Shultz: White House puts spotlight on ag mergers with Executive Order
On July 9, the White House released an ambitious Executive Order to increase competition in many sectors of the American economy. I, like many other agricultural producers, was quite happy to see agriculture as one of the sectors put under a microscope.
The Executive Order on Promoting Competition in the American Economy covers a wide range of agricultural issues which affect a farmer’s or rancher’s profitability. According to the fact sheet released by the White House about the Executive Order, the concentration within the seed industry is costing farmers more for seed. Research by Texas A&M University in 2016 shows that the merger of Dow and DuPont and Monsanto with Bayer was going to raise the price of corn seed by 2.3%, soybeans by 1.9% and cotton by 18.2%.
However, after speaking with friends in Illinois, Indiana and Kansas, I can say that was a low estimate. To quote the Indiana farmer when I told him about the study, he said, “A hundred two percent is more like it.”
This is why part of the Executive Order is to have the USDA and Department of Justice revisit these mergers. Right now, there are only four major seed companies in the U.S. and they controlled 60% of the market as of 2018. Three companies, Cargill, ADM and Continental, export 62% of the grain coming out of the U.S., according to research from Iowa State University. Farmers face a daunting problem of too few sellers of seed and too few buyers of their grain at harvest.
Measures by the USDA announced in July add $500 million for new entrants into meat and poultry processing, $55 million bolstering slaughter capacity of small and very small processors and $100 million to help small and very small processors withstand volatility and unexpected costs related to COVID-19. This will allow processors to expand and give farmers and ranchers more outlets for their animals.
Legislation has been introduced in the U.S. Senate to guide the spending of these monies. U.S. Senator Mike Rounds, R-S.D., along with a bipartisan group of 12 co-sponsors, has introduced The New Market for State-Inspected Meat and Poultry Act. If passed, this would allow meat and poultry products inspected by state meat and poultry inspection programs that are approved by USDA’s Food Safety Inspection Service to be sold across state lines.
Let us not forget the shutdowns that the mega-processing plants experienced during the last 18 months. Not only was meat in short supply across the country in grocery stores, but also farmers and ranchers had nowhere to go with animals ready for market. The disruption in cattle markets backed animals up for months and when cattle did head for slaughter, they were over-fat.
Worse than that was the hog producers’ dilemma. When hog plants closed, there was no outlet market, and in many situations, euthanizing hogs was the best or only financial option. I do not know a single farmer or rancher who wants to go through that again.
I hope we learned from the pandemic when it comes to food security. We need a more nimble system with smaller, regional packing plants to operate in addition to the mega-plants. When one plant can shut down and create a backlog in markets for a 500-mile radius, it creates equally unacceptable options for producers and consumers.
This is why passing legislation that works with the Executive Order is so important. Together with legislation, the Executive Order can improve food security for U.S. consumers and strengthen market security for producers.
Passage of this legislation will assist family farmers in finding additional and more competitive markets for their production. I encourage you to contact your U.S. senators and ask them to support this bill. Both of mine in Montana are co-sponsors.
Bruce Shultz is the Vice President of the National Farmers Organization. He can be reached at firstname.lastname@example.org.