Economics examiner Al Krebs defines this sector of the economy as agribusiness: companies that control the financing of agriculture and the manufacturing, transporting, wholesaling, and distribution of produce, fertilisers, chemical poisons, seed, feed, and packaging materials (Krebs, 1992:3). In general, for over a hundred years, agribusiness has monopolised the farmers’ inputs and their trade outlets, thus gaining the ability to both externalise its costs on farmers and exercise its pricing power over them (McWilliams, 1942; Hart, 2002). In this context, U.S. farmers have become virtually powerless to determine the prices that they pay for agricultural inputs, or the prices they receive for agricultural outputs.
Conversely, the need to rely on overproduction to increase their profits has fostered at once the over-production of surplus in the U.S., the below-cost sale of U.S. surplus abroad, and a general situation of international competition characterised by the devaluation of agriculture.In a sense, the growth of corporate power in agriculture began in the early nineteenth century, when the development of trade and commerce became dependant on the creation of a new transportation system and trade routes (Hart, 2002; Geffert, 2000).
The U.S. government transferred public land to private citizens through dozens of different “land grants,” which granted the railroad companies an extensive amount of land. By the late nineteenth and the early twentieth century, the emerging industrial capital represented by companies such as the United States Steel Corporation, Ford Motor Company, or the Standard Oil Company needed railway lines to gain access to raw materials, labor, and trade outlets. Historians and social scientists looked at the U.S.
railway system as the first example of monopoly. Lenin, for example, noticed how these companies had a voice at the political level, which gave them the power to apply discriminatory land rates; hold land grants and monitor farmers’ profit books, maintain mining operations, regulate transportation and grain terminals, grant mortgages and loans, and ultimately control entire regional economies (Lenin, 1917:26).Already in the 1930s, a small directorate of railroad companies, industrial capital and finance capital governed U.S. agriculture. As McWilliams argues, during the 1930s California Lands, a subsidiary of Transamerica Corporation (Bank of America) was the largest farming organisation in the world owning 600,000 acres of land. Companies like Campbell Soup both owned the land and used contracts to buy fruits and vegetables from “independent” growers; California agriculture was controlled by a small number of corporations:Southern Californians Inc.
(a group of employers); Southern Pacific Company, Santa Fe Railroad Company, Pacific Gas and Electric company, Industrial Association of San Francisco, Canners’ League of California, Holly Investment Company. … In whatever way you turn the investigation, you find the same complex of forces involved (McWilliams, 1942:50). During the 1930s, the concentration of capital in agriculture was further increased by two major events: the Great Depression and the Dust Bowl. At the same time as the Great Depression pushed thousands of families into bankruptcy, a severe drought hit the Great Plains – at the time the “breadbasket of America”- setting records for dryness in twenty states. Farmers suffered a 60 percent decline in income, and millions had to abandon their farms (McWilliams, 1942:50).
These events led to a new wave of foreclosures and bankruptcies in the U.S. countryside, causing an unprecedented concentration of the land. Slowly, the concentration of land ownership proceeded both horizontally and vertically: given the high costs and risks of land ownership, agribusiness has pursued a strategy of horizontal integration, trying to consolidate its ownership and control of production within the same stage of the food system. At the same time, the need to minimise its interaction with other companies led to a strategy of vertical integration, the control the entire process of production from “seed to shelf.
” The vertical integration of production typically occurred through the use of contracts: agribusiness would ask the growers to provide the land and the buildings in exchange for a market outlet (Heffernan,1999). This great concentration in agriculture has dramatically affected farmers. During the 1930s, many farmers were forced to foreclose, and others were dependent on the integrating companies for both their agricultural inputs and to ensure a market outlet for their crops. Throughout the decade, farmers organised against the growing power of U.
S. agribusiness. In 1933, President Roosevelt was warned that “unless something is done for the American farmer we will have revolution in the countryside within less than 12 months” (Agricultural Adjustment Relief Plan, 72nd Cong., 1933:12, quoted in Dawkins, 2002:211). Roosevelt responded to the rural crisis with the New Deal, legislation that introduced a non recourse loan program in U.S.
agriculture. This organised agriculture around the principle of “full cost accounting,” or “parity”: a non recourse loan program which forced the grain companies and other food manufacturers and exporters to pay farmers a minimum price in the marketplace. If the market price fell below parity (the cost of production), farmers could take a government loan worth up to 90 percent of the parity price and withhold their crops until the next year (Dawkins, 2002:210).
