Why Consumers Need Competition Provisions in the Farm Bill

The consolidation of the food industry has concentrated power in the hands of a few special interests and gives them control over the methods used to produce food and what consumers pay for it.  Just a few agribusiness and grocery companies hold most of the power in the food system.  For consumers, this means that it is difficult to comparison shop because about half of all grocery store purchases are made in stores that are controlled by only five companies, and production of staple foods like milk, cereals, and meat are dominated by as few as four companies.

At the other end of the food chain, there are very few companies buying crops or livestock, so many farmers and ranchers are forced to sell at whatever low prices these agribusiness giants offer. The meatpackers, food processors, and supermarkets contend that their size offers consumers more choice and affordability.  In reality, meat processors and supermarkets do not pass their lower costs on to consumers in the form of lower retail prices. Instead, lower livestock prices for farmers have encouraged them to adopt more intensive practices like those found on confined animal feeding operations (or factory farms.)  These intensive methods come with a host of environmental and public health burdens.

Consumers Pay More But Farmers Receive Less

Agribusiness companies contend that they can provide efficiencies of scale that benefit consumers, but in reality, consumers rarely see a change in what they pay for food at the grocery store. During 2006, the prices farmers receive (farmgate prices) from meat packers and processors for cattle, hogs, poultry and eggs have all had periods of significant decline according to USDA’s Agricultural Statistics Board price reports.  However, these savings were not passed on to consumers.  The retail price for ground beef, eggs, pork chops, and whole chickens did not decline in proportion to the decline in farmgate prices according to consumer retail price data from the Bureau of Labor Statistics.  At best, retail prices declined modestly. For example, although the retail price for ground beef slid, the per pound farmgate price for beef cattle declined 16 times faster between January and May 2006. In some cases, retail meat prices rose even when farmgate livestock prices fell.

Poultry and Egg Case Study:
Consumer Prices Rise, But the Prices Farmers Receive Fall

In 2006, farmgate egg prices trended downwards for the majority of the year, but consumer retail egg prices increased.  Consumer egg prices rose by 24 percent between May and November 2006, from $1.24 per dozen to $1.53 per dozen.  Over the same period, the price farmers received for eggs fell by 39 percent, declining from 79¢ a dozen to 49¢ a dozen.  The farmer share of supermarket egg sales during this period fell by half from 63 percent to 31 percent. There was a similar pattern for chickens – the price farmers received from chicken companies fell but consumers paid more. In 2006, the price farmers received for chickens fell by 27 percent between April and August, but the price consumers paid for chickens rose by 3 percent. The farmgate price for chicken moderated somewhat by November but was still 20 percent below April levels and the retail price for chicken remained 2 percent higher than April.

Low Prices for Farmers Encourage Factory Farming

Some farmers have responded to the intense price pressures from meat packers and processors by shifting to more intensive, larger operations with more livestock on each farm. Since farmers receive less for each animal they sell, many have tried to increase the number of animals they raise and then recoup their earnings by selling more animals.  During the 1990s, the number of animals on typical farms grew rapidly. According to USDA Census of Agriculture figures, the number of hogs raised on an average farm grew from 1,880 in 1992 to 23,400 in 2002 – a twelve-fold increase. The number of milk cows per dairy farm nearly tripled from 100 to 275. The number of chickens per farm grew from 384,000 to 520,000 over the same period – a 35 percent increase.

Larger animal operations rely on increased application of veterinary medicines and chemicals including antibiotics and hormone treatments to cope with the density of animals on their farms and to maximize the animals’ growth. For example, factory farmers typically mix low doses of antibiotics (below the amount used to treat an actual disease or infection) into animals’ feed and water to promote their growth and to preempt outbreaks of disease in the overcrowded, unsanitary conditions. The majority of livestock receive low-dose antibiotics in their feed, which has contributed to antibiotic resistant bacteria strains (such as Staph infections) that are more difficult to treat in humans.
 
The dense concentration of so many animals also leads to concentrated production of huge volumes of animal waste. Unlike a city, where human waste ends up at a sewage treatment plant, livestock waste is not treated, but rather washes out of the confinement buildings into large cesspools, or lagoons. These waste pools and lagoons can and have leaked or burst, especially during storms, and spill into local waterways killing fish stocks and spreading the waste and odor across the community.

Learn more about the impacts factory farms have on the environment and public health.

Competition Provisions Would Benefit Consumers and Farmers

The current concentration in the meatpacking and processing industry benefits neither livestock producers nor consumers. Farmers and ranchers could receive better prices for their livestock if there were more competitors bidding for their livestock and consumers would likely receive lower retail prices if there were more competitors for their customer dollars. Adding competition provisions to the farm bill would be a first step to solve long-standing market failures in the livestock and poultry sectors.