Monopoly Power Corrodes Choice and Resiliency in the Food System

• Date: 01 June 2018
• Published date: 01 June 2018
• DOI: 10.1177/0003603X18770063

Article

Monopoly Power Corrodes

Choice and Resiliency

in the Food System

Patrick Woodall* and Tyler L. Shannon**

Abstract

The wave of mega-mergers sweeping the food, agribusiness, and retail grocery industry from seed to

supermarket has accelerated consolidation and concentrated market power in the hands of only a few

dominant corporations. Federal regulators have done little to curb the merger mania in these sectors,

which will ultimately lower the prices farmers receive for crops and livestock and raise the prices

consumers pay for food. But the consolidation also has significantly constrained the range of choices

consumers have at the supermarket, prevented independent food innovators from surviving in the

marketplace, amplified food safety problems, and presented challenges to the resiliency of the food

system itself. This article examines the size, scale,and scope of recent mergers in the food, agribusiness,

and grocery retail sectors and discusses the ramifications for consumers, farmers, and the food system.

Keywords

food, agribusiness, mergers, consolidation, non-price effects

I. Introduction

A powerful cabal of food and agribusiness companies has a stranglehold on the food system from seed

to supermarket. These oligopolistic firms control every link in the food chain— farm inputs, com-

modity processing, food manufacturing, distribution, and grocery retail, separating America’s 2 mil-

lion farmers from its more than 310 million eaters. These companies exert their considerable market

power to the detriment of consumers and farmers and endanger the resiliency of the food system.

Consolidation has enabled companies to impose significant price concessions on farmers and con-

sumers. Only a few companies sell seeds, tractors, and fertilizer; and a few others buy corn, cattle, and

carrots. For years,this economic concentration has eroded the sharefarmers receive from the dollarsthat

consumersspend on food.

1

Increasingagricultural consolidationhas contributed to the currentprecarious

*Research Director at Food & Water Watch, Washington, D.C., USA

**Senior Researcher at Food & Water Watch, Washington, D.C., USA

Corresponding Author:

Patrick Woodall, Food & Water Watch, 1616 P Street NW, Washington, D.C., USA.

Email: pwoodall@fwatch.org

1. U.S. Dept. of Agric. (USDA), Econ. Res. Serv. (ERS), Food Dollar Series, Real Data (1993-2014), https://www.ers.usda.gov/

data-products/food-dollar-series/download-the-data/ (last visited Mar. 2017).

The Antitrust Bulletin

2018, Vol. 63(2) 198-221

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economic viability of independentfarmers. Steeply declining farm pricesare projected to drive 2017 net

farm income 50%below 2013 earnings to some of the lowest levels in two decades.

2

The increasing consolidation of the food supply also directly impacts consumers in the form of

reduced consumer choices and higher grocery prices. Consumers are vulnerable to the concentrated

market power of food companies that sell essential staples; aggregate consumer demand for food is

largely unresponsive to price, so consumers will still buy food when food monopolists impose price

hikes. According to the American Antitrust Institute, the concentration in buyers, processing, and

retailing has “undoubtedly contributed to the increased cost of food.”

3

The steadily rising price of food has significantly outpaced the growth in household earnings. Since

the Great Recession took hold in 2008, real consumer food prices have risen about three times faster

than typical wages.

4

The concentrated agribusiness and food industries have capitalized on the spread

between declining farmgate prices and rising food prices, and the difference ends up in corporate

coffers.

5

The biggest food, beverage, and grocery retailers pocketed $75 billion in profits in 2016.

6

But already high and increasing levels of economic concentration in the agricultural and food

sectors impact far more than consumer and farmer prices. Consolidation has substantially curtailed

the choices available to consumers and farmers. Grocery stores now teem with an illusory cornucopia

of different products, but the vast majority of the supermarket items are manufactured by a few firms

with dominant market positions.

Horizontal and vertical concentration in the agriculture sector has constrained farmers’ choices and

autonomy. Concentration in the seed and fertilizer industries has significantly limited farmers’ culti-

vation options. Perhaps more importantly, the larger, vertically integrated agribusinesses have pushed

farmers to increase the size, scale, and intensity of their farms in order to sell their crops or livestock

and maintain economic viability. This limits farmers’ options and autonomy to control production

decisions on their farms.

Concentration can also reduce quality and compromise safety. According to the U.S. Department of

Agriculture (USDA), high concentration levels allow the largest companies to extract more economic

value from food purchases, but “consumers typically bear the burden, paying higher prices for goods of

lower quality.”

7

The substantial scale combined with highly concentrated chokepoints make the food

system vulnerable to potentially larger, more widespread food safety problems.

2. Jacqui Fatka, Net Farm Income Projected to Decline in 2017,FEEDSTUFFS, Feb. 8, 2017.

3. Am. Antitrust Inst., Fighting Food Inflation through Competition (2008),in TRANSITION REPORT ON COMPETITION POLICY ch. 8,

at 281 (2008).

4. Authors’ analysis of Bureau of Labor Statistics (BLS) data. Constant median wage and salary earnings rose by 3.4%from

2008 to 2016, but the consumer price index for food eaten at home rose by 11.6%. BLS series ID-LUE0252881600 and

CUSR0000SAF11, http://www.bls.gov (last visited Mar. 2017).

5. Thomas Geyer, Farmland Prices Decline for Third Consecutive Year,Q

UAD CITY TIMES, Feb. 25, 2017; Christopher S.

Rugaber, US Wholesale Prices Rise 0.3 pct., Led by Costlier Gas, Food,A

SSOCIATED PRESS, Jan. 13, 2017.

6. Authors’ calculation from Forbes Global 2000 list (Steve Schaefer & Andrea Murphy, The World’s Largest Companies 2016,

FORBES, May 25, 2016). Profits include total worldwide profits, not just in the United States. Food companies included

Campbell Soup, ConAgra Foods, Danone, General Mills, Grupo Bimbo, Hershey, Hormel Foods, JBS, JM Smucker, Kellogg,

Kraft-Heinz, McCormick, Mondel¯

ez International, Nestle, Saputo, Tyson Foods, Unilever and WH Group (Smithfield);

beverage companies included AB InBev, Coca-Cola, Dr Pepper Snapple Group, Heineken Holding, Molson Coors Brewing,

Monster Beverage, PepsiCo and SABMiller; grocery retailers included Costco Wholesale, Delhaize Group, Dollar General,

Dollar Tree, Kroger, Supervalu, Target, Wal-Mart and Whole Foods Market (Costco, Dollar General, Dollar Tree, Target and

Wal-Mart profits were reduced to account for revenues from grocery sales based on filings with U.S. Securities and Exchange

Commission (SEC). Costco Wholesale Corporation, SEC 10-K filing, Aug. 28, 2016, at 67; Dollar General Corp., SEC 10-K

filing, Mar. 22, 2016, at 4; Dollar Tree, Inc., SEC 10-K filing, Jan. 30, 2016, at 7; Target Corporation, SEC 10-K filing, Jan.

28, 2017, at 19; Wal-Mart Stores, Inc., SEC 10-K filing, Jan. 31, 2016, at 8.)

7. John L. King, Concentration and Technology in Agricultural Input Industries 2 (USDA ERS Report No. AIB-763, Mar.

2001).

Woodall and Shannon 199