If prices remained low, the farmer kept the loan and the government kept the crop (Dawkins, 2002:209). It is in this legislation that we find the origins for the “globalisation” of the crisis on the U.S. farm.
The purpose behind the Farm Relief and Inflation Act (better known as the Agricultural Adjustment Act) was to raise farm incomes through price supports and production adjustments. This sort of “minimum wage” for growers encouraged farmers to reduce the acreage under cultivation in order to allow farm commodity prices to increase. In fact, throughout the rest of the century farmers have responded to this policy by increasing productivity. As Pollen explains: “farmers … have only one option if they want to be able to maintain their standard of living, pay their bills and service their debt, and that is to produce more” (Pollen, 2006:52). In this sense, while the notion of “parity” offered a “minimum wage” in exchange for policies of acreage reduction, farmers had to intensify productivity in order to increase their profits.
Since the New Deal, U.S. farmers have found innovative ways to work around the acreage restrictions laws by taking their least fertile acres out of production and improving the yield of cultivated acreage with intensified capital input (Pollen, 206:50).
While these policies reduced the total amount of cultivated acreage, their result was a steady increase in productivity and overproduction. Over the course of the twentieth century, these policies did not lead to an increase in the price of agricultural products, but to its steady decline, and to an accumulation of agricultural surplus that could be sold below cost in the rural peripheries of the world (Shiva, 2002; Vincent, 1981).In the years preceding World War II, the growing productivity of agriculture led to a great accumulation of surplus.
Initially, most of this surplus was sold in Europe during post-war reconstruction. In the years following World War II, the introduction of new technological inputs, such as gasoline and electric-powered machinery, and the widespread use of pesticides and chemical fertilisers, stimulated a further increase in productivity, leading U.S. surplus to reach its highest historical peak in the 1950s. At the time, Congress created U.S. Public Law 480 to promote the shipment of food surplus abroad.
U.S. Public Law 480 (the Agriculture Trade Development and Assistance Act) was defined as a humanitarian effort that allowed U.S. agribusiness to literally “dump” (this mechanism is also known as “dumping”) their agricultural surpluses for artificially low prices on foreign markets (Shiva, 2002; Lappé, Collins and Rosset, 1998; Vincent, 1981).
This law had enormous consequences both in the U.S. and abroad: in the U.S., the growth of overproduction drove down agricultural prices, stimulating farmers to produce more in a general downwards spiral whereby low profits and overproduction continued to feed on one another; abroad, the sale of U.S. surplus contributed to the unequal economic competition which drove small farmers out of agriculture.
During the 1950s, a few political figures questioned the legitimacy of these policies. They observed that while the acreage reduction policy stimulated a continuous increase in productivity and over-production, it also contributed to depress farm prices and incomes, and it caused a grater need for government assistance and an increase in public expenses (Pollen, 2006). In fact, the contradictory nature of these policies was causing a vicious cycle of over-production, low profits, and the need for greater subsidies at the level of the family-farm.
At the same time, these policies rapidly expanded the market for those companies that monopolised the sale of U.S. surplus abroad (Lappé, Collins and Rosset, 1998).
As a result, since the 1950s, U.S. agribusiness has lobbied at the federal level not so much to decrease competition and protect the ability of farmers to sell their crops for prices at least equal to the cost of production, but to decrease assistance to farmers thus forcing them to sell their crops at any price. Indeed, in 1942 agribusiness began lobbying the White House for a reduction of the price of parity (Dawkins, 2002:209).
The “Committee for Economic Development,” formed with the participation of university professors, economists and corporate executives from Heinz and Hormel, Ford and General Motors, AT and IBM, suggested lowering agricultural subsidies and taking “greater advantage” of the farmers’ surplus and financial crisis. The committee argued that: “the movement of people from agriculture has not been fast enough to take full advantage of the opportunities that improving farm technologies and increasing capital create” (quoted in Dawkins, 2002:209). In order to take “full advantage” of the industrialisation of agriculture, it was necessary to stimulate the sale of new machinery and chemical outputs, and to force the substitution of the small farm with the large, industrial farm. The goal of U.
