Iowa Public Television


Ag Consolidation Presses On

posted on November 17, 2000

There is probably no more contentious issue in Rural America than the fundamental question of who owns it. Although most American farms are still owner-operated and occupied, the infrastructure that services those farms is becoming controlled by fewer entities. As that trend advances, indeed accelerates, the folks on the farm and rural communities are becoming more apprehensive about being squeezed out of existence. Seemingly every week there is news that confirms and feeds those fears.

Ag Consolidation Presses On Mergers and acquisitions in recent months have accelerated the level of concentration throughout the food industry and the number of players in the meat production and processing arena continues to shrink. According to the government, the four largest beef packers control 70 percent of U.S. cattle slaughter. The top four companies in pork processing own a 60 percent share of that market.

Those numbers are bound to grow if the latest mega-deal announced this week becomes a reality.

Smithfield Foods, the nation's largest hog producer and pork processor, has made a bid to buy giant meatpacker IBP, Inc., for about $2.7 billion in stock. Smithfield also would assume $1.4 billion in IBP debt.

The purchase offer was the latest by Virginia-based Smithfield, which in recent months has moved aggressively to buy hog production and processing operations across the country. The new company would become the world's largest hog producer and meatpacker, controlling more than a third of the pork and beef sold in the U.S.

To date, the official reaction to the rapid advance of consolidation in agribusiness has been mostly rhetorical.

Sen. Paul Wellstone, D-MN: "It's taking place at such a breath-taking pace and I think that what's happening is that we're moving to monopoly and our family farmers can't get a break..."

But the Smithfield-IBP announcement raised some red flags. Agriculture Secretary Dan Glickman urged antitrust regulators to closely monitor the deal. And some farm groups and farm state lawmakers flat out objected to the merger. They see consolidation as a threat to independent farmers, many of whom contract with the big companies to produce the raw commodities they process.

Iowa Democrat Tom Harkin already has a bill pending in the Senate that would, among other things, prohibit secrecy clauses in contracts and allow producers three days to review and cancel contracts.

For its part, Smithfield has said it expects to divest itself of one or two of its existing plants to satisfy antitrust concerns. The company also promised to continue what it calls its strong partnership with independent farmers.

But with combined interests generating $20 billion a year in revenue, there's a growing sense of unease in the country.

Neil Harl, Economist: "The power would rest with the integrating firms. The decision-making would rest with the integrating firms. And the role of the producer would be a very limited one. I've referred to it as a sector of serfs."

Tags: agriculture industry meat news