Tags: US | Food | and | Farm | Agriculture | Antitrust

Federal Regulators Launch Probe of Big Agriculture

Monday, 08 Mar 2010 08:46 AM

 

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Some Obama administration officials have made clear their unease with the increasing control a handful of corporations have over the nation's food supply, and this week in Iowa they could show whether they are serious about changing the system.

The first joint workshops on agriculture by regulators at the U.S. Justice and Agriculture Departments is expected to give farmers, lobbyists, executives and academics a strong indication of where the Obama administration stands on consolidation in agriculture.

Administration officials said the meeting Friday in the Des Moines suburb of Ankeny will give antitrust attorneys and farm regulators their first chance to work side-by-side and examine the concentration of power in rural America. The Iowa meeting will be followed by four other gatherings held later in the year.

Industry officials and farming groups aren't sure whether the hearings are political theater or a first step toward legal action, or both. For farmers, it's the most attention paid in years to their long-standing complaints that big corporations are choking out smaller players.

"This is certainly a much brighter spotlight than we've seen in the last 10 years," said Tara Smith, the American Farm Bureau's director of congressional relations.

A newly invigorated antitrust team in Washington is behind the hearings.

Christine Varney, head of the Justice Department's antitrust division, came into office last spring complaining that regulators have been too slow to file cases and that the Bush administration's guidelines on enforcement had fostered "extreme hesitancy" in the department.

In a troubled economy where food costs are pinching consumers, Varney said agriculture will be a top priority.

"We've seen a lot of consolidation in the industry in the past decade," she said. "Any time you have a lot of concentration in any part of the market, or any part of a vertical chain, it merits looking at."

Varney and U.S. Secretary of Agriculture Tom Vilsack said the workshops are aimed at creating broad policies to foster competition in agriculture, rather than scattered enforcement actions. Both will attend the hearings, and they emphasized that no action would be taken if competition was deemed fair. The point is to listen and learn.

"We want to make sure the playing field is level," Vilsack said.

The series of workshops will run through December, looking at the seed, dairy, poultry, beef and crop industries. At issue will be the practices of industrial agriculture's biggest players, such as grain processors Archer Daniels Midland Co. and Cargill Inc., meat companies Tyson Foods Inc. and JBS SA and biotech seed firms Monsanto Co. and DuPont.

The hearings are welcome news to Bill Heffernan, a retired rural sociologist from the University of Missouri who has been tracking growing concentration in agriculture for 20 years.

When he began studying the issue 22 years ago, Heffernan said the greatest consolidation was in the beef industry, where four firms controlled more than 50 percent of the market.

When he took his last survey in 2007, the top four meatpackers processed 84 percent of all U.S. beef. Consolidation also had spread to the poultry market, soybean crushing (which turns beans into a wide array of food products) and corn milling, he said.

With so few companies given so much power, Heffernan contends they don't need to cut backroom deals to control the market. They just follow each others' lead on how much to pay for grain or animals and force farmers to take what they can get.

"They don't have to go down to the lounge and talk about price fixing," he said.

Industry groups dispute the notion that consolidation signifies a lack of competition or could lead to price fixing.

The American Meat Institute, which represents meat processors, filed testimony for the hearings, arguing that the companies have gotten so big in large part because of government regulation.

Stringent food safety rules and constant inspections forced the industry to build expensive, high-tech plants, the group said. And the firms have paid the cost for massive recalls of tainted meat, forcing large companies to merge to share the risk and smaller ones to leave the market, the testimony said.

"I think the meat industry is extremely competitive," AMI Policy Director Mark Dopp said. "My hope is (regulators) learn how things really work. We think that will be a good story for the meat industry."

That story line is sure to be one that many regulators will hear in the coming months.

"As I travel around the country, listening to farmers and ranchers, there is a fairy consistent message coming from them," Vilsack said. "They want to make sure that the playing field is level, whether it's access to technology or the way they market their products."

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