S. agribusiness throughout the second half of the twentieth century has thus been to “move off the farm about two million of the present farm labor force, plus a number equal to a large part of the new entrants who would otherwise join the farm labor force” (quoted in Dawkins, 2002:209). As University of Michigan agricultural economist Kenneth Boulding suggested:The only way I know to get toothpaste out of a tube is to squeeze, and the only way to get people out of agriculture is likewise to squeeze agriculture. If the toothpaste is thin, you don’t have to squeeze very hard, on the other hand, if the toothpaste is thick you have to put real pressure on it. If you can’t get people out of agriculture easily, you are going to have to do farmers severe injustice in order to solve the problem of allocation (quoted in Dawkins, 2002:210). Since the 1950s, federal subsidies to farmers have been gradually reduced.
During the Eisenhower’s presidency, the price of “parity” decreased from 99 percent to 75 percent of the cost of production. By the end of the decade, it was reduced to about 55 percent of parity. This meant that farmers would receive payments worth up to only 55 percent of the cost of production, when the government kept their crops (Dawkins, 2002:209). Once again, the reduction of subsidies did not alleviate the crisis for U.S.
farmers, but it did stimulate a further increase in productivity, the plummeting of agricultural prices, and the accumulation of surplus that could be sold for artificially low prices abroad. At the same time, the problem in those years was complicated by the fact that the slow process of industrialisation in agriculture was creating a need for new machinery and chemical inputs. While in the early 1930s the average annual consumption of commercial fertiliser was about six million tons per year, this figure doubled in the forties, more than tripled in the fifties, and finally rose to 32 million tons in the 1960s (Tansey, 1995; Looker, 2003). At the same time, agriculture moved from a system based overwhelmingly on manual labor to a largely mechanised industry. For the first time in history, in the 1950s the number of tractors on farms exceeded the number of horses and mules. In 1968, 96 percent of cotton was harvested mechanically.
Finally, in the late 1950s anhydrous ammonia became the most common source of cheap nitrogen with the purpose to supposedly “spur higher yields” (Pollen, 2006). Ammonium nitrate was introduced in agriculture as a chemical fertiliser in 1947. This was a key factor in the industrialisation of agriculture and the substitution of the small farm with the industrial farm, and marked the period when agriculture became fully dominated by external inputs that were all supplied by agribusiness: chemicals and fertilisers; tractors and stalk cutters; planters, cultivators, and harvesters (Pollen, 2006:41). Since 1947, farmers have been required to apply commercial fertiliser in order to “spur production” and “improve” their methods of weed control, erosion control, and irrigation (Dawson, 1999:1). At the basis of these requests was not so much a concern with the productivity or sustainability of the soil, but rather the overwhelming availability of ammonium nitrate, the principal ingredient in these new fertilisers, and also the principal ingredient in the large quantity of explosives which remained unsold after World War II. At that time, U.S. military held a large amount of ammonium nitrate (Pollen, 2006:40).
These munitions stocks were stored in great numbers at Muscle Shoals in Alabama. By 1947, the government had been looking for ways to convert its war machine to “peacetime purposes” for several years. After technicians and engineers at the Muscle Shoals plants discovered that ammonium nitrate could be used as a source of nitrogen for plants, ammonium nitrate began to be used on farmland as a fertiliser (Pollen, 2006:41).
Once these plants switched over to producing chemical fertilisers, the employment of ammonium nitrate in agriculture changed everything: liberated from the biological constraints of nature that required farmers to conserve the fertility of the soil and maintain a diversity of species, the farm could now be managed on industrial principles. The farmer did not need to grow a diversity of crops relying on sunlight: instead of “eating exclusively from the sun,” nature could finally “sip petroleum” (Pollen, 2006:44) while consumers could eat “the leftovers of World War II.” (Shiva, quoted in Pollen, 2006:41). Synthetic fertility opened the path to monoculture and transformed the farm into a factory characterised by chemical inputs and mechanical efficiency (Foster, 1999:120; Shand, 1997). Within a few years, the food-chain turned “from the logic of biology to the logic of industry” (Pollen, 2006:44).
In this context, not only was agricultural production characterised by lower profits, but also by higher costs.The industrialisation of agriculture made rural America almost entirely dependent on a small group of corporations. Growers could not rely anymore on the soil for the revitalisation of their land, but had to rely on a few corporations for each aspect of production. In fact, farmers were no longer America’s producers; rather, they were “the biggest consumers in the country” (Hightower, 1975:135).
