Letter from Langdon: Playing Fetch
While farmers chase the next crop, the agriculture game has changed. International corporations have reduced their own risk by passing it along to farmers. “Free” trade (like the proposed Trans Pacific Partnership), seed patents, and contract farming for hogs and chickens are some of the ways Big Ag has standardized a once-diverse industry.
Playing fetch with a Labrador is a little like farming. I throw the ball, he brings it back. That's the way it is with farmers on the land; every spring Mother Nature throws the ball.
I can't help but run after it.
No one really understands all of agriculture in America–including our farmers. Wheat in North Dakota is very different from cotton grown in Texas. Climate, soils, machinery, and markets, all would require re-education to accompany farmer relocation.
We seldom pick up and move to greener pastures.
Farm animals have differences too. But corporations have injected genetic uniformity and huge confinement barns into poultry and hog production so that a reliably experienced West Texas hog confinement operator could be expected to perform equally well in the North Dakota winter …if his car will start.
The challenge for big business in agriculture has always been variables–in weather, crops, genetics, markets, and even in society where differences among farmers affect their methods and the way they do things. Consolidation of markets and the companies that buy livestock and poultry from farmers helped transform animal agriculture. That power in markets allows corporations to control the way animals are produced, and it allows them to control the farmers who do the work. (Sometimes it allows them to change consumer habits) Farmers who grow hogs and poultry now make massive investments in facilities, usually financed by loans. The borrower must have a contract or written agreement with one of a handful of livestock reigning corporations, not only to make the banker happy and secure the loan, but to repay it, too.
What's worse, losing a contract can mean losing everything, because farmers who feed corporate hogs or poultry don't actually own the animals or the feed animals consume.
And they have no to an alternative market.
They're contract growers supplying labor and facilities to corporate owners who throw the ball in a game of fetch.
Confined animal feeding operations have corporatized the meat business beyond anything ever seen before. Variables like farm animal inventory that once caused wide fluctuation in prices have been overcome somewhat, but animal health is one area where vagaries of the market persist. Especially when diseases such as poultry virus H5N2, or PEDv in hogs strike unexpectedly.
Genetic diversity and disease resistance can suffer under corporate systems like this. Uniformity for the sake of uniform profits is their natural weakness. Fickle customers play a part, too. That's why higher feed costs leading into 2013 along with diminished exports to China had Smithfield Foods looking for a partner.
They found one in a Chinese government financed buyout by Shuangui Limited.
Thanks to this method of raising livestock, earlier acquisitions of Continental Grains "family farm" Missouri hog venture, Premium Standard Farms, and the bankrupt farmer co-op headquartered in Missouri, Farmland Foods, Smithfield was able to own a big chunk of Missouri's pork business. But Smithfield selling itself to China posed a problem in Missouri, where regulations prohibiting foreign ownership stood in the way. Missouri lawmakers accommodated the buyout through repeal and passage of newer less stringent laws. That work has continued into the 2015 legislative season that now threatens to take away local control rights of rural communities less than thrilled with the ways of corporate agriculture.
That means local communities concerned about clean water and air couldn't "discriminate" against livestock confinements without suffering the consequences. New revelations from Iowa regarding water pollution from confined animal feeding operations have had no effect on corporate livestock bingeing by the Missouri General Assembly.
It's clear that with over $4 trillion in foreign currency reserves, China has money to spend, and they intend to spend some of it on food security. Smithfield is already using its parent company's financial advantage to drive more expansion and modernization.
But that's just one facet of the livestock business in America. Cattle is an area where corporate control is not as strong. Meat packers wield considerable power in markets but lack the ability to own beef production from birth to harvest as with hogs or chicken. Beef doesn't enjoy the worldwide acceptance of pork or domestic consumption of chicken. And despite efforts to open new export markets for U.S. beef, domestic consumption is still the crown jewell of markets here.
