Rep. Helen Chenoweth-Hage

Special Order Speech

Regarding Agribusiness Consolidation

March 15, 2000

 

Mr. Speaker, I begin my remarks tonight with words from one our nation's greatest orators, Daniel Webster.  This great Senator eloquently sums up the mission of agriculture for this nation in a rally cry:

 

Let us develop the resources of our land,

call forth its powers, build up its institutions,

promote all its great interest and see whether

we also in our day and generation may not

perform something worthy to be remembered.

 

Mr. Speaker, this foundational principle, largely responsible for bringing the prosperity to this Nation, is being threatened. 

 

In fact, the market power struggle between corporate giants and helpless family farmers is divesting rural America, especially when consumers are buying record amounts of food at record high prices while our family farm producers are going broke.

 

Mr. Speaker, few realize that approximately four companies control most of the processing and distribution of all beef, pork, chicken, and grain in the United States.  Even further, on the distribution and retail side, there are only a few companies that control the United States grocery industry.

 

What has happened is that today, these giant concentrated companies, with their economic market power, have usurped the farmers' and ranchers' share of the retail dollar, draining the lifeblood from the family farm and threatening our safe, sustainable, and dependable American food supply.  This is unacceptable.

 

In the livestock industry, for instance, four meatpackers control over eighty percent of the beef market, and are using captive supplies and abusive market power to drive down the prices paid to producers.  Specifically, family farmers and small cattle producers are providing approximately 88 percent of the total investment it takes to put a steak on the consumers' plate.  At the same time, packers and distributors are providing about 12 percent of the remaining investment.  Unfortunately, while these big packers and retailers overpower the industry, cattle producers and consumers are losing big time every day on price, quality, consistency, and food safety.

 

The current situation in the cattle market is analogous to economic theories presented by the Nobel Prize winning economist Friedrich August von Hayek over fifty years ago.  Mr. Hayek points out that market capitalism is at its strongest when resource owners who are close to the economic circumstances of time and place make economic decisions.  Such a market structure results in the most efficient use of resources and competitive markets.

 

On the other hand, Mr. Hayek demonstrates that the concentration of economic decision-making in the hands of a relatively small number of individuals is extremely harmful, and counterintuitive to capitalistic principles that have built this group nation.  It does not matter whether those individuals are government bureaucrats in a Soviet-style Communist regime or are corporate executives in large companies.

 

We must not let American agriculture concentration fall into this trap.  This concentration of power creates a cartel that is monopolistic by nature and rewards power and greed.  This must stop, Mr. Speaker.

 

This phenomenon was confirmed in a study by Auburn Professor and agricultural economist, C. Robert Taylor, which states and I quote, "The increasing gap between retail food prices and farm prices in the 1990's is due largely to exploitation of market power, and not to extra services provided by processors and retailers."

[REFER TO CHART]

 

As you can clearly see in this chart, while the price of meat in the supermarket continues to climb, the price paid to producers continues to decline dramatically.  The portion in the middle of the chart represents the inequitable market power gained by the retail industry.

 

Another glaring example is evidenced in the hog sector, Mr. Speaker.  In 1999, Smithfield, the number three hog producer, bought out the number two producer Carroll Foods.

This catapulted them to the top spot ahead of Wendell Murphy.

 

Then in September 1999, Smithfield, the world's largest pork processor, announced intentions to purchase Murphy Family Farms, the new number two hog producer.  This gives

them 660,000 sows or about one-eighth of the total breeding herd in the country.  Imagine, owning one of every eight sows in an industry, where only a few short years ago no single entity had even one percent of the market.

 

Well, Mr. Speaker, the raw, robber baron, market power just doesn't stop here.  In grain crop production, we have gone from eighty individual companies selling seed, to ten, and out of these ten players left, three sell 75 percent of the seed in this country. 

 

Within this high level of concentration among seed companies, we see great efforts to seize control of the entire process.

 

We might logically ask if anyone is aware of this trend besides the small producers.  Yes, Mr. Speaker, many people are aware.  In fact, in 1997 the National Commission on Small Farms, appointed by Agriculture Secretary Dan Glickman, recommended actions for the U.S. Department of Agriculture (USDA) to ensure a future for family farming and ranching.

 

Unfortunately, after assessing USDA's responsive actions, an overwhelming majority of members who served on the Commission recently gave the USDA a "D" for implementing its recommendations to ensure fair market access for family farmers.  A failing grade, Mr. Speaker, and a failure to protect the livelihoods of these American farmers.

 

The Commission's major finding was that the erosion of family farm agriculture was not the result of inevitable market forces, but of a bias at USDA towards "large-scale enterprises." Despite the Commission's recommendations, I am sorry to report, the USDA is continuing to allow the American producer to be exploited by an agribusiness monopoly.

