Consolidation in Organic Agriculture - CCOF

or informal agreements, including mergers,acquisitions, joint ventures or strategicalliances. Although their boundaries are constantlyshifting, several potentially emergingclusters have been identified. For instanceCargill and Monsanto form a cluster, withMonsanto providing genetic material andseeds, and Cargill involved in grain collectionand processing, and meat productionand processing. Kroger, the largest supermarketchain in the US, is linked to this clusterthrough an agreement with Cargill to receivecase-ready meat. DuPont/ConAgra andNovartis (Syngenta)/ADM have similar ties. 4Although predictions are very difficult, basedon other industries that have formed globaloligopolies rather than monopolies (such asautomobiles, pharmaceuticals and oil) thereare likely to be as few as four to six clustersworldwide. 4EFFECTS OF CONSOLIDATIONThe implications of what such a system willmean for farmers can already be seen in thepoultry industry in the US. Ninety-five percentof chickens produced for meat aregrown under production contracts withfewer than 40 companies. The farmer furnishesthe land and labor, and is required toinvest hundreds of thousands of dollars forbuildings and other equipment. The companyprovides the chicks, feed and medicineand agrees to pay a guaranteed price perpound. In the 1950s, when there were morethan a thousand companies, most poultryfarmers benefited from such contractsbecause they were protected from pricefluctuations. Now that four vertically integratedfirms control 50% of the market, theterms of the contracts are much more favorableto the companies. Their power is sogreat that some companies have been foundto cheat farmers systematically by underestimatingthe weight of birds, overestimatingthe weight of feed, or providing poor qualitychicks or feed. A farmer who complainsis likely to have their contract canceled andbe placed on a blacklist. 5 Although mostpoultry farmers are making poverty levelwages or below, without a contract theycannot pay off their mortgages, and thereforeface foreclosure. Some cynics have suggested“why buy the farm when you canown the farmer?” and describe chickenfarmers as “serfs” who are never able toescape their debts.Grain and vegetable growers may soonfind themselves in a similar situation. Geneticallyengineered (GE) crops are controlledby just six multinational corporations, andthe technology is being used as a tool to consolidatethe seed supply. Crop farmers arethen being locked into food chain clustersthrough “bundling,” or linking patentedseeds with contracts, chemicals and credit.Monsanto’s Roundup Ready seeds can onlybe used with Roundup herbicide, eventhough cheaper versions of this herbicide areavailable. Pioneer DuPont seed gives betterinterest rates on financing, depending uponhow much “approved” products the farmerbuys, and approved chemicals include thosefrom Syngenta, Bayer/Aventis, and Dow.The precedent set with GE seeds is alsobeing extended by bundling chemicals andother inputs with conventional seeds. In theUK, Syngenta’s hybrid barley can only bepurchased in conjunction with the company’sgrowth regulator and fungicides.Consumers are also harmed by consolidation.GE foods have been introduced intothe food system without public consent, oreven public knowledge, as recent polls haveshown, 6 thus limiting the freedom to choosenon-GE products. Price gouging is anotherway that food conglomerates may exploittheir increasing power. Although farm milkprices are the lowest they have been since the1970s, prices paid by consumers have notdeclined. Consumers Union has reportedhigh retail milk prices at California supermarketswhen compared to smaller markets,and suggested these prices do not followfarmer and processor costs. 7 A recent classaction lawsuit accused two major supermarketsin Chicago of fixing the price of milkover a four-year period, costing consumersup to $125 million. This is somewhat of anexception, however, as most food prices haveremained low over the past few decades(aside from products like carbonated beverages,snacks and breakfast cereals, which arealready dominated by a small number ofbrands). Although consumer pocketbookshave been much less affected by consolidationthan farmers and workers, this situationmay change if a handful of food chain clustersgain control of the global food supply.CONSOLIDATION IN ORGANICOrganic agriculture is not immune to thesetrends. Many organic brands have beenacquired by giant food processors such asGeneral Mills, Kraft (Philip Morris) and Kellogg,as the accompanying diagram indicates(see page 5). Slightly smaller global foodprocessors not shown in the diagram are alsoestablishing their own organic product lines(such as Dole, Chiquita, and McCormick &Co.) or acquiring existing organic brands(J.M. Smucker bought R.W. Knudsen, Afterthe Fall and Santa Cruz Organic; Novartissubsidiary Gerber’s bought Tender Harvest).The market share for some of these brands isextremely high —Horizon, White Wave andEarthbound Farms control over 60% of themarket for organic milk, organic soymilk,and organic bagged salad mix respectively.Earthbound Farms is a brand of NaturalSelection Foods and a vertically integrated“seed to salad” operation—it contracts withover 200 growers. It is one of just five farmsthat market half of the organic produce soldin California. 8In the rapidly consolidating food retailingindustry, the top 4 supermarkets — Wal-Mart, Kroger, Safeway and Albertson’s — areincreasing the amount of shelf space devotedto organic products. Kroger, for example, hasa natural and organic section in 43% of its2400 stores. 9 Fast growing natural foodschains such as Whole Foods (currently the21st largest supermarket by sales 10 ), WildOats and Trader Joe’s have had success withtheir own brands of organic products,prompting mainstream retailers such asKroger, Safeway, Piggly Wiggly and Harris-Teeter to introduce organic brands as well.Such growth is unlikely to benefit smallfarms because many supermarkets no longerallow managers to buy directly from localfarmers or food processors. Instead, thesecorporations prefer to deal with operationsthat can supply huge volumes for theirincreasingly centralized supply chains.CHALLENGES TO CONSOLIDATION:ALTERNATIVE FUTURESDespite the predictions of some economists,this global industrial food system is notinevitable. Dr. Mary Hendrickson and Dr.Winter 2003–2004 Page 3