Vertical Integration
One of the biggest changes in the food industry since World War II has been the drive toward vertical integration. This term simply means that individual companies attempt to control as many segments of the line we have been describing as they possibly can. Some buy up seed companies (Cargill, Anderson Clayton, General Foods); or institutional feeding operations (Del Monte) or supermarkets (Weston Group of Canada) or chains of restaurants (Ralston Purina, Pillsbury, Heublein, etc.). You can integrate backwards towards inputs or forwards towards the final consumer, but there seems at present to be no single corporate policy towards agricultural production itself in agribusiness strategies. The food industry's relationship to farming itself has been a stormy one. Many companies began "corporate farming" in the 1960s, but a few years later most had decided that it was preferable to let real farmers take the risks of inclement weather and blights. Although there are some spectacular new corporate farming ventures like Boeing's potato growing operation in the Pacific Northwest (that's where McDonald's french fries start life) the far stronger trend seems to be towards contract farming. By 1970, more than half of the total US production of foodstuffs was already taking place under vertical integration (the company runs the farm itself) or under production contract (the company signs up farmers and tells them what to do). Highest integration is in vegetables for processing (95%), fresh-market vegetables (51%), citrus fruits (85%), potatoes (70%), fluid milk (98%), broilers (97%), seed- crops (80%) and sugar (100%). The crops still being sold on the open market in overwhelming proportions were food and feed grains, cotton, tobacco, oilseed crops and livestock (excluding chickens).22 Whereas in 1970, about 22% of the entire US food supply was produced through vertical integration or under contract to a food firm, this figure was expected to reach 50% by 1980 and 75% in 1985.23 In other words, this food is being grown either by hired labor or by farmers working under stringent corporate specifications. Should these laborers and farmers attempt to organize and demand higher wages, prices or better working conditions, the company has the option of closing down and moving elsewhere, as Del Monte, for example, has done. The farmer has nowhere else to go; his one advantage over the laborer (who has only his two hands and relative mobility) is that he still owns his land. But how important is this factor in a country where, as Jim Hightower has remarked, the question is not so much who owns the farm as who owns the farmer?
This is, then, a very brief outline of the US industrial food system model. Given a choice of three words to describe it, I would choose: Waste, Concentration and .... Efficiency.
This food system is wasteful.24 Nearly everyone is now aware that huge amounts of grain are fed to livestock and that animals are quite inefficient converters of grain into meat. Animals therefore entail waste (unless pasture or scrap-fed), but it is characteristic of sophisticated food systems to transform cheap calories into expensive ones because most people find expensive calories (e.g. meat) more pleasant to consume. It is also well known that agriculture in the developed countries frequently absorbs more energy in the form of fuel and inputs of all kinds than it gives back in calories—but again this is to be expected where there is a market for greenhouse lettuces and the like.25
Most experts concede that no country on earth, including the US, has yet reached the outer limits of the meat and dairy products its citizens are capable of consuming if they have the money to do it. Agribusiness, of course, encourages such indulgence and feedlot animal raisers are going into the meat packing business as well, just to make sure they keep hold of both ends of this profitable stick. Further waste is incurred in the proliferation of processed food. For readily understandable reasons of their own, the corporations are not interested in selling us items in bulk that have undergone little processing and which cannot command a highly profitable price. The companies' goal is to add to the cost of food, but not to its real value, however much economists may speak of "value added" in the transformation process. The more steps a company can add to the line that separates the final consumer from the farm gate, the happier it will be. This is why Americans are perhaps the only people on earth privileged to buy unbreakable, perfectly calibrated, dehydrated, rehydrated parabolic potato chips packed in vacuum-sealed tennis ball cans—at dozens of times the cost of the original, long-forgotten potato. The US food system is geared, in its entirety, to getting people to eat money.
This food system is concentrated. We have already given some figures on the oligopolies that exist both upstream and downstream from the farm. Whatever one's opinion of free enterprise and the virtues of competition, the American food system does not exemplify them. Oligopoly control does not only mean the possibility of keeping prices to consumers higher than they would be under circumstances of true competition—it also means that a miracle is required before any other company can enter the field. The companies already there have their access to banks and to raw material suppliers sewn up—they also have the huge cashflows necessary for maintaining the barrage of advertising messages to consumers. In fact, the only people who can get into an oligopoly are other oligopolies—like ITT into bakery products and seeds or Greyhound busses into processed meats. Such newcomers are unlikely to rock such a comfortable, high-powered and profitable boat.
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"Americans are perhaps the only people on earth privileged to buy unbreakable perfectly calibrated, dehydrated, rehydrated parabolic potato chips packed in vacuum-sealed tennis ball cans—at dozens of times the cost of the original, long-forgotten potato."
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Exceptionally high concentration is already a fact both upstream and downstream from the farm, that is, for inputs and processed food products. It also looms as a clear and present danger for hundreds of thousands of farm families who have little chance of survival. The USDA Office of Planning and Evaluation in 1975 prepared for Congressional use a document detailing three possible futures for American agriculture.26
What comes across clearly in this study, based on computer simulations, is that barring a crash program to encourage and save the smaller farmers, the farm sector is going to shrink drastically. Even if such radical action is taken, some 300,000 family farms will disappear by 1985. If approximately the same government policies and interventions that obtained between 1930-1970 prevail, 600,000 fewer farmers will be on the scene in 1985. If, however, the scenario of the "Maximum Efficiency Future" is adopted—and this means mostly not consciously adopted, for it is enough to do nothing at all and let nature and capitalism take their course—then "market forces" alone will allocate resources and the strong will devour the weak. This is perhaps the most likely of the three possible scenarios; its major features have, in fact, been incorporated in US agricultural policies since the late 1960s. If "Maximum Efficiency" is what is wanted, then seven years from now 1,680,000 farms will have failed—or 62% of the present total! All of the million remaining farms will be selling over $40,000 worth of produce each year, and yields will have improved, thanks to intensive technology, by 89% over the end of the 60s.27 Of course, as the USDA explains, "the consolidation of uneconomical small farms into fewer and larger farms capable of fully using new technology and minimum cost production will require that some farm people choose off-farm employment."28 This "choice" is, mutatis mutandis, comparable to the "choice" exercised by consumers over food prices; it will necessarily increase the numbers of rural and urban unemployed.
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"….some 300,000 family farms will disappear by 1985."
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This food system is also efficient. You might feel that a food system is efficient if it assures every member of the national community of a decent, sufficiently varied and nutritious diet at a reasonable cost. On such grounds, the US system does not measure up very well since over 12% of the population is now living below the poverty line and several million Americans are unable to eat decently because of lack of purchasing power. Junk food sales have increased appallingly as availability of fre
sh produce has declined. Working class and especially minority families pay high prices for processed foods with little nutritional value.29 But no one with any clout measures "efficiency" in terms of usefulness to people's health and livelihood. The criterion of efficiency for the US economy in general and for the food system in particular is merely how much profit it generates. The more profit, the more efficient the system. Certainly there is nothing very complex about this notion economically—one may indeed consider such terms of reference extremely crude at a time when even the World Bank is beginning to use what it calls "social indicators" to measure the efficient performance of national or regional systems.
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"The criterion of efficiency for the US economy in general and for the food system in particular is merely how much profit is generated."
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