Fewer Firms, Farms Producing Food

[imgbelt img=DairyHogs.jpg]Food prices have gone up, but farmers are getting a smaller share of the food dollar. Is the food market getting too concentrated?

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C. Robert Taylor. “I hate to use words like that, but darn it, I just expected a more substantive report.”

“We have a corpse, we think he was murdered and we want to find out who done it,” said Fred Stokes after hearing the results of the GAO study. Stokes, executive director of the Organization for Competitive Markets, said the “farmer is the weakest link in the whole food chain and he is being victimized.”

Members of Congress asked the GAO to study the food industry after a rapid price increases last year rattled consumers. The agency didn’t undertake an original study. Instead, it compiled other studies of market concentration within the food and agriculture sectors. 

The GAO report found that the business was getting more concentrated at all levels, from the size of farms to the size of grocery chains stores. But the agency said that any price increases due to growing concentration had been moderated by increased efficiencies that came with operations of  larger size.

The GAO did find that farmers were receiving a progressively smaller portion of the food dollar. The report is filled with charts showing a widening gap between what farmers are paid for meat, grains and milk and what consumers pay. “Over the past 25 years, farmers have received a decreasing share of the consumer food dollar,” the GAO reported.

Auburn’s Bob Taylor said that when adjusted for inflation, in many sectors, prices paid to farmers had decreased during this time.

Moreover, Taylor said, the increasing spread between what farmers are paid and what consumers are charged for food “is very strong evidence that market power is being exerted.”

During the same period retail firms and food producers have been consolidating, there has been a rapid decrease in the number of dairy, beef, hog and grain farms. There are nearly 200,000 fewer grain farms than there were in 1987. The number of dairy farms has dropped from 163,000 in 1987 to 70,000 in 2007. Hog farms in this same period declined from 239,000 to 75,000.

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