viewer will find a helpful "Fact Sheet" on agriculture and corporate agribusiness; a "Fact Miners" page which is an effort to assist the reader in the necessary art of researching corporations; a "Links" page which allow the reader to survey various useful public interest, government and corporate web sites; a "Feedback" page for reader input, and a page where readers can order directly the editor's The Corporate Reapers: The Book of Agribusiness.
The CARP web site was design and produced by ElectricArrow of Seattle, Washington.
Simply by clicking on either of the addresses below all the aforementioned features and information are yours to enjoy, study, absorb and sow.