 

Mr. Speaker, as a result, Idaho farmers and ranchers are on their knees.  Our American food producers and rural communities are being destroyed while the processing and distribution conglomerates are gorging on unprecedented profits.

 

Let us not forget our responsibility to protect the American farmers and ranchers.  As Thomas Jefferson said:

 

Those who labour in the earth are the chosen people of God, if ever he had a

chosen people, whose breasts he has made his peculiar deposit for substantial

and genuine virtue.  It is the focus in which he keeps alive that fire, which

otherwise might escape from the face of the earth.  Corruption of morals in the

mass of cultivators is a phenomenon of which no age nor nation has furnished

an example.  It is the mark set on those, who, not looking up to heaven, to their

own soil and industry, as does the husbandman, for their subsistence, depend for it

on causalities and caprice of customers. 

 

How can we have a fair marketing system when these conglomerates make record profits and my agriculture constituents in Idaho and those in America are being run out of business?  How can that happen? 

 

And to complicate matters even further, listen to what Mark Drabenstott, Vice-President of the Kansas City Federal Reserve, said before the House Agriculture Committee in February 1999:  "As supply chains become a more dominate structure, farmers face a simple test; build new relationships or be left out of the game... the emergence of bigger players means producers must be much more nimble and savvy in adjusting to new market realities."

 

This shocking statement suggests that Mr. Drabenstott would like to see the American food producer subjugated to the status of serf.  Under this scenario, the big corporate agriculture giants will severely hamper the farmers’ ability to earn a fair return for their product as they are forced to get in line in the chain supply -- a growing food for a narrowing market.  Even further, it will erode the independence of farmers by shifting major decision-making to a handful of corporate firms and executives.

 

America is great a nation because we were built on a strong moral threshold -- that is to say -- in part, we have stongly encouraged small businessman to freely enter a fair market system.

 

Unfortunately, the corporate conglomerates now stand between hundreds of thousands of producers and millions of consumers as they manipulate the markets to their own advantage.  This is seriously handicapping our farmers, ranchers and consumers, Mr. Speaker.

 

            We all know that big agribusiness -- like ConAgra, Cargill and IBP -- need American producers more than farmers and ranchers need big agribusiness.

 

Again, remember that we know from history that concentration of economic decision-making in a small number of hands is the least productive and the least beneficial system.  Ultimately, it only serves as the road to serfdom for American farmers.

 

Take Communism for instance.  It took what Karl Marx called "the means of production" and consolidated it into one giant entity, the government.  It gave a small group of people control over the farms, the factories, and even the roads and rivers.  Yes, that is precisely what is happening here today, except that it is the corporate monopoly that is gaining a stranglehold on the means of production.  And to make matters worse, the Federal government is giving it’s “winking approval.”  This is brutally wrong, and against American principles and public policy.

 

Mr. Speaker, the time has now come for the Clinton Administration to use the powers at its disposal under the Packers and Stockyards Act of 1921 to provide a fair beef marketplace.  The measure was enacted to prevent these kind of anti-competitive practices by the big corporate giants.  Undoubtedly, there is something wrong when the conglomerates are allowed to operate in blatant violation of federal laws. 

 

In fact, meatpackers today look into our eyes with a straight face -- while their monopolistic practices remain unchecked by existing law -- and deny that they are even regulated.  This is a mockery of our existing laws and the justice system. 

 

I believe in a fair and competitive marketplace.  However, I am very concerned that the individual agricultural producers have been overwhelmed by threats and predatory pricing.  The time has come to restore the market balance between small producers and big agribusiness.

 

To help in this, legislative measures such as H.R. 1144, the Country-of-Origin Meat Labeling Act of 1999, which I introduced, complete price reporting, as well as other measures addressing anti-competitive practices by the big meatpackers, will give hope and encouragement to the American producer and the American consumer.

 

Let me conclude by pointing out the very powerful words of Theodore Roosevelt.  President Roosevelt states in his March 4, 1905 Inaugural Address, and I quote:

 

Never before have men tried so vast and formidable an experiment as that of

administering the affairs of a continent under the forms of a Democratic republic. 

The conditions which have told our marvelous material well-being, which have developed to a very high degree our energy, self-reliance, and individual initiative, have also brought the care and anxiety inseparable from the accumulation of great wealth in industrial centers.  Upon the success of our experiment much depends, not only as regards our own welfare, but as regards the welfare of mankind.  If we fail, the cause of free self-government throughout the world will rock to its foundation, and therefore our responsibility is heavy, to ourselves, to the world as it is today, and to the generations yet unborn.

 

Mr. Speaker, these are important words to remember as we work to restore economic fairness and equal opportunity in the agriculture community, and in our precious America.

 

Thank you, Mr. Speaker.