It is not generally recognised that farmers probably are the biggest consumers in the country. From bailing wire to barns, from pickling jars to corn pickers, the farmer seems constantly to be in town buying the necessaries of farm business. Before the first sprout breaks ground, American farm families are over their heads in debt to such corporate powers as Bank of America (production loans), Upjohn Company (seeds), the Williams Companies (fertilisers), International Minerals and Chemicals (pesticides), Ford Motor Company (machinery), Firestone (tires), Ralston Purina (feeder pigs), Merck and Company (poultry stock), Cargill (feed), Dow Chemical (cartons and wrappings), Eli Lilly (animal drugs), Exxon (farm fuel) and Burlington Northern (rail transportation).As agribusiness gained the ability to centralise agricultural surplus, trade outlets, and inputs, farmers became largely dependent on industrial capital for every necessary item: machinery, fertilisers, feed, agri-chemicals and biotechnologies. Chemical inputs not only turned the small family-farm into one of the greatest customers for agribusiness, but also further increased over-productivity and further decreased prices and incomes. In 1972, a series of disastrous harvests in Russia forced the country to purchase 30 million tons of grain from the United States (Pollen, 2006:41). The surge in demand and the bad weather in the Farm Belt drove grain prices up to unprecedented heights, resulting in short-lived, but rapid growth in income for the small family-farm. In 1972 and 1973, conveniently low interest rates persuaded many farmers to go deeply into debt based on the assumption that commodity prices and land values would continue to rise (Luttrell, 1989:82).
When the “boom” ended several years later, farmers had accumulated even more debt. At the same time, the temporary increase in inflation and farm income persuaded President Nixon’s second secretary of agriculture, Earl Butz, to dismantle the New Deal price support policy, “a job made easier by the fact that prices at the time were so high” (quoted in Pollen, 2006:52). In 1973, Congress passed a new farm bill that replaced the New Deal with a system of “direct payments” to growers. Federal “deficiency” payments again cut federal assistance. Now payments were offered to growers when the market price fell below an arbitrary “target price” set by government regulators. To receive these payments, farmers had to remove some of their land from production, thereby supposedly helping to keep market prices up.
This repeated the “side-effects” of the old acreage reduction policy: increasing production, decreasing prices, and driving small farmers off their lands. Once again, the “new system” of direct payments did not solve problems for the small family-farm, but it did allow the government to further accumulate grain surplus to dump in the foreign market, and to justify “squeezing” small farmers out of the countryside. In fact, pushing small farmers off their land was not the unintended result of these policies, but their intent (Dawkins, 2002:210; Pollen, 2006:52).In 1984, Butz admitted that the goal of these contradictory agricultural policies was not to benefit farmers, but rather to foster the liberalisation and industrialisation of agriculture. Indeed, its intent was to force farmers to “plant their fields ‘fencerow to fencerow’,” and to increase productivity. Ultimately, the idea was to “‘get big or get out'” (quoted in Pollen, 2006:52; Tansey, 1995; Looker, 2003), because small farms were non-competitive obstacles to the mechanisation of agriculture and expensive recipients of federal assistance. In this context, small farmers had to “adapt or die” (Pollen, 2006:52).
In fact, the more small farmers were in debt, the more they were obliged to over-produce and sell at any price. In those years, the U.S. accumulated an enormous quantity of surplus to sell below-cost abroad. At the same time, the government cut direct payments by 50,000 dollars, and forced farmers to sell more grain at any price. This new reduction in public payments pushed farmers off their lands, and promoted the industrialisation of agriculture. In the 1980s, American agriculture became so productive that a small number of farmers could feed the American people with about half of their output. While the number of large farms (with average sales of over 200,000 dollars) doubled between 1960 and 1982, the number of small farms (with average sales of 10,000 dollars to 40,000 dollars) fell from 1.
2 million to 500,000 (USDA, 1987). By 1984, farm indebtedness rose to 215 billion dollars. According to Federal Reserve senior economist Emmanuel Melicher, more than one-third of America’s commercial farmers were in serious trouble: for the first time in history, the total of interest payments on farm loans exceeded total net farm income (Ball and Beatty, 1984:442). Farm foreclosures rose dramatically, and many described the farm crisis of the Eighties as the worst since the Great Depression (Weiner, 1999:14; Lewontin, 1998). Between 1996 and 1999, farm income in U.
S. farms declined by nearly half. At the end of 1998, Vice President Al Gore admitted that the U.S.
was facing “the worst crisis our farmers have ever experienced” (Weiner, 1999:14). In this context, the overproduction of low-cost crops was not only generating a crisis for the U.S. farming industry, but creating a situation of international competition whereby small farmers had to continuously produce more and sell for less, making the sale of produce below the cost of production more and more unprofitable, while farm production costs kept climbing higher and higher.