Not all, but many farmers and ranchers and one of their top organizations, National Cattlemen's Beef Association, oppose labeling domestic beef products as born in the USA. Multinational corporate druthers aside, there's a shopping list of reasons why that's so. For one thing a lot of cheap imported dairy animals are mixed into our beef. Foot and mouth disease is still a problem in Mexico. And occasionally mad cow disease turns up in Canada. But the crutch for every argument against labeling always comes down to Americas free trade commitments and World Trade Organization courts that contend labeling as to country of origin (COOL) constitutes an unfair advantage for U.S. products.
I say wave the flag. But ethnically diverse trade court judges sitting in Geneva courtrooms don't seem to agree.
Now another trade agreement in the works, Trans Pacific Partnership or TPP, is proclaimed by the Obama Administration as the be all, end all of U.S. ag trade at a time when world trade partners see us forfeiting our leadership.
Big Agriculture, including grain and oil seed producer groups who never fail to fall for the carrot on a stick routine, has climbed on board with TPP. History shows a fish hook buried in the bait, because U.S. farm exports always seem to suffer as our trading partners benefit from expanded markets at our expense.
But like Dad always said to me when I wasn't thinking clearly, "I suppose if all your friends jumped off a cliff, you would too?".
A good example of how trade really works in agriculture is evident in Smithfield, whose profits went over the edge when among other things, Chinese demand for their products suddenly fell sharply. A year later China stepped in to buy the company. Now profits have never been better as Smithfield expands its business.
And Chinese demand for pork has never been better either.
Though no other form of U.S. agriculture is more consolidated and controlled than chickens and pigs, basic commodities of corn and soybeans are well on their way to getting there. Genetically modified (GMO) seeds have lowered farm profitability by driving up the cost of seed and contributed to reducing the amount of real competition among seed companies. Farmers in general have paid a mighty price for years of depressed markets as GMO grain battled for market share against balky customer acceptance.
I would mention Monsanto, but after so many years of little or no action by government regulators who fail to see competition issues anywhere around the farm, what's the point?
But purely for the sake of argument, Monsanto has acquired more seed companies than any other corporation and controls 90% of the soybean seed market through its patented herbicide resistant genes.
This is how the hog business works too, because contractors never own the genetically identical corporate developed hogs they feed, and soybean farmers never own the patented genes they grow as new marketing ventures between seed companies, grain sellers, and farmers lead us down that familiar path.
One seed company lately has gone so far as to require its customers who buy the seed to agree to sell grain with unapproved genetic traits to one particular buyer who would limit its movement to domestic markets. The idea was to keep the grain out of export markets where it might be rejected.
The grain buyer, a recent Japanese acquisition called Gavilon, has completed another step in the march toward multinational ownership of our food system. Marubeni, a Japanese corporation with a long history of testing the limits has purchased the grain company Gavilon from original investors who put it together from a number of regional and foreign grain businesses.
Among other things Marubeni has been called on the carpet for failing to force Chinese buyers of U.S. soybeans to make meaningful down payments on soybean purchases, who have then reneged on sales commitments because fluctuations in markets and currencies make forfeiture cheaper than honoring contracts.
When China or any other country books a grain purchase but refuses it, farmers are affected as supplies surge back to earlier levels and prices fall. Consuming 60% of world soybean production along with its huge currency reserves gives China power in a marketplace where basic scruples are scarce.
As one source was quoted to say, "China is China".
So it is that similar market forces affecting prices can apply to hogs or cattle–or soybeans and corn that, quite coincidentally, are consumed by Chinese owned hogs both here and in China. Trade agreements have little effect on trading partners' ethics, unapproved crop genes, inelastic food demand around the world, or unrealistic expectations for ag trade.
Farmers willing to risk all for a new crops and markets aren't much help either.
But we sure do love to chase that ball.
Richard Oswald, a fifth generation farmer, lives in Langdon, Missouri, and is president of the Missouri Farmers Union.